August USO, XLE Put Options Active

I just checked out today's option activity on $USO and $XLE and found big out of the money August put volume. USO (oil ETF) closed at $37.41 today and 9,370 August $37 puts traded with 192 open and 25,897 August $34 puts traded with 2,209 open. Call action was minimal. XLE (energy stock ETF) also had large out of the money August put action. XLE closed at $47.03 today and 12,836 August $45 puts traded with 333 open.

The volume/open interest ratio was very wide on these trades. So were these trades speculative out of the money longs or sellers? Lets say these ballers were long. Using XLETS (XLE Aug $45 Put) $1.99 premium at the close, traders dropped $2,554,364 for the right to sell 1,283,600 shares of XLE at $45 which would make profit < 43.01. I'm sure OptionMonster has information on the actual ticks. XLE broke below the 50 and 200 day moving average and the Oil Volatility Index ($OVX) gathered strength recently (chart below). This could be a crazy summer for the energy sector. Watch out for hurricanes in the Gulf and/or volatility in Tehran.

AUDJPY Hit Retracement Level, Needs Reflation Jumper Cables


I'm revisiting the $AUDJPY currency pair. It just hit the 50% fibonacci retracement level and sold off (104 2008 high - 55 2009 low, hits 80). I wrote about the AUDJPY carry trade unwind, reflation trade and commodity currency relationship a few posts ago. The Australian Dollar bottomed out against the Yen and rallied hard as the reflation trade caught traction (or China restocking unwound the carry trade unwind - Baltic Dry Index On Fire, 1, 2, 3). China is a big importer of Australian commodities which requires Australian Dollars. With oil, gold and other commodities losing strength it could sink the $AUD. GOLD could sell off to the 200dma (875ish) if the risk aversion trade sticks for a while.

As you can see from the chart below, $AUDJPY broke through the 75.52 support level and could test the 38.2% retracement level (74.26) then possibly hit 70 if nothing can hold. C-bank moves and Japan fundamentals could also affect this pair. It will be interesting to watch and stay protected w/ stops. I'd probably hedge w/ ITM calls somehow. So will the Yen carry trade unwind unwind, unwind?

For better info and analysis visit these articles:

Barclays’ Englander Sees Room for Australian Dollar to Retreat (Bloomberg)
Dollar and Yen Extend Rally on Falling Stocks and Commodities (IBTimes)
Risk Aversion Spikes as World Bank Sees Deeper Recession (FXStreet)
Yen gains as uncertainty stalks market ahead of Fed (Guardian.co.uk)
Australian, New Zealand Dollars Decline on World Bank Outlook (Bloomberg)
Nikkei Plummets As Stocks See Massive Sell-off On Economic Woes (RTTNews)



AUDJPY (FXstreet.com)


Market Needs Support From IYT, Transports, FDX


Not too long ago the Dow, S&P and Nasdaq all busted through their 200 and 50 day moving average. The Transports ($TRAN, $IYT) tested and failed that level recently and now price action is being squeezed between the 50 and 200dma awaiting trend decision. I wouldn't stand in front of this uptrend (or at least in size) until it breaks the 50 day and trend support. Also watch for the 50/200 day "golden cross" to the upside which would be a long term bullish indicator. Puts open are dominating calls however there is no crazy OTM activity. The IYT Schaeffers Volatility Index is at 0.41, up 10% from 0.37 on June 5. Look at the $IYT chart.


Stockcharts.com


Prechter: Another Wave Lower Coming -Elliot Wave

Robert Prechter of the Elliot Wave International was interviewed on Bloomberg. Something to look out for.
"On a short term basis I think after 3 months coming into the 11th of June we might have ended the first wave up so we may be in for some correction for a while and if everything goes ideally, which it doesn't always do, we would have a second leg up in the summer and that would probably complete things." (By "complete things" he means complete the counter trend rally).

25,000 XHB $10 January 2010 Puts Traded

Hat tip to Crimson Mind for the information. 25,000 January 2010 $10 puts just hit the tape. Not sure of the exact nature of the trade (hedging, spec short pocketing change or spec buy) but if $XHB (Homebuilder ETF) violates support here it could retest lower levels. It's trading at $11.42 right now. This is looking out 7 months. I will continue to monitor housing data (Housing Analysis June 3 - Housing Starts, Building Permits, Pending Home Sales). Will WCI Communities and TOUSA be the only public building casualties? Unless I am missing one. Also read this after reading the WCI post. I'm wondering when there will be more M&A in this space.

Russia Plans To Sell Oil To China In Ruble



At the recent BRIC meeting Russia and China talked up settling trades in Ruble and Yuan instead of the US Dollar. Russia plans to sell oil to China denominated in Ruble. The USD better get a hold of itself. Survival of the fit only the strong survive....
"June 17 (Bloomberg) -- The leaders of Russia and China agreed to expand use of the ruble and yuan in bilateral trade to lessen dependence on the U.S. dollar a day after they took part in the first summit of the so-called BRIC countries." (Bloomberg.com)

JP Morgan's Lee Sees Recovery, S&P Target 1,100

Thomas Lee, Chief U.S Equity Strategist at JP Morgan spoke at the 2009 Reuters Investment Outlook Summit. Here's a summary and video from Reuters.com.
  • Global synchronized economic recovery taking place (U.S this summer)
  • Consumer will stabilize
  • Employment will improve 2nd half 2010
  • Businesses will rebuild inventory, areas of underinvestment
  • Attractive rates for businesses to lever up again
  • Will either buy companies, stock or invest in capital (expand)
  • Unanticipated wave of innovation will drive both consumer and business spending
  • 2009 S&P Target 1,100

Roubini Sees Deflationary Pressures, Unemployment at 11% and Output Gap

Dr. Roubini at the Reuters Investment Outlook Summit was interviewed at by Dan Burns. Here is the video and a few points he made, he thinks the $GOLD run is premature.
  • Too much talk about green shoots, sees mostly yellow weeds
  • Still sees data showing contraction rather than expansion
  • For next year and a half deflationary pressures will be dominant
  • Massive output gap: Demand falling relative to excess supply/demand
  • Prices will be cut to sell inventories
  • CPI still negative in US and across the world
  • Labor market is a major slack, unemployment will reach 11% in US
  • Slack in goods and labor markets = deflationary pressures
  • Sees inflation problem in 2 years due to Fed monetization of debt
  • Thinks oil and gold are overpriced

Are Blogs Diluting Yahoo's CPM Rate?

Are blogs (like Dvol) diluting Yahoo's advertising dollars per CPM? I'm wondering if they are scooping up independent online video properties? This is an interesting clip I found at BNN TV. Brigantine Advisors managing director Colin Gillis initiated coverage on Yahoo with a SELL and $13 target.
"The supply of pages that are available online is tremendous and it's the supply piece of the equation that we have to be worried about. Ad rates are dropping particularly for Yahoo on display advertising. When they used to get 12-$15 per 1000 page views that has dropped down to $5" continued at BNN.ca.
Check out this chart that compares Yahoo, Google, Bing search traffic from StatCounter. Also below I provided $Yahoo's stock chart from stockcharts.com ($15 at 50d/trend support, 200d just under $14).

Crazy SPY Tick Volume, Bots Taking Over!

Have you seen how $SPY volume hits the tape? On the tick charts below in about a second tick volume increased from 0 to about 40,000 shares (and SPY is trading at 92 so it's not cheap). The volume triangles were so perfect that I made boat sails out of them in MS Paint for your viewing pleasure. It's weird that I didn't see any massive red volume spikes. WTF? The bots are taking over!

SPY Tick Volume (Optionsxpress)

Someone Loading Up on SPY Aug Puts? Or Just Hedging. Don't Break Trend!

Check out the PUT v. CALL volume on the $SPY August option chain. Are traders loading up here for volatility or are these funds getting hedged out of the money. I wish I knew, but it is possible a correction overshoots and these options make some money if bought-to-open by August expiration. $SPY is at 91.73 right now.


SPY AUG Option Chain (Yahoo Finance)

SPY AUG 87.00 PUT , 2 Day (Optionsxpress.com)



 
DON'T BREAK THIS TREND $SPY! (Optionsxpress)

SPY/UUP Ratio to SPY, Jim Rogers Dow 30,000, Market Correction v. USD Bid

If the market corrects here $UUP (US Dollar Index ETF) could catch a bid again. Look at the inverse relationship between the S&P and US Dollar. I specifically charted out the SPY:UUP Ratio vs. SPY below. It looks exactly the same. That's why Jim Rogers on CNBC said the Dow could reach 20,000-30,000 during a currency crisis. The inflation play is all about timing..

SPY:UUP/SPY (Stockcharts.com)


S&P Futures In Backwardation

Source: Barchart.com


More information:
Contango Vs. Normal Backwardation (Investopedia)
S&P 500 futures market and the normal backwardation hypothesis (JEF, PDF)
Contango, Backwardation, and The Futures Curve (InformedTrades Video)

$MAR Implied Volatility, Short Interest and $VIX Update

This is a continuation of my last post, Marriott, Hotel Downturn Analysis - Economist Video ($MAR). I want to look strictly at sentiment. $MAR volatility plunged along with the $VIX, short interest increased 7.7% from 33.28 million shares to 35.82 million shares on June 1, 2009. This gave the short ratio a boost given the lower volume (4.4 to 7.9). Something has to give here... Either $MAR is setting up to crush crowded shorts on better than expected Q2 earnings/guidance OR implied volatility spikes and $MAR breaks down on strong volume to test some levels. There needs to be a volume boost either way to confirm that traders are buying the dull trade (low volatility/green shoots) or selling the re-emergence of fear trade. Get ready! Here's a VIX update by OptionMonster.com.

Marriott, Hotel Downturn Analysis - Economist Video ($MAR)

I just watched a video on The Economist's Youtube channel about Marriott and the hotel industry so I thought I'd flood this post with some info. I did not know Marriott only owned 2% of their hotels and franchised out the rest. This Economist video titled "An Unlevered Hotel Chain" explained that Marriott did not lever-to-own hotels during Greenspan's cheap rate environment. They left money on the table but at least they are not handing over keys to secured lenders. The video also shows how RevPAR (Revenue Available Per Room) volatility affects both the owner and franchiser. "A 1% drop in RevPAR will lower franchise profits by 1% and ownership profits by 5%". Here is a snapshot of Marriott's Q1 performance from their 8K. RevPAR dropped 18% worldwide in constant dollars. Q1 Total debt net of cash = $2.8 Billion and EBITDA = $89 Million.

From the clip, here are quotes from Arne Sorenson, President of Marriott International on the industry today.
"These are probably the worst times we've ever seen in terms of year over year comparison for the hotel business. So we thought in the fall of 2001 after the events of 9/11 that they were sort of stunningly bad lodging environments for us. Interestingly today when we look at the way the global business is performing, the U.S is about as bad as it was in the 4th quarter of 2001 even without that significant terrorist event, and the rest of the world is significantly worse than it was in 2001."

Pimco's Mohamed El-Erian, Fed Not Raising Rates

Reuters News spoke with Mohamed El-Erian, CEO of Pacific Investment Management Co, on rate hikes going forward. On the video he said major moves in unemployment will keep the Fed on hold for the rest of the year. In the beginning they put up a snapshot of the January 2010 Fed Fund future. On June 5 it sold off hard (99.6->99.3) but since regained most of it's losses. He also thinks the FED will buy Treasuries and mortgage-backed securities again to lower yields. PIMCO must have some longs under pressure, or they just went long in size!!

Household Net Worth Down 1.3 Trillion During Q1, Equities Up!

That's a lot of dough. At least "the speed at which net worth shrunk slowed at the start of the year" (AP). During Q2 so far household "stock" net worth measured in $SPY (S&P 500 ETF) is up 21.5%, however those who rushed to buy $IEF (7-10 Treasury ETF) are down 8.3% since March 31. Things could all reverse tomorrow so be careful. Here's the full June 11, 2009 report (Federalreserve.gov) and a few articles. Is Soros's reflexivity theory currently at work?

U.S. household net worth falls to $50.4 trillion (Reuters)
Household wealth drops for 7th straight quarter (MarketWatch)
Household Wealth in U.S. Decreased by $1.3 Trillion (Bloomberg)

Q2 7-10 Treasuries Net Worth
Q2 SPY (S&P) Net worth


10Y-Treasury Yield Spikes, Will S&P Follow? (MOVE Index, Mortgages, TNX, SPY)

The 10 Year Note Yield and S&P 500 have been married since mid-March. In other words Treasury prices and equities have been in an inverse relationship since the rally in risk appetite commenced in March (treasuries -> equities). During the past month the combination of 0.25% rates, inflation expectations, green shoots, fiscal deficits and the questionable USD brought significant volatility into Treasuries. Check out the Merrill Lynch $MOVE index which measures implied volatility on 1-month Treasury options (SeekingAlpha). Treasury I-vol broke out of a long term downtrend and spiked in May. Also today's disappointing 10Y Treasury auction did not help. Watch to see if the 10Y Yield/S&P relationship decouples. If rates overshoot it could squeeze the already distressed consumer/business. At some point something has to give or the Gov has to intervene unless the black swan is a Q2 GDP spike driven by exports.

The 10 year yield directly affects mortgage rates and mortgage applications fell last week. Also oil is at $72 and gas is up 9% since Memorial Day. Would the market OD on green shoots if the Fed raised rates in November? (Debates: 1, 2, 3). Look at the Fed Fund futures curve.

The 10 year yield is at 4% resistance so watch that level. Could the $MOVE Index see spikes like the $VIX did in 2008?

$TNX and $SPX (Stockcharts.com)

Merrill Lynch MOVE Index (Bloomberg.com)
Bankrate - 30Y Mortgage Rate (Bloomberg.com)



Lloyd Blankfein: Recovery Will Feel Just Like This

Lloyd Blankfein, CEO of Goldman Sachs, was at the 2009 IOSCO Conference in Tel Aviv and Bloomberg put up the Blankfein video clip. He said Fiscal and central bank moves significantly reduced or "priced-out" the worst-case scenario and this complacency translated into higher asset prices, and you can see this on the $VIX:S&P (Volatility Index) chart below.

Articles:
Goldman’s Blankfein Says Market Gains Reflect Government Aid (Bloomberg)
UPDATE 1-IOSCO-Goldman CEO Blankfein sees long recession (Reuters)
IOSCO-Goldman Sachs CEO urges convergence of rules (Reuters)


Blankfein Remarks on Asset Prices (Bloomberg Video)
VIX:S&P (Yahoo Finance)


It is interesting that all of these TARP recipients are making moves in the market. Read posts about $SPY (S&P ETF) activity at zerohedge.blogspot.com where TD provides Bloomberg Terminal snapshots of block trades. TD also shows SPY Indication of Interest activity which has been getting heat from regulators. Very interesting to see WTF goes on behind the scenes! ZH posts are very informative and entertaining.

Market (Lack Of) Action Charts
Intraday SPY Indication Of Interest Update
Goldman Now Dominating Dark Pool Trading; Who Is Sigma X?
Proudly Gunning Every Market Upswing Since TARP
Goldman Sachs Principal Transactions Update: 741 Million Shares
SLP Brokers Taking Their Role Not Too Seriously, Others Gunning Market
SPY Block Trading Update

Peter Schiff on Daily Show With Jon Stewart, Yes He Was Right

Peter Schiff was right about the recession coming. It's funny how people were laughing in his face on TV. Here he is on the Daily Show with Jon Stewart.

The Daily Show With Jon Stewart
Mon - Thurs 11p / 10c
Peter Schiff
www.thedailyshow.com

Daily Show
Full Episodes

Political Humor
Newt Gingrich Unedited Interview


NYSE Bullish Percent Index 6/2009 - $BPNYA (Charts)

I'm going to check out the NYSE Bullish Percent Index, a breadth indicator that measures the percent of NYSE stocks showing a point & figure buy signal. Stockcharts.com explains it all: NYSE Bullish Percent Index, P&F charts and pattern alerts. They also show which stocks are buys based on signals.

P&F charts smooth out price movements to make support and resistance levels more convincing. From investopedia.com, P&F charts "filter out non-significant price movements". Readings above 70% are considered overbought and readings below 30% are oversold. If the Index crosses back above 30% it is considered a buy and back below 70% is a sell. Of course there are exceptions during extremes.

Check out the relationship between the NYSE Bullish Percent Index and each top and bottom in the S&P 500 since late 2007. The Bullish Percent Index improved drastically from the October low of 2.76% and also diverged with the March S&P lows and printed higher highs (2.76->12.11%) which was a distressed buy signal. It closed at 74.83 today. Watch for $BPNYA to break below 70% as that could be a signal to sell or position shorts. However in this crazy environment you never know what will happen. The index could hit extreme highs. For more information on this index go to
Investopedia
.

NYSE Bullish Percent Index (Stockcharts.com/$BPNYA)


Here is the S&P 500 P&F chart. The column of X's broke through triple top resistance and pierced early '09 highs. Watch to see if we close below 932 (I believe that's where the X hits) and print a column of O's. Until then the S&P will keep defying gravity or trade in a boring channel.

Oakland, California Denies Bankruptcy Rumors, General Fund Drying Up

I just got this link to Mish's blog on Twitter so I thought I'd check out what the deal is. Below is Oakland, California's June 30, 2008 CAFR (Comprehensive Annual Financial Report) filed at Oaklandnet.com. It looks like their General Fund is drying up with an $83 million - $100 million deficit expected on July 1. Police, fire and debt service payments are squeezing their general fund which could lead to cost cuts/police layoffs. Eastbayexpress says they need a $67 million police grant. What happens to muni bond holders in a bk??
City of Oakland Denies Bankruptcy Rumors (CBS5 VIDEO)
Budget woes have Oakland mulling bankruptcy (sfgate.com)
Bankruptcy not immediate option for Oakland (Mercury/Oakland Tribune)
Oakland faces $115M budget deficit (ABC7 SF)
Oakland Officials Discussing Bankruptcy (Listen to Podcast)(KGO Newstalk)
Oakland Considers Bankruptcy (East Bay Express)


From their CAFR look at revenue/expenses on the public safety line. They need that grant!




Apple WWDC 2009 Full Keynote Video - MacBook Pro, iPhone, Mac OS

The 2009 Apple WWDC (Worldwide Developers Conference) Keynote video is up at Apple.com. Here is the full Quicktime Movie link or you can find the link at Apple.com. Schiller first talked about the thin 15 inch MacBook Pro with the revolutionary lithium-polymer battery which allows up to 7 Hours of battery life. It's the fastest notebook they've ever made with speeds up to 3.06 Ghz using the Intel 2 Duo Core processor with 6MGs of Level 2 Cache. Everybody clapped when he said it allowed up to 8GBs of memory with 1066 MHz DDR3, 500GB hardrive. It costs $2,000 fully loaded or the minimum is $1699. The 13inch MacBook Pro looks good too and starts at $1,199. These people are geniuses. They also talk about the iPhone 3G S and Mac OS Snow Leopard.

"Watch Philip Schiller, Senior Vice President of Worldwide Product Marketing, unveil the new iPhone 3G S, the new MacBook Pro family, and Mac OS X Snow Leopard."


Apple WWDC 2009 Keynote Video


Also: What is inside the MacBook Pro 13"? Disassembled at ZDNET.

The Green Shoot Revolution!

Hat tip Zero Hedge

Does VIX to SPY Converge or Diverge Here?

It all comes down to one moment and a final fear vs. complacency decision will determine if the S&P can reach 1,000. Either volatility spikes and $SPY corrects or fear premium is sold and $SPY moves to 100. $VIX is the measurement of implied volatility on S&P index options.


VIX to SPY

Roubini Dismisses Green Shoots Sees Complacency

Here's Roubini at the St. Petersburg International Economic Forum talking about the outlook for banking regulation. I couldn't find the video on clipsyndicate so here's the full video at Bloomberg.com. You can also find a nice write up at Business Insider.


S&P Testing 2002 Bear Market Rally High

Last historical relationship chart, for now. The S&P is testing the 2002 bear market rally high. If you look at the 2002 double bottom "W" formation it rallied to 964 on 8/23/2002 (Bigcharts.com interactive chart). The SPX last week hit a high of 950. Not that this resistance line means much but it could be on the minds of traders or Bots.

Notice that the long term RSI and MACD is still well below the zero level, however a bullish cross could bring some upside momentum and knock this thing to 1,000. Also from the chart the monthly rate of change to the upside seems to be abating.

So Mr. Market are you consolidating or is it correction time? Don't be a b-otch $VIX!

S&P 500 (Bigcharts.com)

Blogger "Operation Aborted" Error on Internet Explorer

I thought maybe I could get some help if I do a blog post about the "Internet Explorer Cannot Open The Internet Site", "Operation Aborted" Blogger issue. Also the error occurs pre-Disqus comment installation on January 11, 2009. It briefly loads but then comes up with the "operation aborted" message. Is it related to my Stocktwits, Twitter Counter, Disqus or Feedjit traffic widgets I have installed? Is it an Internet Explorer issue? Or is the Google comment system confused. I do not have the "Google Follower" widget on here so that is not the problem. BUT... I am now logged into google comments and my pages seem to work again. WTF? Any idea on what is going on here? Thanks. Examples below -DV

Charts Comparing 1974, 1982, 2002 Market Bottoms To Today, 80s Recovery

Digging into historical charts here. I know nothing repeats itself but I feel bits and pieces do. I am providing charts of market bottoms during the 1973, 1982 and 2002 recessions and comparing them to today. I guess you could say the 1983 bottom and sharp recovery looks similar to the March lows. In early 1982 the SPX double bottomed at 105 and capitulated just below that level which shook out all longs. Was the 666 low in early March capitulation??

From Wikipedia:

"According to Keynesian economists, a combination of deficit spending[citation needed] and the lowering of interest rates slowly led to economic recovery. From a high of 10.8% in December 1982, unemployment gradually improved until it fell to 7.2% on Election Day in 1984.[5] Nearly two million people left the unemployment rolls.[31] Inflation fell from 10.3% in 1981 to 3.2% in 1983.[1][32] Corporate earnings rose by 29% in the July-September quarter of 1983, compared with the same period in 1982. Some of the most dramatic improvements came in industries hardest hit by the recession, such as paper and forest products, rubber, airlines, and the auto industry.[31]"

Use that Wikipedia data with caution. Also I found an article and Reagan's radio address from 1982. "Year Of Economic Recovery in 1982" (Evening Independent January 4, 1982), Reagan Radio Address to the Nation - Program for Economic Recovery (May 1, 1982).

1973-75 Recession History, Chart, 2009 Comparison?

I provided a S&P chart during the 1973-1975 recession and other information. Wikipedia: From 1973-75 the Dow lost 45% of it's value, real GDP growth slowed to -2.1% and inflation (CPI) jumped from 3.4% in 1972 to 12.3% in 1974 due to oil embargo, USD devaluation etc. With the S&P, oil and other commodities on the rise and US Treasuries being dumped lets hope it is forecasting strong growth with stable prices going forward w/ I guess the Gov picking up the employment tab (2)? Plus is China trying to bring down the price of oil by showing their reserves (WSJ 1, 2). Keep an eye on crude.

S&P 500 1971-1976 (Bigcharts.com)


This is also interesting. Analysts called 1973 wrong (Time Magazine article on January 8, 1973, mentions economist Alan Greenspan).


"Most Wall Street analysts are convinced that the market will continue to climb smartly in 1973. Brokers looking for a marked increase in trading volume see signs that small investors are beginning to overcome fears instilled by the Wall Street slide of 1970 and return to the market. Investment from abroad is also on the rise. Economist Alan Greenspan estimates that foreigners put $1.6 billion into American securities last year and will buy $3 billion worth in 1973."

A Gilt-Edged Year for the Stock Market (TIME - January 8, 1973)



Other news links I found about the 1973-1975 recession:

David Rosenberg: Recession to Be Worst Since 1970s (WSJ Blog)

Recession 1973 vs. 2008 (Jack B. Walters)

The Recession of 1973-75 in the U.S. (applet-magic.com)

1973–1974 stock market crash (Wikipedia)

George Bush Impersonator, Colbert (Correspondents Dinner)

If I had a blog in 2006, this would definitely be on there. At the White House Correspondents Dinner in 2006 George Bush and an impersonator were on stage at the same time. Also Colbert Roasted Bush too. I couldn't embed the C-span videos but they are both available on Google: Bush Impersonator, Colbert Roasts Bush. Bush was funny for doing that.




Posted by newsbysector blog.

G7 Currency Implied Volatility Up Since May

Kind of related to my last post about the Latvian Lat. The currency markets could get volatile again based on the JPM G7 Currency Implied Volatility Index at Bloomberg.com. Fund X has been bidding up volatility since early May. Today the index closed at 15.67 which is up 17% since it hit bottom in early May (13.38). It is interesting that G7 volatility caught a bid right when the US Dollar broke down. Someone is anticipating currency swings but implied volatility isn't even close to the 2008 highs. I'll be watching for premium sellers or G7 currency movement on news going forward. Also euro/dollar implied vol is at an 8 week high. We shall see people.


G7 Currency Volatility Index (Bloomberg.com)

VIX, Currency Options Signal Rally May End: Technical Analysis (Bloomberg)
Forex Options Show US Dollar Sentiment Extreme, Bounce Likely (DailyFX)
Carry Interest Rising, Lack of Risk Doesn't Translate Into Strong Fundamentals (DailyFX)

Obama Speaks in Cairo, Egypt (Full CSPAN Video)

"PRESIDENT OBAMA: Thank you very much. Good afternoon. I am honored to be in the timeless city of Cairo, and to be hosted by two remarkable institutions. For over a thousand years, Al-Azhar has stood as a beacon of Islamic learning; and for over a century, Cairo University has been a source of Egypt's advancement. And together, you represent the harmony between tradition and progress. I'm grateful for your hospitality, and the hospitality of the people of Egypt. And I'm also proud to carry with me the goodwill of the American people, and a greeting of peace from Muslim communities in my country: Assalaamu alaykum. (Applause.)"

Full Transcript at Whitehouse.gov

Economic Blogger Mish Speaks at Google (Video)

Mish (Mike Shedlock) who runs the blog "Mish's Global Economic Trend Analysis" spoke at Google. His blog is great for economic analysis.

Latvian Lat Falls, Blondes Rally

A failed Latvian short-term debt auction on Wednesday made the Lat and other Eastern European currencies fall against the Euro and USD. The fear is that Latvia would devalue it's currency to spur exports due to the economic slump (Latvia expects -18% economic growth, budget deficit 8.2% of GDP -FT). This would make it harder for Latvian companies/consumers to service their debt or pay back loans denominated in other currencies (Swedbank -15.9% -FT). Nigel Rendell of RBC Capital had this to say about the country.

"Nigel Rendell, senior emerging markets strategist at RBC Capital Markets, said: “The country is in a mess with the economy expected to contract very sharply this year, while the budget deficit is horribly high. Devaluation looks very likely as a way of boosting exports and growth.” (FT.com)
Last thing we need right now is another interbank lending freeze which could spill into the Euro and US Dollar funding markets and bank CDS (which would ultimately lead to more Gov backstops). Latvia's CDS spread widened while it's Central Bank said it would keep the Lat pegged to the Euro (Bloomberg, Reuters).

USD/Latvia Lat (INO.com)

News Links:
Latvia, Lithuania, SEB CDS rise sharply-CMA (Reuters)
EU Warns Latvia on Budget Deficit Amid Crisis (WSJ)
Latvia auction flop sparks fears of struggle to find debt buyers (FT)
Baltic concerns take their toll of krona (FT)
IMF agreement on budget critical for Latvia-Fitch (Reuters)
Waiting for Latvia to devalue (FTAlphaville)
Make no mistake, the ‘Baltic Three’ are in the dock (FTAlphaville)
Latvia Finds Itself In Currency And Funding Crisis, Kills EM Rally (Zero Hedge)

Forint Falls Most in Three Months on Latvia Devaluation Concern (Bloomberg)

To stay up to date on currency pairs of Eastern Europe vs. USD I embedded live charts below from forexpros.com.

Housing Datathon: Housing Starts, Building Permits, Pending Home Sales

This is part 1 of a DV housing datathon. I'm going to dig into housing and housing related data on my next few posts to show what's going on in the industry and to see if we are at the bottom.

Housing Starts/Building Permits: The total Housing Starts (HOUST) chart is still in a downtrend however you could say the pace is getting less worse. Housing Starts for 1 Unit structures (single family homes) actually increased 2.8% from March. It is brushing up against downtrend resistance so watch out for a break there and possible leadership. The data point that killed HOUST was apartment building starts. Also building Permits hit a new low.


Total Housing Starts (Stlouisfed.org)

Housing Starts (1 Unit) (Stlouisfed.org)

Construction Permits (Stlouisfed.org)


Full Bernanke Testimony Video/Text (House Budget Committee) - 6/3/2009

Chairman Ben Bernanke testified about the state of the U.S economy before the House Budget Committee today (June 3, 2009). Below is the full hearing video via CSPAN and text.



"Chairman Ben S. Bernanke
Current economic and financial conditions and the federal budget
Before the Committee on the Budget, U.S. House of Representatives, Washington, D.C.
June 3, 2009


Chairman Spratt, Ranking Member Ryan, and other members of the Committee, I am pleased to have this opportunity to offer my views on current economic and financial conditions and on issues pertaining to the federal budget.

Economic Developments and Outlook

The U.S. economy has contracted sharply since last fall, with real gross domestic product (GDP) having dropped at an average annual rate of about 6 percent during the fourth quarter of 2008 and the first quarter of this year. Among the enormous costs of the downturn is the loss of nearly 6 million jobs since the beginning of 2008. The most recent information on the labor market--the number of new and continuing claims for unemployment insurance through late May--suggests that sizable job losses and further increases in unemployment are likely over the next few months.

However, the recent data also suggest that the pace of economic contraction may be slowing. Notably, consumer spending, which dropped sharply in the second half of last year, has been roughly flat since the turn of the year, and consumer sentiment has improved. In coming months, households' spending power will be boosted by the fiscal stimulus program. Nonetheless, a number of factors are likely to continue to weigh on consumer spending, among them the weak labor market, the declines in equity and housing wealth that households have experienced over the past two years, and still-tight credit conditions.

Activity in the housing market, after a long period of decline, has also shown some signs of bottoming. Sales of existing homes have been fairly stable since late last year, and sales of new homes seem to have flattened out in the past couple of monthly readings, though both remain at depressed levels. Meanwhile, construction of new homes has been sufficiently restrained to allow the backlog of unsold new homes to decline--a precondition for any recovery in homebuilding.

Businesses remain very cautious and continue to reduce their workforces and capital investments. On a more positive note, firms are making progress in shedding the unwanted inventories that they accumulated following last fall's sharp downturn in sales. The Commerce Department estimates that the pace of inventory liquidation quickened in the first quarter, accounting for a sizable portion of the reported decline in real GDP in that period. As inventory stocks move into better alignment with sales, firms should become more willing to increase production.

We continue to expect overall economic activity to bottom out, and then to turn up later this year. Our assessments that consumer spending and housing demand will stabilize and that the pace of inventory liquidation will slow are key building blocks of that forecast. Final demand should also be supported by fiscal and monetary stimulus, and U.S. exports may benefit if recent signs of stabilization in foreign economic activity prove accurate. An important caveat is that our forecast also assumes continuing gradual repair of the financial system and an associated improvement in credit conditions; a relapse in the financial sector would be a significant drag on economic activity and could cause the incipient recovery to stall. I will provide a brief update on financial markets in a moment.

Even after a recovery gets under way, the rate of growth of real economic activity is likely to remain below its longer-run potential for a while, implying that the current slack in resource utilization will increase further. We expect that the recovery will only gradually gain momentum and that economic slack will diminish slowly. In particular, businesses are likely to be cautious about hiring, and the unemployment rate is likely to rise for a time, even after economic growth resumes.

In this environment, we anticipate that inflation will remain low. The slack in resource utilization remains sizable, and, notwithstanding recent increases in the prices of oil and other commodities, cost pressures generally remain subdued. As a consequence, inflation is likely to move down some over the next year relative to its pace in 2008. That said, improving economic conditions and stable inflation expectations should limit further declines in inflation.

Conditions in Financial Markets

Conditions in a number of financial markets have improved since earlier this year, likely reflecting both policy actions taken by the Federal Reserve and other agencies as well as the somewhat better economic outlook. Nevertheless, financial markets and financial institutions remain under stress, and low asset prices and tight credit conditions continue to restrain economic activity.

Among the markets where functioning has improved recently are those for short-term funding, including the interbank lending markets and the commercial paper market. Risk spreads in those markets appear to have moderated, and more lending is taking place at longer maturities. The better performance of short-term funding markets in part reflects the support afforded by Federal Reserve lending programs. It is encouraging that the private sector’s reliance on the Fed’s programs has declined as market stresses have eased, an outcome that was one of our key objectives when we designed our interventions. The issuance of asset-backed securities (ABS) backed by credit card, auto, and student loans has also picked up this spring, and ABS funding rates have declined, developments supported by the availability of the Federal Reserve’s Term Asset-Backed Securities Loan Facility as a market backstop.

In markets for longer-term credit, bond issuance by nonfinancial firms has been relatively strong recently, and spreads between Treasury yields and rates paid by corporate borrowers have narrowed some, though they remain wide. Mortgage rates and spreads have also been reduced by the Federal Reserve's program of purchasing agency debt and agency mortgage-backed securities. However, in recent weeks, yields on longer-term Treasury securities and fixed-rate mortgages have risen. These increases appear to reflect concerns about large federal deficits but also other causes, including greater optimism about the economic outlook, a reversal of flight-to-quality flows, and technical factors related to the hedging of mortgage holdings.

As you know, last month, the federal bank regulatory agencies released the results of the Supervisory Capital Assessment Program (SCAP). The purpose of the exercise was to determine, for each of the 19 U.S.-owned bank holding companies with assets exceeding $100 billion, a capital buffer sufficient for them to remain strongly capitalized and able to lend to creditworthy borrowers even if economic conditions over the next two years turn out to be worse than we currently expect. According to the findings of the SCAP exercise, under the more adverse economic outlook, losses at the 19 bank holding companies would total an estimated $600 billion during 2009 and 2010. After taking account of potential resources to absorb those losses, including expected revenues, reserves, and existing capital cushions, we determined that 10 of the 19 institutions should raise, collectively, additional common equity of $75 billion.

Each of the 10 bank holding companies requiring an additional buffer has committed to raise this capital by November 9. We are in discussions with these firms on their capital plans, which are due by June 8. Even in advance of those plans being approved, the 10 firms have among them already raised more than $36 billion of new common equity, with a number of their offerings of common shares being over-subscribed. In addition, these firms have announced actions that would generate up to an additional $12 billon of common equity. We expect further announcements shortly as their capital plans are finalized and submitted to supervisors. The substantial progress these firms have made in meeting their required capital buffers, and their success in raising private capital, suggests that investors are gaining greater confidence in the banking system.

Fiscal Policy in the Current Economic and Financial Environment

Let me now turn to fiscal matters. As you are well aware, in February of this year, the Congress passed the American Recovery and Reinvestment Act, or ARRA, a major fiscal package aimed at strengthening near-term economic activity. The package included personal tax cuts and increases in transfer payments intended to stimulate household spending, incentives for business investment, increases in federal purchases, and federal grants for state and local governments.

Predicting the effects of these fiscal actions on economic activity is difficult, especially in light of the unusual economic circumstances that we face. For example, households confronted with declining incomes and limited access to credit might be expected to spend most of their tax cuts; then again, heightened economic uncertainties and the desire to increase precautionary saving or pay down debt might reduce households’ propensity to spend. Likewise, it is difficult to judge how quickly funds dedicated to infrastructure needs and other longer-term projects will be spent and how large any follow-on effects will be. The Congressional Budget Office (CBO) has constructed a range of estimates of the effects of the stimulus package on real GDP and employment that appropriately reflects these uncertainties. According to the CBO's estimates, by the end of 2010, the stimulus package could boost the level of real GDP between about 1 percent and a little more than 3 percent and the level of employment by between roughly 1 million and 3-1/2 million jobs.

The increases in spending and reductions in taxes associated with the fiscal package and the financial stabilization program, along with the losses in revenues and increases in income-support payments associated with the weak economy, will widen the federal budget deficit substantially this year. The Administration recently submitted a proposed budget that projects the federal deficit to reach about $1.8 trillion this fiscal year before declining to $1.3 trillion in 2010 and roughly $900 billion in 2011. As a consequence of this elevated level of borrowing, the ratio of federal debt held by the public to nominal GDP is likely to move up from about 40 percent before the onset of the financial crisis to about 70 percent in 2011. These developments would leave the debt-to-GDP ratio at its highest level since the early 1950s, the years following the massive debt buildup during World War II.

Certainly, our economy and financial markets face extraordinary near-term challenges, and strong and timely actions to respond to those challenges are necessary and appropriate. Nevertheless, even as we take steps to address the recession and threats to financial stability, maintaining the confidence of the financial markets requires that we, as a nation, begin planning now for the restoration of fiscal balance. Prompt attention to questions of fiscal sustainability is particularly critical because of the coming budgetary and economic challenges associated with the retirement of the baby-boom generation and continued increases in medical costs. The recent projections from the Social Security and Medicare trustees show that, in the absence of programmatic changes, Social Security and Medicare outlays will together increase from about 8-1/2 percent of GDP today to 10 percent by 2020 and 12-1/2 percent by 2030. With the ratio of debt to GDP already elevated, we will not be able to continue borrowing indefinitely to meet these demands.

Addressing the country's fiscal problems will require a willingness to make difficult choices. In the end, the fundamental decision that the Congress, the Administration, and the American people must confront is how large a share of the nation's economic resources to devote to federal government programs, including entitlement programs. Crucially, whatever size of government is chosen, tax rates must ultimately be set at a level sufficient to achieve an appropriate balance of spending and revenues in the long run. In particular, over the longer term, achieving fiscal sustainability--defined, for example, as a situation in which the ratios of government debt and interest payments to GDP are stable or declining, and tax rates are not so high as to impede economic growth--requires that spending and budget deficits be well controlled.

Clearly, the Congress and the Administration face formidable near-term challenges that must be addressed. But those near-term challenges must not be allowed to hinder timely consideration of the steps needed to address fiscal imbalances. Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth."

$SLV Back Month Options Active, Implied Volatility Up

Silver has been on fire recently moving inversely with the US Dollar. Tonight the USD is at 78.51 down from 82 a few weeks ago. The USD has support around 78 where it could start to retrace. $SLV is up 30% from the beginning of May. I recently wrote about Paulson & Co's GLD/GDX buys and Hecla Mining option activity.

Back to $SLV's options. Last Friday ONN.tv, (article) reported that 100,000 Jan 2010 $13 puts were sold, 75,000 Jan 2010 $14 calls were bought and 100,000 $19 calls were sold (vertical call spread) on $SLV. If these prints are correct someone is levering up to own 7.5 million shares of $SLV at $14 before Jan 15, 2010 with a $19 cap. Here it is visually.

$SLV Jan '10 Calls (Yahoo Finance)
$SLV Jan '10 Puts (Yahoo Finance)

I also saw interesting action in October today. Over 6,000 contracts traded on both the Oct '09 $17 and $22 calls. Is this an out-of-the money credit or debit spread? The ticks were quite peculiar. Either way calls on this ETF are being played with from $14-22 expiring Oct-Jan. The 75k-100k volume speaks much louder. I provided a charts for the Oct '09 $17 and $22 strike.

$SLV Oct '09 Calls (Yahoo Finance)

$SLVJQ Oct '09 $17 Call (OptionsXpress)

$SLVJV Oct '09 $22 Call (OptionsXpress)

Also check out implied volatility on $SLV. It's been trending higher recently with a big volume spike. Check out this chart from Ivolatility.com. Options are anticipating a move here.


On the chart $SLV recently broke out and is testing a flattish downtrend and overhead resistance (early 2008). RSI is strong at 78 but could get overbought eventually. The 50/200 crossed to the upside which could support a rising trend going forward. Resistance is at $19 and $20 . Silver looks like a good long term story imo. We'll see.

Conan O'Brien First Tonight Show Episode Featuring Will Ferrell

Nothing finance related here. I thought I would put up the first Conan O'Brien Tonight Show episode. Hulu is taking over the world. $SLV options active, developing..

$SPY Testing May 2008 Downtrend, Technical Views From Strategists

SPY and $ES_F (S&P E-Mini June Future) pierced through ceiling resistance and are now about to test the mother downtrend starting at May 2008. A break through of this trend would be very bullish. A break down would be bearish. The GM/Chrysler bankruptcy news is behind us (hopefully runs smoothly) so this summer should get interesting, place your bets. I provided charts of $SPY and $ESM9 (S&P future) via INO.com. Also technical views on the market from CNBC.com videos.

ING Technical Analyst Roelof van den Akker: USD will move higher, Dow will top out at 9,000 and correct to 7,500.

SPY May Put Pessimists Squeezed, Contracts Ripped Up

These charts are interesting from schaeffersresearch.com. Look how the SPY (S&P 500 ETF) put/call open interest ratio declined 24% after the May expiration (1.87-1.42). The market rally and declining volatility squeezed the May pessimists and expired insurance worthless. The SPY put/call ratio is still relatively elevated at 1.59 on June 1 and the put/call volume ratio is still holding it's own.

SPY Put/Call Open Interest Ratio (Schaeffersresearch)

SPY Put/Call Volume Ratio (Schaeffersresearch.com)

SPY Volatility vs. Price (Schaeffersresearch)

D7 Tech Conference Videos, Charts: YHOO, MSFT, NOK, RIMM (Nasdaq)

The Nasdaq and the Qs are in charge at the moment so I thought I'd look at the tech industry. AllThingsD recently had their D7 Conference so I embedded some videos below along with tech stock charts. Large cap tech is making moves and YHOO, MSFT, RIMM and NOK are all above their 200 day moving average. The RSI (relative strength index) is still very strong so they could be chasable for a few more points, but a pullback would look good after a 50%+ run, in my opinion (yo no se). First here is Tech Ticker's take on the conference.


Yahoo's CEO Carol Bartz said she would sell Yahoo if she got a boat load of money and the company had the right technology. She also talks up brand advertising and video ads etc.. When will there be another $33 offer? Yahoo Chart ($YHOO/Stockcharts.com).




Microsoft just came out with a new search engine called Bing. CEO Steve Ballmer introduces Bing and also talks about Netbooks. Microsoft Chart ($MSFT/Stockcharts.com).




Nokia CEO Olli-Pekka Kallasvuo previews the Nokia N97 phone. Nokia Chart ($NOK/Stockcharts.com). It looks like it's options were active today, Nokia (NOK) Sees Spike in Option Trading (Schaeffers Research).




RIMM (Research and Motion) co-CEO Mark Lazardis talks about the next phase in wireless technology, smart phones, the iPhone buzz and the consumer's appetite for advanced communications. Research & Motion Chart ($RIMM/Stockcharts.com).




They also had the Twitter founders and Mark Cuban on stage. Cuban hates on the Internet but likes the TV space.



Geithner's Speech Peking University, Prof Xiao Geng

Here is part of Geithner's speech at Peking University in Beijing, China along with words from Professor Xiao Geng from Tshinghua University and news links below.

"May 31, 2009
TG-152

The United States and China, Cooperating for Recovery and Growth
Treasury Secretary Timothy F. Geithner
Speech at Peking University - Beijing, China
June 1st, 2009


It is a pleasure to be back in China and to join you here today at this great university.

I first came to China, and to Peking University, in the summer of 1981 as a college student studying Mandarin. I was here with a small group of graduate and undergraduate students from across the United States. I returned the next summer to Beijing Normal University.

We studied reasonably hard, and had the privilege of working with many talented professors, some of whom are here today. As we explored this city and traveled through Eastern China, we had the chance not just to understand more about your history and your aspirations, but also to begin to see the United States through your eyes.

Over the decades since, we have seen the beginnings of one of the most extraordinary economic transformations in history. China is thriving. Economic reform has brought exceptionally rapid and sustained growth in incomes. China¡¯s emergence as a major economic force more fully integrated into the world economy has brought substantial benefits to the United States and to economies around the world.

In recognition of our mutual interest in a positive, cooperative, and comprehensive relationship, President Hu Jintao and President Obama agreed in April to establish the Strategic and Economic Dialogue. Secretary Clinton and I will host Vice Premier Wang and State Councilor Dai in Washington this summer for our first meeting. I have the privilege of beginning the economic discussions with a series of meetings in Beijing today and tomorrow.

These meetings will give us a chance to discuss the risks and challenges on the economic front, to examine some of the longer term challenges we both face in laying the foundation for a more balanced and sustainable recovery, and to explore our common interest in international financial reform.

Current Challenges and Risks

The world economy is going through the most challenging economic and financial stress in generations.

The International Monetary Fund predicts that the world economy will shrink this year for the first time in more than six decades. The collapse of world trade is likely to be the worst since the end of World War II. The lost output, compared to the world economy's potential growth in a normal year, could be between three and four trillion dollars.

In the face of this challenge, China and the United States are working together to help shape a strong global strategy to contain the crisis and to lay the foundation for recovery. And these efforts, the combined effect of forceful policy actions here in China, in the United States, and in other major economies, have helped slow the pace of deterioration in growth, repair the financial system, and improve confidence.

In fact, what distinguishes the current crisis is not just its global scale and its acute severity, but the size and speed of the global response.

At the G-20 Leaders meeting in London in April, we agreed on an unprecedented program of coordinated policy actions to support growth, to stabilize and repair the financial system, to restore the flow of credit essential for trade and investment, to mobilize financial resources for emerging market economies through the international financial institutions, and to keep markets open for trade and investment.

That historic accord on a strategy for recovery was made possible in part by the policy actions already begun in China and the United States.

China moved quickly as the crisis intensified with a very forceful program of investments and financial measures to strengthen domestic demand.

In the United States, in the first weeks of the new Administration, we put in place a comprehensive program of tax incentives and investments ¨C the largest peace time recovery effort since World War II - to help arrest the sharp fall in private demand. Alongside these fiscal measures, we acted to ease the housing crisis. And we have put in place a series of initiatives to bring more capital into the banking system and to restart the credit markets.

These actions have been reinforced by similar actions in countries around the world.

In contrast to the global crisis of the 1930s and to the major economic crises of the postwar period, the leaders of the world acted together. They acted quickly. They took steps to provide assistance to the most vulnerable economies, even as they faced exceptional financial needs at home. They worked to keep their markets open, rather than retreating into self-defeating measures of discrimination and protection.

And they have committed to make sure this program of initiatives is sustained until the foundation for recovery is firmly established, a commitment the IMF will monitor closely, and that we will be able to evaluate together when the G-20 Leaders meet again in the United States this fall.

We are starting to see some initial signs of improvement. The global recession seems to be losing force. In the United States, the pace of decline in economic activity has slowed. Households are saving more, but consumer confidence has improved, and spending is starting to recover. House prices are falling at a slower pace and the inventory of unsold homes has come down significantly. Orders for goods and services are somewhat stronger. The pace of deterioration in the labor market has slowed, and new claims for unemployment insurance have started to come down a bit..." (Full speech at Treasury.gov).

E-Mini June S&P Future Testing MAJOR Levels

GM is going bankrupt and the E-Mini S&P June future, currently trading at 932, is testing ceiling resistance between the Jan high of 938 and May high of 929. It successfully broke through the 200 day moving average at 925. If it can get above the 930s with conviction it could head toward 1,000 where the long term downtrend from May/Sept 2008 meets today. Goldman's 1,050 call would be in the money. So bear market rally or not, a break here could bring more pain for the bears. We'll see how the market digests the GM bankruptcy and if auto delevering affects the market going forward. This is not a recommendation to buy or sell. Also watch out for capitulation buying.

E-Mini S&P June Future ESM9 (OptionsXpress)