From the chart below you can see that once the head and shoulders breakdown failed, traders and investors rushed into the S&P 500. The RSI, CMF and volume all made strong moves..
Nasdaq Volume Highest Since Oct 2008 ($COMPQ) (June 23, 2009)
"So as investment guys we look at the rally in equities, especially what happened in July, and you get a feeling that the equity market is now on a sugar high. Assumptions are being made, assumptions are being made on things like.. corporate profitability can continue to be driven just by cost cutting, that's not true you need revenue growth. Assumptions are being made that the stimulus is going to have a permanent affect, that's not true just look at what happened in China today. The Chinese equity market was down 5% on talk that some of the stimulus may be withdrawn. And finally an assumption is being made that the stabilization of housing is sufficient to get this economy going again. It's not sufficient, it's necessary but it's not sufficient. So our feeling is that the July part of the rally was a bit of a sugar high"
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"The Great Recession, which rolled over our financial lives like one of P.J. Keating's giant pavers, is most likely over. Home sales, while still far below the levels of a year ago, have risen for three straight months—a first since 2004. The stock market has rallied 44 percent since March, thanks to renewed optimism and improving earnings from big companies like Goldman Sachs and Apple. In June, seven of the 10 indicators in the Conference Board Leading Economic Index pointed upward, including manufacturing hours worked and unemployment claims...... Read full article"
"It was a 120K by 240K put backspread rolled from August to December, executed on behalf a major US-based hedge fund; 120k of Aug 92 puts were traded up to Dec 95 puts and 240K of Aug 80 puts were traded up to Dec 82 puts; the transaction was virtually fresh cash-neutral for the fund."
"This trade is bearish and has a large area under which it would remain profitable to the downside," said Joe Kinahan, chief derivatives strategist at online brokerage thinkorswim Group. "This institutional investor is definitely looking for a pullback in the S&P 500 between now and December expiration."Here is when the AUG Puts were originated. Hopefully it was just a hedge against a large SPY position ($SPY rallied 11.3% since June 15).
Rather than an outright bearish bet, this appears to be a hedge on a long stock position in the Spiders, Schwartz said." (Reuters, July 23)
"At least one option trader appears to be on the defensive in an exchange-traded fund that tracks the performance of the Standard & Poor's 500 index .SPX on fears the benchmark could suffer extended losses this summer."
"The Aug $92 and $80 puts have jumped to the top of the most actives list in morning trade as an investor apparently bought the $80-$92 (2X1) put ratio spread 120,000 times for about $1.75 premium on the International Securities Exchange, said WhatsTrading.com option strategist Frederic Ruffy. Both legs look like opening trades, he added." (Reuters, June 15)
Musk stated, "We nailed the orbit to well within target parameters...pretty much a bullseye. Satellite has separated and is communicating with (the) ground." This launch marked the 5th flight of the Falcon 1. Liftoff from Omelek Island, Kwajalein Atoll occured at 8:35 P.M. PDT.
"NEW YORK, July 23 (Reuters) - The U.S. government is set to sell record amounts of long-dated Treasury securities next week in an effort to raise billions to fund its economic stimulus package and industry bailouts." (Reuters)
Tom Keene: "David Rosenberg you say it is a redux of 2002, what do you mean by that, what is a redux of 2002?"
Rosenberg: "Well what I was saying was that you know today we talk about the green shoots and back then we were talking about V-shaped recoveries. Essentially what I was talking about Tom was that the stock market on September 24, 2001 hit what everybody believed at the time was going to be the low for the cycle. 955 on the S&P 500 that was universally believed to be THE low and we didn't bail out banks at that point but we were bailing out airlines, tremendous fiscal monetary stimulus and people were building in this view that we were going to have post 9/11 reconstruction, gobs of fiscal stimulus, the FED had cut rates dramatically and of course the fabled inventory rebuild which we saw and it took the ISM above 50 into the opening months of 2002 and it was all good. The Nasdaq rallied about 40%, all the major averages were surging, bonds were getting killed and the primary view was that we were going to get a really nice post recession recovery and the problem of course is that in an asset deflation cycle which that was, it wasn't easy street it took about a year and a half before we got a durable sustainable economic recovery. This time around it wasn't just asset deflation times three, it was coupled with a credit collapse and here we have this universally held view that the March lows are going to hold. Everybody believes that and maybe they will but I'm a bit of a Maverick contrarian at heart. Everybody believes those March lows are going to hold and everybody is talking about the green shoots and the onset of the economic recovery and of course we're probably going to see a positive third quarter GDP number because of the rebuilding of inventories in the auto sector and everybody is extrapolating that into the future as they did in the opening months of 2002."
"...We actually didn't put in the conclusive low in the stock market until 2003 which was a year after the recession ended.." (Listen to full 17:24 audio)
|Source: TraderTim on Flickr|
"Well my basic view point is that when it comes down to whether or not you're going to have profits you have to look at the income statement first and when you look at revenues what you see isn't bullish at all. Harley Davidson for example is 30% down on shipments, we have the automakers all going from 14 million units to about 10 million units a year that's about a 30% decrease, we had REVpar for Marriott down about 19%, we had GE's revenue down 17-18% and the same story keeps getting told. We're in the high teens, low twenties, thirty percent decrease on revenue. What you're seeing is profits from operating efficiency and how do you get operating efficiency? You offshore and you fire people. That's great for the bottom line but it isn't any good for America on (as a) whole."
"I think it's time to get very short. This rally is absolutely unsustainable and unsupportable on the fundamentals."
"GE is too late to sell they are already in the toilet. As far as being short the S&P yes I shorted it hard at the close today and the reason is this, you have a credit recession that was caused by too much debt being throughout the economy in banks, in consumers, in businesses everywhere. Consumers have managed to take $60 billion out of a $1 trillion between secured and unsecured debt not including mortgages off their balance sheet since the peak which was just a few months ago. That's less than 6% and you're telling me that's enough deleveraging for the consumer. Not a chance Larry."
"We have, I think, an excessive degree of concern right now about home ownership and it's role in the economy. Obviously speculation is never a good thing. But those who argue that housing prices are now at the point of a bubble seem to me to be missing a very important point. Unlike previous examples we have had where substantial excessive inflation of prices later caused some problems. We are talking here about an entity, home ownership, homes, where there is not the degree of leverage that we have seen elsewhere. This is not the dot com situation. We had problems with people having invested in business plans for which there was no reality, with people building fiber optic cable for which there was no need. Homes that are occupied may see an ebb and flow in the price at a certain percentage level but you're not going to see a collapse that you see when people talk about a bubble. So those of us on our committee in particular will continue to push toward home ownership."
".... But not for low income people. Home ownership for people that could afford it"
"What you are really looking for now is some sort of traction. The companies that we see at the earliest stages have, even without venture funding, demonstrated traction. If you follow Twitter there's a group called StockTwits founded by an entrepreneur named Howard Lindzon, and what Howard did is instead of doing anything other than some angel funding he went out and built a community of 100,000 people so now he can get venture funding because he has proven his concept. By the way I'm not an investor and I probably should've been". (Double check wording, starts at 3:25)
"A credit default swap (CDS) is a swap contract in which the buyer of the CDS makes a series of payments to the seller and, in exchange, receives a payoff if a credit instrument - typically a bond or loan - goes into default (fails to pay). Less commonly, the credit event that triggers the payoff can be a company undergoing restructuring, bankruptcy or even just having its credit rating downgraded."
“The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways,” Facciponti said. “The copy in Germany is still out there, and we at this time do not know who else has access to it.” (Bloomberg)
"The worldwide manufacturing sector took a further step towards recovery in June. The JPMorgan Global Manufacturing PMI — which acts a barometer of the overall health of the sector — posted 46.9, its highest reading since last August. Output expanded slightly following a year-long period of contraction." (Source)The June ISM Manufacturing Index number increased 2% to 44.8%. The 17 month trend trend in economic activity is still contracting at a SLOWER pace. Look at the downtrend. History shows dramatic rebounds after ISM hits less than 40%. The chart does not show ISM during the 1930s. The # needs to break above downtrend.