Latvian Lat: Auction Fails, Speculation of Devaluation ($LVL)

Could this be a catalyst for a USD carry trade unwind if fears spread throughout the Baltic region? This is nothing new though, read Latvian Lat Falls, Blondes Rally from early June. I provided a $USD/LVL chart below for you to keep an eye on the pair. From today's WSJ article:
"The criticism came as a government bond auction failed to attract buyers, and worries about the Latvian economy weighed on the currencies of Sweden -- whose banks are Latvia's major lenders -- and other countries."

"Latvia's struggle has continued for months and its current woes revived market speculation that the country could try to ease its troubles by devaluing its currency, the lat. Such a move could trigger devaluations in the region as Latvia's neighbors come under pressure from nervous markets, analysts said."
Full Article: Latvia's Woes Rise as Auction Fails (10/8/09)


ForexProsForex Charts Powered by Forexpros.com - The Forex Trading Portal.


Hat tip: Across The Curve by way of Eco_Feed.

Conundrum: $TLT and $GLD 4 Month Chart, Someone Explain This

We have a condundrum on our hands. Look at the 4 month chart of $TLT and $GLD move up side by side. Does this mean we are in for deflation while the USD gets pushed out of trade? If it doesn't decouple that is... Someone please explain this. Anyway read this: Which Will Blink First? (MarketWatch).

TLT vs. GLD 4 Months (Courtesy of Stockcharts.com)

Gold COT Report At Extremes, 92% Bullish on 9/29/09

Do you run with the large specs or fade them on the breakout? I remember Gregor Macdonald on MacroTwits not too long ago mentioned the extreme level on the gold commitment of traders report. You can find charts at nowandfutures.com or get the data at CFTC.gov (US Commodity Futures Trading Commission).

Source: Nowandfutures.com

$GLD Makes New High Above March 2008, Volatility and Protection (Charts 10/6)

$GLD, the gold ETF, broke above the March 2008 intra-day high of 100.44. Good job Paulson and Pento. The Sky's the limit if no downside catalysts fuel a risk reversal. If I were to run with this, IMO, a stop under $100 and put protection would be mandatory. GLD implied volatility is at 23.55 while historical is at 15.25. When $GLD broke out of that symmetrical triangle IV hit a peak of 26 before selling off. The ISEE ratio is at 213 meaning the opening call/put ratio is at 2.13. Explanation on ISEE ratio.

Chart courtesy of Stockcharts.com

This was probably contributed to the breakout (oil traders ditching the US Dollar?)..



Be careful because Fed speak could ruin this trade at any time. Also if the market and commodities start to sell off with a stronger dollar, GLD could get crushed. Some people are hedging that risk. Reported from the VIX pit by OptionMonsterTV, someone bought 10,000 Oct 30 VIX calls which could be hedging Q3 earnings results. There was also out of the money put action on IWM (Russell Small Cap ETF): Bought: 40,000/March 2010 60 Puts, Sold: 40,00/March 2010 45 Puts (explanation at OptionMonster.com). IWM closed at $60.31 today and $VIX cash closed at 25.70.

Previous posts on GLD:
Santelli vs. Pento on Gold, Charts: CRB, Gold, Dollar, 30Y Treasury 9/7/09
GLD Breaks Out, December $100 Call Up 49% (Charts: GLD, Comex Gold Futures) 9/3/09
Gold Spot Eyeing $1,000, GLD at Inflection Point (2 Year Chart) (8/6/09)
John Paulson Buys GLD, GDX. Laidi Long Gold/Oil Pair Trade (5/20/09)

Chris Whalen Warns Of Rough Q4 For Bank Earnings

Chris Whalen of Institutional Risk Analytics was on Tech Ticker the other day. I listened to him speak to congress about credit default swaps not too long ago on CSPAN which was interesting (link).
"When you see the markets rallying when the real economy is shrinking that tells you this [recovery] is not going to be very enduring," Whalen says." (Tech Ticker)


He was "astounded" by Goldman's upgrades of Wells Fargo and Capital One this week.


Things should get VERY VERY interesting here.................

Tech Ticker sources:
"Astounded" by Goldman's Upgrade: Banks "Heading Into the Storm," Whalen Says

The "Real" Economy Is Dying: Q4 "Going to Be a Bloodbath," Whalen Says

Robert Prechter Sees 30% Decline From These Levels During Next Wave (10/5/09)

Prechter predicted the March lows, the June-July correction and the 1,000-1,100 target. He now thinks we are going to see another wave to the downside. Get ready to surf an amazing short if the next wave can drown those freshly printed US Dollars. Watch the trend line for a break folks.

February 2009


June 2009

"At that time (March) I was looking for the biggest rally since the high and we had a target range on the S&P of 1,000-1,100. We've reached that area and all the same indicators are now on the other side of the ledger"
  • Advanced/Decline : 13/1 in March, 9/1 in July, 4.8/1 in Sep, slowing upside momentum.
  • 92% of traders were bullish in September on daily sentiment index, 2% in March!
  • Regarding Q3 earnings, news lags the market.
  • You want a low p/e ratio for a bottom, last 100 years it's been 6-7 and it is now over 100! (But if Tom Lee is right, Forward 2010 P/E is at 14x btw).

October 2009

Thomas Lee of JP Morgan Sticking With 1,100 S&P Target (Bloomberg Interview)

Tom Lee (Chief US Strategist of JP Morgan) has been spot on with his 1,100 call on the S&P from this June 17, 2009 (Reuters Interview). HE IS STICKING WITH HIS CALL FOLKS. Here is the Bloomberg interview from a few days ago with a quick summary (Link: JPMorgan's Lee Interview on Stock Market Outlook). His 2010 EPS Estimate at $75/share.

Australia Raises Rates By .25 to 3.25%, AUD/USD Reaction (Charts, Articles)

Wow, the Australian central bank increased interest rates by a quarter point to 3.25%. Up from a 49 year low. AUD/USD spiked 0.83% as of 12:45a and is testing the Sep 30 high of 0.8854. Right now it is at .8846. If that area gets taken out then 0.90 is next. Look at that clean 20 weekma/100weekma cross on the weekly to the upside which proves strong momentum. I thought we'd see a correction at the .68% retracement level, guess not. The Australian Dollar priced in US Dollars rose about 40% since the reflation trade began in February. There was a minor AUD/USD correction in June-July but that's about it. It would be very interesting to see AUD/USD retrace 100% of it's losses from the July 2008 peak to October 2008 low (during the financial crisis). I'd watch that strong uptrend and if it gets broken, hedge or position accordingly imo.

The Dollar is NOT getting much love these days. For example read this article: The demise of the dollar (The Independent). "In a graphic illustration of the new world order, Arab states have launched secret moves with China, Russia and France to stop using the US currency for oil trading". Here are charts and articles.

Australia's shares come off highs on surprise rate hike (Market Watch)
RBA puts housing market in jeopardy say brokers (Tradingroom.com.au)
Australia c.bank raises rates, more expected (Reuters)
Australia Lifts Key Rate From 49-Year Low, Signals More to Come (Bloomberg)


AUD/USD Hourly (Courtesy of FXStreet.com)
AUD/USD Weekly (Courtesy of FXstreet.com)

Full statement from the Reserve Bank of Australia (Source: rba.gov.au)

No: 2009-23
Date: 6 October 2009
Embargo: For Immediate Release


STATEMENT BY GLENN STEVENS, GOVERNOR
MONETARY POLICY


At its meeting today, the Board decided to raise the cash rate by 25 basis points to 3.25 per cent, effective 7 October 2009.

The global economy is resuming growth. With economic policy settings likely to remain expansionary for some time, the recovery will likely continue during 2010 and forecasts are being revised higher. The expansion is generally expected to be modest in the major countries, due to the continuing legacy of the financial crisis. Prospects for Australia’s Asian trading partners appear to be noticeably better. Growth in China has been very strong, which is having a significant impact on other economies in the region and on commodity markets. For Australia’s trading partner group, growth in 2010 is likely to be close to trend.

Sentiment in global financial markets has continued to improve. Nonetheless, the state of balance sheets in some major countries remains a potential constraint on their expansion.

Economic conditions in Australia have been stronger than expected and measures of confidence have recovered. Some spending has probably been brought forward by the various policy initiatives. As those effects diminish, these areas of demand may soften somewhat. Some types of capital spending are likely to be held back for a while by financing constraints, but it now appears that private investment will not be as weak as earlier expected. Medium-term prospects for investment appear, moreover, to be strengthening. Higher dwelling activity and public infrastructure spending is also starting to provide more support to spending. Overall, growth through 2010 looks likely to be close to trend.

Unemployment has not risen as far as had been expected. The weaker demand for labour over the past year or so nonetheless has seen a moderation in labour costs. Helped by this and the earlier fall in energy and commodity prices, inflation has been declining, though measures of underlying inflation remained higher than the target on the latest reading. Underlying inflation should continue to moderate in the near term, but now will probably not fall as far as earlier thought.

Housing credit growth has been solid and dwelling prices have risen appreciably over the past six months. Business borrowing has been declining, as companies have sought to reduce leverage in an environment of tighter lending standards. But large firms have had good access to equity capital and access to debt markets appears to be improving, helped by the better-than-expected economic conditions and increased willingness on the part of investors to accept risk. Share markets have recovered significant ground.

Interest rates facing prospective borrowers on fixed-rate loans have already risen to some extent, as markets have anticipated a higher level of the cash rate. For many business borrowers, increases in risk margins will still be occurring for some time yet. In addition, the exchange rate has appreciated considerably over the past year, which will dampen pressure on prices and constrain growth in the tradeables sector. These factors have been carefully considered by the Board.

In late 2008 and early 2009, the cash rate was lowered quickly, to a very low level, in expectation of very weak economic conditions and a recognition that considerable downside risks existed. That basis for such a low interest rate setting has now passed, however. With growth likely to be close to trend over the year ahead, inflation close to target and the risk of serious economic contraction in Australia now having passed, the Board’s view is that it is now prudent to begin gradually lessening the stimulus provided by monetary policy. This will work to increase the sustainability of growth in economic activity and keep inflation consistent with the target over the years ahead." (Source)

The Alignment of Asset Reflation and a Collapsed Economy

Great post at Gregor.us: The Alignment of Asset Reflation and a Collapsed Economy
**"Like the prestige-performance gap, the divergence between the economy and asset prices apparently has to become even more grotesque before people will understand."

Rutgers Econ Professor: Jobs Won't Recover Until 2017 (Joseph Seneca)

Rutgers Economics Professor Joseph Seneca thinks we won't see a jobs recovery until 2017. "It will take over 7.5 years, til the middle of 2017, to get back to those labor market conditions that existed at the end of 2007, a 4.9% unemployment rate".


A new normal?
Oct. 5 (Bloomberg) -- "Mohamed El-Erian says economists are wrong to dismiss unemployment as merely a lagging indicator, a sign of where the economy has been. For the chief executive officer of Pacific Investment Management Co., the 26-year high jobless rate is also an omen of things to come."



Recent posts:
Unemployment at 9.8%, Most Annual Job Cuts Since 1930s (BLS Report, Charts) 10/4
Q2 Household Equity Up But Asset/Liabilities Ratio At 65 Year Low 9/18

Roubini: Stocks Have Risen Too Fast, Expects U-Shaped Recovery

Dr. Roubini is back expecting a U-shaped recovery and a stock market correction. He doesn't give a specific price target but expects a correction to occur in the 4th quarter of 2009 or 1st quarter of 2010. He also talks about the growing disconnect between financial markets and economic activity, risk of double dip recession from fiscal stimulus drag, demand lagging supply and lower dollar fueling net exports (potentially filling in as a demand component).


and Noubini's thoughts.

Hong Kong Property Index Update, Aberdeen Cuts Bets

Distressed Volatility (仿旧波动) - China Section (中国科)

After reading, Aberdeen Trims China, Hong Kong Property Bets (Bloomberg.com) the Hang Seng Property Index is being squeezed in a symmetrical triangle. It could be good as a straddle trade depending on volatility or at least a play on the breakout/down. Being up 85% since March, there could be a correction if the Hang Seng Composite rolls over. I couldn't find a Hang Seng Property Index ETF but check out these charts from Bloomberg.com.

Hang Seng Property Index (HSP:IND, Courtesy of Bloomberg)

Janet Tavakoli: Adjust GDP for DEFLATION, Risk of Collapse Higher Than 2007!

Yes deflation.. Here is Janet Tavakoli's (Tavakoli Structured Finance) interview with Max Keiser. Here are two points from her summary she provided.
  • GDP is adjusted for deflation (and inflation when it is relevant). GDP in U.S. is actually 2.1% worse than reported, i.e. nominal GDP is worse.
  • GDP looks better because prices fell more rapidly than income. But that means a negative wealth effect, and loan payments are made from nominal income, so falling income means more loan defaults in our overleveraged environment, because we never deleveraged.





I did some research on Janet Tavakoli and it speaks for itself. It just shows how quarter-to-quarter greed took over these huge public financial institutions at the expense of risk management and our economy. Now after the collapse and Government intervention, she says it isn't helping and just masking the underlying problem. She thinks the final deflation hasn't yet been realized.

Bear Stearns Shakes the CDO Honey Pot (August 5, 2005, Thestreet.com)
"There are huge transparency issues,'' says Janet Tavakoli, a structured finance and derivatives consultant and the author of a book on CDOs. "In some cases, investors have been taken in by hype. Some investors don't know what they are getting into."

Tavakoli says buyers typically only care about how much yield a CDO will throw off. Rarely do they inquire about how the underlying assets will be valued, or whether there's a secondary market for trading them.

A Trader's Victory Lap Raises NYSE's Eyebrows (August 17, 2006, WSJ)
In recent weeks, she says she's turned down requests from at least seven regulators, including the Securities and Exchange Commission and the National Association of Securities Dealers, according to her Web site. Each has asked her to share her views in conference calls or meetings with them.

"I can't be doing all this pro bono work," says Ms. Tavakoli. "They can easily ask their members for more information about these instruments ... I don't understand why they're so far behind."

Questions lie behind CPDO hype (November 16, 2006, FT.com)

"Once again, the rating agencies have proved that when it comes to some structured credit products, a rating is meaningless," says Janet Tavakoli, an independent consultant.

"CPDOs have an extreme amount of mark-to-market and liquidity risk. The ratings volatility is likely to be very high . . . All AAA's are not created equal, and this is a prime example."

Bear Stearns Funds Own 67 Percent Stake in Everquest (May 11, 2007, Bloomberg)
The potential for conflicts of interest that would hurt investors buying such an IPO are ``mind boggling'' because buyers would need to rely on securities firms to assign prices to assets that have no ratings, don't trade often and are difficult to value, said Janet Tavakoli, president of Tavakoli Structured Finance Inc., a Chicago-based consulting firm.

This Investment Could Turn Ugly (June 18, 2007, BusinessWeek)
Such investments are also ripe for abuse, since there's little transparency in the underlying holdings. "We've seen several examples in the past where managers succumb to temptation and inflate prices to increase their fees," says Janet Tavakoli, a consultant to institutional investors and president of Tavakoli Structured Finance Inc. "These products are not appropriate for retail investors."

Can Wall Street be trusted to value risky CDOs? (July 13, 2007, Reuters)
"'Mark to model' is a joke," said Janet Tavakoli, president of Tavakoli Structured Finance, a Chicago consulting firm. "What you need to do now is vet the underlying collateral" in CDOs instead of just modeling, which wasn't done earlier, she said. "It's grubby, roll-up-your-sleeves kind of work.

Bond Funds May Be Next to Feel Subprime Shockwaves (September 10, 2007, CNBC)
Critics charge that Standard & Poor's, Moody's Investors Service and Fitch Ratings routinely give triple-A ratings -- the safest rating there is -- to far too many mortgage-backed bonds backed by subprime home loans.

"The rating agencies just completely missed the boat in their methodology for rating these things," said Janet Tavakoli, president of Tavakoli Structured Finance, a Chicago consulting firm.

So, Janet has street cred folks so watch out for deflation. She has a book out called, Dear Mr. Buffett: What An Investor Learns 1,269 Miles From Wall Street.

HT Zero Hedge

Unemployment at 9.8%, Most Annual Job Cuts Since 1930s (BLS Report, Charts)

Here is the recent jobs report from BLS.gov.
Transmission of material in this release is embargoed USDL-09-1180
until 8:30 a.m. (EDT) Friday, October 2, 2009


THE EMPLOYMENT SITUATION -- SEPTEMBER 2009


Nonfarm payroll employment continued to decline in September (-263,000), and
the unemployment rate (9.8 percent) continued to trend up, the U.S. Bureau of
Labor Statistics reported today. The largest job losses were in construction,
manufacturing, retail trade, and government.


Household Survey Data

Since the start of the recession in December 2007, the number of unemployed
persons has increased by 7.6 million to 15.1 million, and the unemployment
rate has doubled to 9.8 percent. (See table A-1.)


Unemployment rates for the major worker groups--adult men (10.3 percent),
adult women (7.8 percent), teenagers (25.9 percent), whites (9.0 percent),
blacks (15.4 percent), and Hispanics (12.7 percent)--showed little change
in September. The unemployment rate for Asians was 7.4 percent, not season-
ally adjusted. The rates for all major worker groups are much higher than
at the start of the recession. (See tables A-1, A-2, and A-3.)

Among the unemployed, the number of job losers and persons who completed
temporary jobs rose by 603,000 to 10.4 million in September. The number of
long-term unemployed (those jobless for 27 weeks and over) rose by 450,000
to 5.4 million. In September, 35.6 percent of unemployed persons were job-
less for 27 weeks or more. (See tables A-8 and A-9.)


The civilian labor force participation rate declined by 0.3 percentage point
in September to 65.2 percent. The employment-population ratio, at 58.8 per-
cent, also declined over the month and has decreased by 3.9 percentage points
since the recession began in December 2007. (See table A-1.)

In September, the number of persons working part time for economic reasons
(sometimes referred to as involuntary part-time workers) was little changed
at 9.2 million. The number of such workers rose sharply throughout most of
the fall and winter but has been little changed since March. (See table A-5.)

About 2.2 million persons were marginally attached to the labor force in
September, an increase of 615,000 from a year earlier. (The data are not sea-
sonally adjusted.) These individuals were not in the labor force, wanted and
were available for work, and had looked for a job sometime in the prior 12
months. They were not counted as unemployed because they had not searched for
work in the 4 weeks preceding the survey. (See table A-13.)

Among the marginally attached, there were 706,000 discouraged workers in
September, up by 239,000 from a year earlier. (The data are not seasonally
adjusted.) Discouraged workers are persons not currently looking for work
because they believe no jobs are available for them. The other 1.5 million
persons marginally attached to the labor force in September had not searched
for work in the 4 weeks preceding the survey for reasons such as school
attendance or family responsibilities.

Establishment Survey Data

Total nonfarm payroll employment declined by 263,000 in September. From May
through September, job losses averaged 307,000 per month, compared with los-
ses averaging 645,000 per month from November 2008 to April. Since the start
of the recession in December 2007, payroll employment has fallen by 7.2 mil-
lion. (See table B-1.)


In September, construction employment declined by 64,000. Monthly job los-
ses averaged 66,000 from May through September, compared with an average of
117,000 per month from November to April. September job cuts were concen-
trated in the industry's nonresidential components (-39,000) and in heavy
construction (-12,000). Since December 2007, employment in construction has
fallen by 1.5 million.

Employment in manufacturing fell by 51,000 in September. Over the past 3
months, job losses have averaged 53,000 per month, compared with an average
monthly loss of 161,000 from October to June. Employment in manufacturing
has contracted by 2.1 million since the onset of the recession.

In the service-providing sector, the number of jobs in retail trade fell by
39,000 in September. From April through September, retail employment has
fallen by an average of 29,000 per month, compared with an average monthly
loss of 68,000 for the prior 6-month period.

Government employment was down by 53,000 in September, with the largest
decline occurring in the non-education component of local government
(-24,000).

Employment in health care continued to increase in September (19,000), with
the largest gain occurring in ambulatory health care services (15,000).
Health care has added 559,000 jobs since the beginning of the recession,
although the average monthly job gain thus far in 2009 (22,000) is down from
the average monthly gain during 2008 (30,000).


Employment in transportation and warehousing continued to trend down in
September. The number of jobs in financial activities, professional and
business services, leisure and hospitality, and information showed little
or no change over the month.

In September, the average workweek for production and nonsupervisory workers
on private nonfarm payrolls edged down by 0.1 hour to 33.0 hours. Both the
manufacturing workweek and factory overtime decreased by 0.1 hour over the
month, to 39.8 and 2.8 hours, respectively. (See table B-2.)

In September, average hourly earnings of production and nonsupervisory
workers on private nonfarm payrolls edged up by 1 cent, or 0.1 percent, to
$18.67. Over the past 12 months, average hourly earnings have risen by 2.5
percent, while average weekly earnings have risen by only 0.7 percent due
to declines in the average workweek. (See table B-3.)

The change in total nonfarm payroll employment for July was revised from
-276,000 to -304,000, and the change for August was revised from -216,000
to -201,000.

_____________
The Employment Situation for October is scheduled to be released on
Friday, November 6, 2009, at 8:30 a.m. (EST).

Unemployment Rate at 9.8%, Chart since 1940s (St. Louis Fed)
Total Non-farm payrolls Change from year ago (most cuts since.. great depression?)

Also look at this.. The Scariest Jobs Chart Ever (Business Insider) and Q2 Household Equity Up But Asset/Liabilities Ratio At 65 Year Low! (Link, 9/18/09).

Gold Outperformed Oil, Dollar and S&P From October 2006 to 2009

From October 2006 to October 2009 gold outperformed oil, the US Dollar and the S&P by a long shot. Gold rose 77%, Oil rose 15%, the US Dollar declined 10% and the S&P 500 came in last place down 24%! I know it's only a 3 year period but during that time the economy aged pretty quickly. First a little history.
  • Leverage Boom, mispricing of risk
  • June, 2006 the Fed makes it's last rate hike to 5.25% from 1.25 in 2004.
  • March, 2007 New Century Financial sub-prime bust.
  • June, 2007 two Bear Stearns sub-prime hedge funds going under.
  • September, 2007 Fed starts to cut rates aggressively.
  • October, 2007 the S&P peaked, recession begins.
  • May-July, 2008 Hot money flows into gold and oil and out of US Dollar.
  • September, 2008 Fannie, Freddie and Lehman go bust; Oil and Gold sell off, Dollar spikes.
  • October 2008 $700 Billion TARP established, bank capital infusions begin.
  • November, 2008 $200 Billion TALF created, Gold begins rally.
  • February, 2009 Oil begins rally.
  • March, 2009 stock market begins rally, US Dollar breaks down... Reflation trade begins.
You can see that oil was riding the commodity inflation train in 2008, up 140% at one point (about double gold's performance), while the US Dollar was hitting all time lows. From the second chart below it's interesting that, from pre-collapse levels to now, the US Dollar is up 7%, gold is up 9.8%, oil is down 34% and the S&P is down 25%. Everyone is giving the Dollar hell right now, but you would've outperformed the S&P by 32% and actually made money if you put money under a mattress during the past year and a half. And since S&P benchmarks are so important, looking at the 3 year numbers, the US Dollar outperformed the S&P by 14% even with a trillion dollar stimulus! That is insane.

Gold, Oil, USD, S&P 3 Year Chart (Courtesy of Stockcharts.com)
Gold, Oil, USD, S&P Pre-Crisis April, 08-today (Courtesy of Stockcharts.com)

ISEE Index Analysis to S&P 500: Put/Call Ratio Excluding Market Makers

The ISEE Index or the ISE Sentiment Index is a put/call ratio that measures opening customer transactions on the International Securities Exchange and leaves out market makers, which distorts the normal put/call calculation. The ISEE can be used as a directional sentiment indicator, protective (hedging) or speculative in nature. Just like the normal put/call ratio it can show extremes that traders can fade or run with, depending on your judgment of giddiness/doomsday. During the second half of 2008 and the beginning of 2009 the extreme short bias on the normal put/call open interest and volume was spot on (read this post), with help from the $VIX (volatility index). At ISE.com you can find the index and they also provide links to articles on the ISEE Index.
"The ISE Sentiment Index is a unique put/call value that only uses opening long customer transactions to calculate bullish/bearish market direction. Opening long transactions are thought to best represent market sentiment because investors often buy call and put options to express their actual market view of a particular stock. Market maker and firm trades, which are excluded, are not considered representative of true market sentiment due to their specialized nature. As such, the ISEE calculation method allows for a more accurate measure of true investor sentiment than traditional put/call ratios."

So it is more of a real indicator than nominal I guess you could say, deleting the noise. I did some analysis between extremes in the ISEE and the resulting move in the S&P. Out of each extreme from March until now 5/7 predicted direction correctly. I'll remind you that this was a period of declining volatility. The massive bullish extreme on 3/9 would have made people a lot of money on the upside. Looking at the activity now, the ISEE itself has been volatile during the past couple of weeks. Right now the SPX is making a low, testing the 50 day moving average, while the ISEE is at the mid point. It looks like ISE customers need to place their opening bets on the 50 day moving average.

ISEE Index Extremes (Courtesy of ISE.com)

SPX w/ ISEE Extreme Comparables (Courtesy of Stockcharts.com)


I found they had a white paper on their site. Here is their whitepaper section. This one is titled ISEE vs. DJIA in 2008 (PDF source).

Whitepaper ISEE vs DJIA Complete 2008

Wells Fargo Put Volume In October and January, Implied Volatility Update (10/2)

I saw that WFC had big put volume today in October 2009 and January 2010. Related to this? "S&P Lowers 12 Wachovia Bank Comm Mortgage 2007-ESH Ratings 21 minutes ago - Dow Jones News". There's a large amount of open interest so I'm not sure if they are closing out positions or putting on hedges. Maybe both. Steve Smith over at Minyanville claims they are monster rolls. Andrew Wilkinson of Interactive Brokers also mentioned Wells Fargo and Morgan Stanley put activity here. Also from ISE, Implied Volatility = 48.32 and Historical Volatility = 36.52. $WFC is trading at $26.19 and as of 3:40 eastern time:

84,111 October $24 puts traded with 131,234 open
109,081 October $27 puts traded with 102,077 open

and

60,447 January $20 puts traded with 166,949 open
60,330 January $27.50 puts traded with 47,360 open

Looking at the chart. It broke below an uptrending wedge and the 50dma. It could test lower levels from here if RSI (relative strength on chart) continues to move lower. But remember this is a TARP bank and Warren Buffet is the biggest holder (302 million shares, 6.48% outstanding) so if there is a price puke coming, maybe the $22 level/200dma will act as support. We'll see. Earnings come out on October 21.


Chart Courtesy of Stockcharts.com

2009 Bank Failure List, Closing Dates (Count: 95 Up Until 9/25/09)

Source: FDIC.gov
Banks With 20% Unpaid Loans at 18-Year High Amid Recovery Doubt

"Non-current loans averaged 4.35 percent of the total at U.S. banks as of June 30, the most in 26 years of FDIC data. Regulators typically take notice at 5 percent, according to Walter Mix, a former commissioner of the California Department of Financial Institutions. Corus Bankshares Inc.’s bank unit in Chicago was shut Sept. 11 after 71 percent of its loans soured.

The last time so many banks had 20 percent of their loans more than 90 days overdue was in 1991, near the end of the savings-and-loan crisis, when there were 60, according to an SNL analysis of FDIC data. That year the number of bank failures was less than half those at the peak of the crisis in 1988; this year closings are almost four times what they were in 2008." (Read full article at Bloomberg)

$USD and $SPX 2008-2009 Long Term Inverse Trend Correlation

I find it interesting that long term trends (about a year) between the US Dollar and S&P 500 are exactly inverse to one another. From March 2008 until now on this chart. It's still going... I'm waiting to see when that correlation no longer exists.
$USD vs. $SPX 2 Years (Courtesy of Stockcharts.com)

Jim Rogers Update On Dollar, Yen, Base Metals, Gold, China (10/1/09)

Jim Rogers live from Singapore via CNBC sees a US Dollar short squeeze and plans to sell a rally if it comes, Yen strength on carry trade unwind/Gov incentives to bring Yen back, not buying base metals right here (base metals train moved too fast), Chinese market doubled and could consolidate but bullish long term. Prefers silver over gold, not buying either at the moment though. Long term he doesn't like the US Dollar. Boo yaaaa Jim.

$UNG (Natural Gas) Still In Downtrend But Everything Comes To An End, Eventually

Look at this monster downtrend for UNG, the natural gas ETF. Looking technically, contango infested UNG failed at resistance and the 50 day moving average 11.83. UNG needs to break above those levels. UNG has been in a crazy downtrend and had nice bear market rallies to trade. The money flow (CMF) is making strong moves to the upside and downside which could form a new price channel eventually.

To be bullish I'd like to see the 20d cross the 50d to the upside and for UNG to make a strong move ABOVE resistance and the 50dma. Also an up-trending RSI above 50 and the MACD (moving average convergence/divergence) above zero is required on a momentum standpoint. So it looks like a short to neutral play until things deviate from the norm. I still have those massive 10,000 $10 call trades for February and March 2010 in my head which were bought for pennies ($0.056) Trader Buys Cheap Out Of The Money Natural Gas Calls (August 19).

$UNG (Natural Gas ETF) (Courtesy of Stockcharts.com)

So all eyes are on natural gas spot and the futures curve/roll yield. At some point there will be natural gas inventory absorption and a rebound in demand as well as a positive roll which would benefit UNG. For more on this read: What Contango Means for Oil ETFs (ETF Trends).
"a negative “roll yield” could cause the net asset value of USO to deviate significantly from crude’s spot price."

Previous posts on natural gas:
Natural Gas: V-shaped Recovery Or $2.50 Retest, Karl Miller is Bearish (9/16)
Trader Buys Cheap Out Of The Money Natural Gas Calls (August 19)