Greece Will Not Default (Stiglitz), EU Bailout? Germany Loan Guarantees? EUR/USD at 1.378

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Joe Stiglitz (economist), on Bloomberg, said there's no default risk for Greece.  Sovereign debt interest rate risk is another story.  Stiglitz Sees No Greek Default as ‘Speculative Attacks’ Persist (Bloomberg).  He thinks their plan will work.  Greece’s Papaconstantinou Unveils Tax Overhaul to Boost Revenue (BusinessWeek).  So will provide aid to Greece.  From Bloomberg:
"The European Union dropped hints that a summit this week will offer an aid package to financially- stricken Greece as officials seek to prevent its budgetary woes from eroding confidence in the euro.

“We are talking about support in the broad sense,” Olli Rehn, the EU’s new economic affairs commissioner, said in an interview in Strasbourg, France today. Michael Meister, financial affairs spokesman for German Chancellor Angela Merkel’s Christian Democratic Union, said in an interview in Berlin that aid would come “under strict conditions and if the Greek government undertakes far-reaching state reforms.” (Full article at Bloomberg)

Also this was a headline on WSJ just now.
"Germany is considering loan guarantees for Greece and other troubled euro partners, but a final decision may not come this week."

Below is the video of Joseph Stiglitz talking about Greece on Bloomberg.  EUR/USD is trading at 1.3780 and I provided more news links.

2nd UPDATE: Germany Working On Possible Greek Aid Package (WSJ)
European Governments Agree to Help Greece: Source (ABC/Reuters)
Treasurys Down On Reports Of EU Aid To Greece, 3Y Auction Looms (WSJ)
UPDATE: Almunia: Greece Must Pay Price For EU Support (WSJ)
EUR/USD, Trichet Leaves Early For ECB Meeting, Stiglitz: No Default For US, UK (yesterday)

Marc Faber, Nassim Taleb, Hugh Hendry at Russia Forum 2010 (Video Link)

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At the 2010 Russian Forum, Marc Faber asked Nassim Taleb (Black Swan), Hugh Hendry and other panelists how they'd put $100 million to work in the next 12 months.

Taleb said to short S&P-to-Gold ratio, use way out-of-the-money options betting on hyperinflation (gold, silver, treasury puts) and short US Treasury Bonds. Hugh Hendry talked about UK interest bets and the next "Paulson" trade which would risk 1.5% for 75%, he claims. Hendry is long US Treasuries (and I believe bullish on US Dollars), taking the other side of Faber and Taleb. Hendry thinks the US interventionists (monetary/fiscal) will fail to spark inflation so he is betting on deflation. You know where Hugh Hendry stands on China. Marc Faber thinks "self sufficiency" will one day be important (living on farmland) and water is a concern. Hendry considers agriculture a risk asset at the moment. This was a very interesting panel, I suggest you watch it. They also chat about Japan, China, geopolitical risks etc. Click here or the pic.

EUR/USD, Trichet Leaves Early For ECB Meeting, Stiglitz Says No Default For US, UK

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News was jumping tonight on sovereign debt issues.  A catalyst is coming soon for Greece debt, CDS and the Euro. Whether the ECB (or someone else) steps in or not, watch the Euro trade against the US Dollar. On 2/1/2010 I looked at EUR/USD using a Screenr video when it was trading at 1.3912 and it looked like it would hit 1.35 support without an upside catalyst. It hit 1.358 yesterday and since then rallied up to 1.366.  Is Euro weakness priced in or just getting started?  We'll see.

Trichet Leaving Sydney Early to Attend EU Meeting (Correct)(Business Week)
Trichet leaves early to attend crisis meeting (ABC)
Greece Says Call for Aid Would Send ‘Worst Signal’ (Update1) (Bloomberg)
The Ever Increasing Parallels Between AIG And Greece... And The CDS Puppetmaster Behind It All (Zero Hedge)
Goldman Sachs’ response to The New York Times article on AIG (Goldman Sachs)
Euro ‘January Effect’ May Signal Drop, MIG Says: Chart of Day (Bloomberg)
Euro Near 8-Month Low Against Dollar on Greece Fiscal Crisis (Bloomberg)
Australia Sovereign Risk Nears 9-Month High on Greece Debt Woe (Bloomberg)
Stiglitz: It's Time To Go "Sparta" On Evil Greek Speculators (Business Insider)
No Exit in Sight for U.S. As Fannie, Freddie Flail (WSJ)
Ayatollah Khamenei: Iran Set To Deliver Punch That Will Stun The West (Business Insider)
Stiglitz Says U.S., U.K. Default Is ‘Absurd’ Investor Notion (Bloomberg)
Portugal, Greece, Spain default worries rise (Market Watch)
Two Hedge Funds One Bank? Is There A Concerted Effort To "Destroy" Greece? (Zero Hedge)
Pimco’s El-Erian Says 2010 Will Be About Sovereign Risk (Business Week)

Take Off Your Dow 10,000 Party Hats For Now, Need A New Keg

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The Dow 30 is at 9,964 as I type. The same number we hit in March, 1999.  Today a value manager on Tech Ticker (Vitaliy Katsenelson of Investment Management Associates) said we will trade around 10,000 for the next 10 years! I have great vids on this post:  Partying Like It's 1999 Again, Dow Hits 10,000 (3/29/1999 CNBC Video) (10/2009).  Tech Ticker video below.

(Chart courtesy of

GBP/USD Pierced Floor on Weekly, Riding Downtrend On Hourly, Is Action Based On Yield, Growth or Sovereign Risk (CHARTS)

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It appears that GBP/USD pierced through a floor from October on the weekly chart and is riding a downtrend channel on the hourly. If the Pound doesn't want to see the 1.40s, or perhaps double bottom, it needs to get back above that yellow line. Or in other words, the Dollar needs to "consolidate gains". Currencies in Europe are trying to sober up after the newsfest last week out of Greece, Portugal and Spain.  Here is a look at EUR/JPY last week.

GBP/USD (British Pound/US Dollar) Hourly Chart

GBP/USD Weekly Chart
(Charts courtesy of

Forex: GBP/USD dips to a fresh 8-month low at 1.5530 (FXSTREET)
Dollar climbs as debt concerns linger (MarketWatch)
Dollar May Consolidate Gains (FXSTREET)
Debt problems weigh on equity markets (Report) (BHF Bank/FXSTREET)
2/5: British Pound May Remain Under Pressure As Yield Outlook Diminishes (DailyFX)
2/4: Morgan Stanley: Even We Can't Believe How Fast The Euro Has Unraveled (BusinessInsider)

Watch GM/NASA's Robonaut "Humanoid Robot" Work On Assembly Line (Video)

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Doesn't Robonaut "R2" look like a 1984 Terminator? Check out these videos. Engineers will use the GM bot to automate "dull, repetitious or ergonomically difficult tasks as well as to test software, sensors" etc. (DiscoveryNetworks video). Soon they will do dishes, laundry, cook and play baseball outside with your kid. The videos come from Gmblogs, Traclabs and Discoverynetworks on Youtube.

Chicago Housing Market Bottoms In 2013? S&P/Case Shiller Index, Foreclosures and Futures (Video/Home Price Chart)

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This continues from my previous posts on the Chicago CTA, Illinois financials and 2010 commercial real estate outlook. I found a Chicago housing article at Crain's Chicago (video below). Burns Real Estate Consulting and Fiserv said the Chicago housing recovery was years away, perhaps 2013, as underwater mortgages, the tight lending environment, high price/income ratio, foreclosures and high unemployment put pressure on upside momentum.

Chicago CTA Volatility, $95M Budget Hole, Service Cuts, 1100 Laid Off (Video)

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CTA services will be cut on Sunday with 1,100 workers laid off.  The video below is from ABC7 Chicago. They have a $95 million budget shortfall. I guess the 25 cent fare increase didn't help the situation. This is a disaster for Chicago workers and commuters.

Bus union official: CTA cuts will be 'horrific' (ABC7 Chicago)
No deal to save CTA from service cuts (ChicagoTribune)
CTA: Plan trips as service cuts take effect (JG-TC Online)
CTA bus barn shut as bus, train cuts loom (ChicagoBreakingNews)
Illinois Insolvency, Chicago Commercial Real Estate Outlook [Warehouse Vacancies Hit 12.1%]

Weekend Reads On Credit Default Swaps, CDOs, AIG/Goldman

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Read this post at "The Market Ticker" blog by Karl Denninger, You Had Better Cage The Monster CONgress (AIG/GS/CDS).  For more on CDS and CDOs go to this post with links to Tavakoli Structured Finance. Here are other interesting articles:  Testy Conflict With Goldman Helped Push A.I.G. to Edge by New York Times (h/t @deepakshenoy) and Dear Senator Corker: Meet The HVol 4 And Basis (Prop) Trades That Destroyed Merrill Lynch, Guest Post: AIG's Banks - Market Makers Or Flippers Of CDOs? by Zero Hedge.  CDS n' CDOs son...

January Option Trades Timed Sell Off Perfectly Using Cheap Volatility (IWM, SPY, IYT, UUP, SLV, SRS)

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When the S&P and Dow knocked up against long term downtrend resistance I thought there was a decent chance of a sell off so I started watching put action in detail.  If $SPY corrected at a minor downtrend resistance level in July, 2009 why wouldn't it at the ultimate 3 year downtrend? With the volatility index ($VIX) making new lows (16) and traders chasing market upside on breakouts it was hard to pinpoint the exact top. I'm sure that's why traders were buying, on a net credit basis, out of the money VIX options in November expiring in December.  The VIX futures curve was also steep.  The market broke out yet again during the Santa Clause rally.  In the beginning of January the Transports, Industrials, Russell 2000 and S&P 500 Indexes all ran out of breath right at downtrend resistance.  During this time I saw interesting option trades.  For example, $SRS (Inverse Real Estate ETF) April calls, IWM (Russell ETF) February puts (with a put/call ratio spike), IYT (Transports ETF) February puts (extremely low put/call ratio but rising short interest) and UUP (US Dollar ETF) June calls were active.  In December, SLV (Silver ETF) February puts, SPY (S&P ETF) puts, IWM puts and UUP calls were active at higher premiums.  Traders in January timed their speculative or protective positions perfectly using cheap volatility.  Protective meaning hedging a long portfolio of ETFs which was, in this case, a decent kicker.  The FEB puts expire in two weeks (2/19).

January 2010 Action: (Expirations 2010 except one Jan 2011):

1/5/2010: SRS APR 7 call $1.36 to $1.69 (+24%)
1/6/2010: IWM FEB 60 put $0.92 to $1.63 (+77%)
1/12/2010: UUP JUNE 23 call $0.58 to $0.90 (+55%)
1/13/2010: IYT FEB 75 put $2.10 to $6.10 (+190%)

December 2009 Action:

12/30/09: SLV FEB 15 put $0.23 to $0.46 (+100%)
12/30/09: SLV APR 15 put $0.53 to $0.96 (+81%)
12/15/09: UUP JAN 2011 24 call $1.00 to $0.96 (-4%)
12/14/09: UUP March 23 call $0.55 to $0.66 (+20%)
12/11/09: IWM, SPY Put Positioning (noted volume on ISE)
12/11/09: SPY Exotic Way Out Of Money Dec 55 put $0.60 to $0.43 (-28%) 
12/2/09: SPY MAR 110 put $5.20 to $5.46 (+5%)

Coppock Curve on S&P 500 Predicts Bottoms On Monthly Chart, Similar to MACD on Daily

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Anyone notice how the "Coppock Curve" and S&P 500 converged before the March lows and diverged all throughout the massive rally?  It looks similar to the MACD.  Here is the definition from Wikipedia:
"The indicator is designed for use on a monthly time scale. It's the sum of a 14-month rate of change and 11-month rate of change, smoothed by a 10-period weighted moving average.  "Coppock, the founder of Trendex Research in San Antonio, Texas, was an economist. He had been asked by the Episcopal Church to identify buying opportunities for long-term investors. He thought market downturns were like bereavements and required a period of mourning. He asked the church bishops how long that normally took for people, their answer was 11 to 14 months and so he used those periods in his calculation.  A buy signal is generated when the indicator is below zero and turns upwards from a trough. No sell signals are generated (that not being its design)......" (Coppock Curve on Wikipedia)

First, I used it on the daily chart and saw higher lows and a 0-line cross to the upside right after the S&P March bottom. Thereafter, I saw lower highs on the Coppock Curve from March to January, 2010.  The curve just made a new low below the zero line at -9.48.  Not sure if there is structural significance.  Just saying it could have been sensing the recent sell off like the MACD.

Chart courtesy of

Moody's Warns US on AAA-Rating, Peter Schiff Update on Sovereign Credit Risk, California

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I wanted to hear what Peter Schiff had to say about today's events. He talks about the sovereign debt crisis in Greece, the US and it's derivative California. Also Moody's warned that the U.S AAA-credit rating was at risk of downgrade because of deficits and Congress today raised the Federal debt limit by $1.9 trillion to $14.3 trillion. A lot going on in public finance land.

US credit rating at risk, Moody's warns (
Congress Approves $1.9 Trillion Debt-Limit Increase (BusinessWeek)
Taleb Says ‘Every Human’ Should Short U.S. Treasuries (Update2) (Bloomberg)

Watch S&P Get Smoked Into The Close, Down 3.1% ($SPX Video, 2/4/2010)

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Watch the S&P get smoked today into the close.  It ended down 3.11% and took out 1072 floor support. It looks like 1040 is the next support level and ultimately the 2009 summer highs at 954.  We shall see folks, whatever the algos want to do. Hopefully you are riding cheap index puts from early January. Recap on the day:

Greek Union Strike, Spain, Portugal CDS Widen, Sovereign White Knight Needed (Blog Post)
Initial jobless claims at highest level since mid-December (MarketWatch)
Productivity, Jobless Claims Rise (WSJ)
Congress OKs $1.9 trillion boost in debt limit (CNNMoney)
From yesterday: U.S. May Lose 824,000 Jobs as Employment Data Revised: Analysis (Bloomberg)
New York sues Bank of America over Merrill Lynch merger (CSMonitor)
Get Ready:  PREVIEW-US Jan payrolls seen +5,000,jobless rate 10.1 pct (Reuters)

Chart/, Instrumental/Who Shot Ya

Greek Union Strike, Spain, Portugal CDS Widen, Sovereign White Knight Needed?

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Euro aid coming? Who will be the sovereign white knight.

Massive deficit in Greece and Portugal threatens banks (
Sydney Herald)
ECB chief says Greece takes steps in right direction (MarketWatch)
REFILE-UPDATE 1-IMF would help Greece if asked -Strauss-Kahn (Reuters)
UPDATE 1-Greece not planning to seek IMF help -minister (Reuters)
IMF chief-Spain's Zapatero in tough spot on pensions (Reuters)
IMF calls Greek austerity program 'appropriate' (AFP)
Greece's Biggest Union Sets Strike; Tax Collectors Stage 48 Hour Walkout (Benzinga)
Greek taxmen kick off wave of strikes against austerity (Reuters)
Greece’s Biggest Union Sets Strike, Threatens Cuts (BusinessWeek)
Greek debt woes spread to Portugal and Spain (
RBS's Cailloux on Greece, ECB (Bloomberg Video)
Spanish Borrowing Costs Jump at Three-Year Note Sale (Bloomberg)
Portugal and Spain CDS prices at fresh high (
Portugal's CDS prices at new high (
Fears of 'Lehman-style' tsunami as crisis hits Spain and Portugal (Telegraph)
European Stocks Fall Most in Two Months as Portugal, Spain Sink (Bloomberg)
Portugal stocks slide amid debt worries (BusinessWeek)
Greek Strike Deepens Debt Crisis Fears (ABC News)
Trichet Says ECB ‘Confident’ Greece Can Cut Deficit (Bloomberg Video)
Greek officials start walkouts over cuts (Digital Look)
Crisis in the currency club (EuropeanVoice)

To escape the madness visit Lagos and Ponta de Sagres, Portugal, é muito legal na minha opinião.

Ashraf Laidi: If Yen Stronger Than Dollar and Dollar Stronger Than Euro.. (Video)

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Ashraf Laidi of CMC Markets gives an update today on currencies, gold and oil.  Below is a one year chart of EUR/JPY (Euro/Yen). 117 looks supportive. - EUR/JPY

Jim Chanos Presentation Video On China, Shanghai 200DMA Chart ($SSEC)

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Short seller Jim Chanos (Kynikos Associates) has been bearish on China for a while now.  Below he makes his case in a 57 minute presentation. I first found this at Big Picture.  I also put up a 3 year chart of the Shanghai Composite ($SSEC) below which is trading 2 points above the 200 day moving average.  Below that level, if confirmed, would be bearish with heavy overhead resistance. I looked at $FXI and $SSEC a week ago and provided different views of China's economy. Chanos thinks "there are classic pockets of overheating and overindulgence".  It is not a secret that China is tightening a bit. Is it already priced in or is there more adjustment ahead?

China Banks Tightening Standards for Loans To Property Sector (iMarketNews)
Shanghai equities at lowest since Oct (People's Daily Online)
Economic fears pull US copper futures below $3/lb (Reuters India)
China curbs companies’ capital raising (
Tightening fears give rise to China 'buy' opportunities (
Chinese Tightening Unlikely to Cause Copper Collapse (
Chinese mortgage rates rise as loan clampdown bites (Reuters)

There are also geopolitical tensions going on between China the US about Obama's Dalai Lama visit, internet censorship, Yuan pressure, trade and arms sales to Taiwan.  So interesting times folks. Jim Chanos correctly shorted Moody's while Buffett was buying in May 2007. Today he is taking the other side of "BofA Merrill Lynch, CLSA Ltd., Morgan Stanley and Macquarie Group Ltd." who believe that "Chinese equities may soon rebound." (BusinessWeek, 2/3/2010).

June $UUP 23-26 Call Spread Up 52% In 20 Days (Net Debit .52 to .79)

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To those of you who despise $UUP, I present to you a trader who is up 52% (net debt .52 to .79) so far on a $UUP June $23-26 call spread initiated a couple weeks ago.  At that time UUP held on to 50dma support (22.63) and it closed at 23.40 today, up 3.4%.  The USDX (US Dollar Index) move from December is another story, you can thank Jim Rogers (Jim Rogers Betting On US Dollar Rally, Would Buy Gold At $1000).

Chart courtesy of

Waiting For $SPY Catalyst, Afternoon Reading, Video, Chart (2/3/2010)

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Waiting for a catalyst.

Goldman May Lose Record Profit to Bid-Ask Spread: Chart of Day (Bloomberg)
Spain’s Tax-Cheat Landlords Add to Rising State Debt (Bloomberg)
Pimco Says California Yields May Revisit 2009 Peak on Deficits (Bloomberg)
Pimco's El-Erian Sees `Bumpy Journey' as Economy Resets (Bloomberg Video)
Italy Seizes Bank of America, Dexia Assets Amid Probe (Bloomberg)
Greek Bonds Advance as Almunia Says EU Endorses Deficit Plan (Bloomberg)
U.S.'s LaHood News Conference About Toyota Recall (Bloomberg Video)
Manufacturing Way Ahead Of Services As ISM Index Misses Expectations Due To Weak Employment (BusinessInsider)
Payrolls Show First Job Creation Since 2008 For Medium Businesses... (BusinessInsider)
February 2010, Monthly Newsletter From Sundaram BNP Paribas Asset Management (ZeroHedge)
Portugal Bund Spreads Even Wider Following Substantially Reduced Bill Auction, Yield, CDS.. (ZeroHedge)
Pfizer 4Q Net Doubles; Earnings View Below Street (WSJ)
Volcker Plan May Reverse Bank Recovery: CRA (HousingWire)
U.S. May Lose 824,000 Jobs as Employment Data Revised: Analysis (Bloomberg)
Rosenberg: Forget The "Flat" Pending Home Sales Number, Here's The Real Disaster (BusinessInsider)
Gasoline rises after unexpected supply drop (AP)

Paul Volcker Testimony Before Senate Banking Committee (Text/Video)

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Paul Volcker testified before the Senate Banking Committee today on the proposed "Volcker Rule" which would ban hedge funds, private equity funds and proprietary trading inside commercial banks.

Full Video at Banking.Senate.Gov

Here is a portion of the prepared testimony:
"Third, I want to note the strong conflicts of interest inherent in the participation of commercial banking organizations in proprietary or private investment activity. That is especially evident for banks conducting substantial investment management activities, in which they are acting explicitly or implicitly in a fiduciary capacity. When the bank itself is a “customer”, i.e., it is trading for its own account, it will almost inevitably find itself, consciously or inadvertently, acting at cross purposes to the interests of an unrelated commercial customer of a bank. “Inside” hedge funds and equity funds with outside partners may generate generous fees for the bank without the test of market pricing, and those same “inside” funds may be favored over outside competition in placing funds for clients. More generally, proprietary trading activity should not be able to profit from knowledge of customer trades.

I am not so naive as to think that all potential conflicts can or should be expunged from banking or other businesses. But neither am I so naïve as to think that, even with the best efforts of boards and management, so-called Chinese Walls can remain impermeable against the pressures to seek maximum profit and personal remuneration." (full testimony)

Doesn't it all come down to risk management?  Small banks are failing just because of bad loan portfolios.  How do you regulate greed, giddiness and flawed risk models to prevent any of this from happening again in 2088?

Business, Finance and Investment News for 2/2/2010

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Bullish News Corp result buoys Murdoch (ABC News)
Toyota U.S. sales reel from crisis; GM, Ford surge (Reuters)
Possible loan from China bank keeps high-speed rail plan alive (LasVegasReviewJournal)
Microsoft's Bing will make money: executive (Reuters via Yahoo)
Pragmatic Capitalist Evening Reading (
Ford China January Passenger Auto Sales More Than Double To 30,759 (WSJ)
European Online Retail Sales Up (New York Times)
GM Core brands have 40.6% gain (DetroitFreePress)
Japan indexes climb, with oil shares advancing (MarketWatch)
Twitter Under Phishing Attack? (Mashable)
Reserve Bank of Zimbabwe Defaults on Redemption of Bonds Issued to Gold Firms (VOAnews)
WRAPUP 4-US pending home sales edge up, vacancies rise (Reuters)
Home buyers' negotiating power gains: Zillow (Reuters)
Iran: We can live with U.N. uranium deal (MSNBC)
Moody's Sees US Rating Under Pressure After $3.8 Trillion Budget (ZeroHedge)
Unemployment rises in most metro areas (AP via Yahoo)
Digital doomsday: the end of knowledge (NewScientist)
Rupert Murdoch needs to be convinced Conan O'Brien can make money for Fox (LATimes)
Banker caught on TV looking at topless girls instead of charts (Youtube) h/t @WeeklyTA
Palestinians: 3 hurt in IDF strike in southern Gaza (
PNC to Repay TARP, Sell $3 Billion in Common Shares (Bloomberg)
Build America Subsidy Cut May Spur $150 Billion Taxable Munis (Bloomberg)
Volcker defends bank rules (

Wharton's Siegel Thinks Market Will Like Oil below $70 (Video)

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I've been monitoring what Wharton Professor Jeremy Siegel's been saying on Bloomberg TV since the beginning of 2010. First off here is his 2010 outlook that he gave on Bloomberg. Before the bank prop trading ban was proposed by Obama, Siegel thought we would see a mid-year correction when the Fed started raising rates. He said equities would rise 10-15% in 2010. Today Siegel still thinks we are headed higher (post correction) and if oil breaks below $70 to $65 it will be positive for equities.  Below are quotes from the video. He also mentioned that a stronger Dollar could affect equities in the short run but is good for the long run.
"A strong dollar is good in the long run for the U.S but it can give the stock market problems in the short run, and that strengthening Dollar does make our exports less competitive, does lower the Dollar value of revenues coming from abroad. The little bit of portfolio re-allocation that comes so.."

"Now the good aspect of that is it's bringing down oil. I'd love to see oil under $70 I was disturbed when it was $83. We get oil under $70, $65, bring those energy prices down I think that will be a base for the stock market."

For more info on oil technicals, Adam Hewison at MarketClub sees a potential sell off. Here is the free video. Also if interested in Gold they have a 2 part video series on the Gold super cycle (1, 2). Full FTC disclosure, I am an affiliate.

Video: Obama Answers Q&A at Republican Retreat in Baltimore, Full Speech

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This was an interesting Q&A session. President Obama was in Baltimore at the House Republican Conference and answered questions from Rep. Mike Pence of Indiana, Rep. Paul Ryan of Wisconsin talking budget and spending, Rep. Shelley Moore Capito of West Virginia and many more.   FYI: The Senate approved to raise debt ceiling by $1.9 trillion to $14.3T and Obama proposed a $3.83 Trillion budget.  Videos below from CSPAN.

$SPY Near Term Uptrend Channel and Long Term Downtrend (Charts, 2/2/2010)

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SPY is riding the uptrend channel again.  It is above the 100 day moving average and testing October ceiling resistance.  The 50dma is not that far away either.  Waiting for decisiveness... Keep an eye on the long term 3 year downtrend as well (2nd chart).

SPY Testing 100DMA, Is Correction Pricing In Soft Patch Or Just Market Dynamics (SPY, DIA, RBA Leaves Cash Rate, AUD/JPY, AUD/USD, US ISM, FXI, SSEC)

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This is a continuation from my previous post about the March S&P E-mini future testing its 100 day moving average.  The e-mini right now is trading just above the 100DMA (1081.68) at 1083.25. It is down 2 points or 0-.18%.  Below is trend and 100dma analysis on the S&P ETF ($SPY) and Dow ETF ($DIA) with charts.  Tonight the Reserve Bank of Australia kept its cash rate unchanged at 3.75%. Economists were expecting 25bps according to the Sydney Morning Herald. AUD/JPY just died in a sea of red, down 1.21% to 79.92.  AUD/USD followed (chart below).  Today we also saw decent US ISM numbers ("ISM hits 58.4%, best since Aug. '04" - MarketWatch).  If I recall, China's December PMI hit its highest level since 2004 and a few weeks later the Shanghai Composite and $FXI (China ETF) both were under their 200 day moving average!  Were we just massively overbought or are these corrections pricing in a global soft patch?

SPY is currently testing 100DMA resistance in an immediate term downtrend channel but is riding a longer term uptrend.  The immediate term downtrend and longer term uptrend will force SPY to make a decision at some point.   107.23 is the next support level if it rolls over.  DIA is right on channel support and just above the 100DMA.

DIA 1 Year Chart (Courtesy of

SPY (SPDRs S&P 500 ETF) 6 Month Chart

AUD/USD After RBA Announcement, BOOM

Quick Look at EURUSD Hourly, Daily and Weekly Charts, 1.3912 (Chart Video)

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EUR/USD is down tonight after a nice rally today with the equity markets.  The situation in Greece could be putting pressure on the Euro.  I'm waiting to see how it gets resolved and who gets bought and sold.  EUR/USD broke the hourly downtrend but it looks like a disaster from December, 2009 to Feburary (big legs down).  If it doesn't hold here, 1.35 looks supportive imo.  I didn't show you this in the video but on the monthly chart it is just under the 20 month moving average.  Go to for this live streaming forex chart.

Chart courtesy of

News links from today:
EUR/USD capped by 1.3930 (
Forex: EUR/USD, expected to bottom at 1.3300 in 4Q - Rabobank (
Euro: Can the ECB Make Conditions Even Worse for the Currency? (DailyFX)
Euro Remains on Track Lower Below 14000 (DailyFX)
Euro Finds Limited Support From Risk Appetite, As Correlation Weakens (DailyFX)

S&P E-Mini March Future Under 100 Day Moving Average, First Time Since March 2009 Lows, Watch How Contract Reacts To That Resistance Level

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The overnight S&P March E-Mini Futures (ESH10) is currently up 0.30% and trying to regain a channel from September (black lines).  The contract is trading below its 50 and 100 day moving average in a steep downtrend from January 19.  So if there is a relief rally (or continuation) watch how it reacts to the 100 day moving average (orange) which currently stands at 1,082.  The March future hasn't been below that level since the March 2009 lows.  If the market gets punished again here, 1022, 1000 and 933 (June, 2009 highs) look like support levels imho.  Chart courtesy of OptionsXpress.

Pricing of Greek CDS, 10Y Bond Yields Sense Risk (CDS 399bps, 10Y 6.85%)

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Interesting times folks.  Here is an update on Greece and Euro-land.  ZeroHedge has a detailed post showing a flow chart of potential scenarios (via Barclay's).  The recent move in the US Dollar Index above the 200dma could be related to all of this.  Remember institutions were building USD positions in Nov/Dec? Credit risk is reflected in Greek CDS as well as 10 Year Bond Yields.  CMA Datavision houses data on credit default swaps (insurance premium to protect against debt default) for a fee but provide most active wideners/tighteners, sovereign CDS and index fair values to the general public for free.  Greece 5 year CDS closed at 399.23 basis points on Friday, up from 175bps in November, 2009 (Chart).  Currently Dubai trades at 493.13bps and Venezuela at 1017.13 basis points!  It is a reminder of what happened in 2008 when Lehman, credit default swap sellers and counterparties all went bust.  Read the articles and watch the Davos video below.  From the first video, European Union Economic and Monetary Affairs Commissioner Joaquin Almunia said Greece will NOT DEFAULT, there will be a "fiscal adjustment for imbalances".  I also put up a chart of the Greek 10 Year Yield hitting 6.85% on Friday, up from 4.6% in November, 2009.  It will be interesting to see what happens with EUR/USD and Gold when news is eventually sold.

News Links
Greek Debt Swap Counterparty Risk May ‘Spook’ Market (Bloomberg)
A Greek [Default/Bailout]: Flowcharting The Dominoes (
Who’s selling Greek CDS? (FT Alphaville)
Germany’s Bruederle Rules Out Bailout for Greece (Bloomberg)
BNPP: Domestic And Foreign Banks Exposed To Greece (
Greece 5-Year CDS Reaches New Record Wide Of 397 BPs -CMA (1/28/10, WSJ)
Randolph (IHS Global Insight) Says Greece Won't Default on Debt Obligations, CDS (Bloomberg Video)
Billionaire Soros Says Confident Greece ‘Will Make It’ (Bloomberg)
The Greece Dilemma (Nouriel Roubini at
Joaquin Almunia: we don't need a Greek bail-out because the country won't default (Telegraph)
2nd UPDATE: Greek-German 10-Year Yield Spread Hits New Highs (1/27/10, WSJ)
Greek 10-Yr GGB Spread Over Bunds Hits 300 BPs; CDS Widens(1/20/10, WSJ)

Below are Bloomberg videos at Davos featuring EU and Greek leaders.

EU's Almunia Says 'No Plan B' to Plug Greek Deficit"

Greece Prime Minister: Papandreou Says Rumors Hurt Greece, Not Seeking Aid

Greece Finance Minister Papaconstantinou at Davos, "May Make Deeper Budget Cuts"

Greek 10 Year Bond Yield (from Bloomberg)

Geopolitical News Volatility: China, US, Taiwan Arms Deal, Internet, Europe, Iran, Venezuela (1/31/2010)

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Geo-political and corporate related tensions are building, I noticed this when browsing my news feed and twitter stream.  Here are recent news links of interest not in any particular order but in late January 2010.  Squash the beef, we don't want any geopolitical-black swans.  If you see updated news provide a link below.

U.S. companies involved in Taiwan arms sales (Reuters)
China's strident tone raises concerns among Western governments, analysts (Washington Post)
Clinton warns China to stay the course on Iran nuclear sanctions (LA Times)
China suspends U.S. military visits after Taiwan arms deal (CNN)
China threatens sanctions over arms sale to Taiwan (LA Times)
Video: US reacts to Chinese hostility over arms deal ITN NEWS (Youtube)
China condemns the United States over an arms deal with Taiwan (Reuters Video, CCTV)
China, Iran Prompt U.S. Air-Sea Battle Plan in Strategy Review (BusinessWeek)
How should Europe respond to China's strident rise? (
UK's Mandelson: Ludicrous To Compare UK's Situation To Greece (WSJ)
Protesting Firefighters Clash With Police in Spain (SKY Video)
ECFA to endanger Taiwan democracy and human right: warned Chinese democracy activists (TaiwanNews)
Colombia protest over Venezuela 'airspace violation' (BBC News)
Protests continue in Venezuela following 2 deaths (CNN)
Chavez Says Protests May Require ‘Radical’ Response (BusinessWeek)
Canada concerned over free speech rights in Venezuela (AFP)
WTF? Hugo Chavez Mouthpiece Says U.S. Hit Haiti With 'Earthquake Weapon' (FOX)
U.S. surrounds Iran with missile defenses (
Fears that US missiles move may be exploited by Iran's hardliners (
*'Iran will deliver telling blow to global powers on Feb. 11' (PressTV)
Iran Continues Focus on Outside Provocateurs, Now Blaming Germany (New York Times)
Iran accuses U.S. of seeking to use Internet against it (Washington Post/Reuters)
Iran Warns Against Protests During Islamic Republic Anniversary (BusinessWeek)
Israel "responsible" on Iran, Obama adviser says (Reuters)
Iran leader predicts destruction of Israel (AFP)
Critical Infrastructure under Siege from Cyber Attacks (PC World)
Critical infrastructure execs fear China, But they fear the US more (TheRegister)
China fires back at Hillary Clinton on internet restrictions (
China launches its own search engine 'Goojje' in midst of row with Google (Beforeitsnews)
Japan Protests To Russia After Boats Fired At (
Moscow police break up anti-Kremlin protest (
Report: Russia to sell Libya weapons in $1.8 billion deal (CNN)
Political Uncertainty Grips a Russian Republic (New York Times)
Bin Laden deplores climate change, Targets USD (Al Jazeera)
Bin Laden warns US of more attacks (Al Jazeera)
Israel: Hamas commander killed in Dubai was key arms smuggler (ChristianScienceMonitor)
*Palestinians get 1st private equity fund designed to boost economy (CanadianPress) -ETF available?
Leaders of Turkey and Israel Clash at Davos Panel (NewYorkTimes)
Israel-Turkey ties strain again over TV show (AFP)
Video:  Turkish PM storms off in Gaza row (BBC News)

VIX Update From Davos, Switzerland (Video)

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Dr. Phil Pearlman on reported live from Davos, Switzerland on Friday at the World Economic Forum featuring Adam Warner, author of and Options Volatility Trading (book). Also follow them on twitter @ppearlman, @agwarner for good info. Dr. Phil and Adam discussed the recent move in the $VIX (Volatility Index) and what it's implying about the underlying S&P 500 Index. Adam talks about the dynamics of implied volatility, the quick change in sentiment (VIX spiked 50% in a week (18-27), how the measure is still low relative to 2008 and if technical analysis is applicable.  Adam noted that it was the biggest weekly move in the VIX since 2008.  It is reflected in the chart below.  Keep in mind the VIX hit 90 in 2008 and we are at 24! So there would need to be 5 black swans in a row to retest those levels, imo.  Never know, anything can happen. They both gave market predictions as well.

Weekly VIX Chart from August 2008 (Courtesy of

IYR Intraday Descending Triangle and Carnage, Technical Analysis | DVtv

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As you've noticed, with the boost in volatility lately I've been showing intra-day trading activity.  I use Screenr to record my computer screen.  Below I presented live intra-day trading activity of IYR (iShares Real Estate ETF) inside a bearish "descending triangle", where price makes lower highs after an initial spike and rides floor support towards the downtrend vertex point. Learn more about descending triangles at Chart School.  Obviously breakouts/breakdowns fail half the time so trades warrant a decent stop and/or hedge imo.  In this case downside momentum was dominating the market so I thought there was better risk/reward on the downside. It ended up taking out support.  I've seen this work (and fail) across many different time frames. It is just analyzing the supply/demand of stock (via traders) over time measured in price.  I was thinking that a long term example would be if the S&P tested the 2002/2009 lows again and broke down right at the 2007 downtrend.  Hopefully the downtrend demon from 2007 gets violated soon so we don't have to experience that.  If it does happen I'm sure it would be priced in gold not Dollars.  The high speed rail idea could boost jobs and economic activity... First is a live streaming video of IYR and then a snapshot of IYR at the close (chart from

IYR (chart courtesy of

How Low Does Tech Go, Potential Support for QQQQ, AAPL, GOOG, MSFT, QCOM

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I've been on a massive charting spree given the sell off and volatility. This post is dedicated to technical analysis on QQQQ (Nasdaq ETF) and its largest holdings, $AAPL (Apple), $GOOG (Google), $MSFT (Microsoft) and $QCOM (Qualcomm).  Charts are courtesy of

QQQQ:  I'd like it exhausted at $37.50 (June, 2009 support) but that's just me.

AAPL:  Apple is being mashed in an interesting triangle.  It is 15.66% of QQQQ.  If people continue to exit this stock, $180-ish looks like decent support from August, 2008 and $150 from June, 2009.  Watch Apple to guide the QQQQ.

Senate Reappoints Bernanke For New Term (77/23), Traders Sell SPY Into Close

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"Bernanke Clears Senate Hurdle for Confirmation as Fed Chief" (Bloomberg). $SPY was riding an uptrend channel in the last half hour of trading but broke below floor (109) and uptrend support and closed at 108.55 (-1.15%).  See video and snapshot of the close.  Streaming chart is from Any thoughts going forward?

(Chart courtesy of

Wall Street 2: Money Never Sleeps Trailer Video

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Here is the Wall Street 2: Money Never Sleeps trailer. Yes!

Hat tip
Reformed Broker

Technical Analysis $SPY, $ITY, $IWM, $DIA Charts 1/28/2010, Obama State of Union Overnight Hope Trade Today

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So much for Obamas State of the Union overnight hope trade! Last night I showed you Screenr videos of traders bidding up the March S&P future during Obamas speech. They almost drove it to 50DMA resistance before the big plunge.  Watch out for the Bernanke vote as well.

Today it looks the risk trade couldn't hold and the downtrend will resume, we will see how the markets close.  Qualcomm's forecast, Greece bond sell off and US Dollar Index rise crushed the hope trade (Stocks, Greek Bonds, Commodities Fall; Dollar, Treasuries Rise -Bloomberg) Also a glitch went down at the NYSE (NYSE Says Error Delays Delivery of Price Quote Data -Bloomberg) and the Senate is voting for Bernanke's second term today (Final Bernanke vote may come Thursday, Reid says -MarketWatch). The Dow is down 149 points as of 12:32pm.  Here are 9 month charts of $SPY, $IYT, $IWM, $IYR, $DIA and $VIX with trend lines, 50 day moving average and support/resistance levels.

First of $SPY (S&P 500 ETF): After the multi-day plunge a squeeze was inevitable and the 50 day moving average resistance level looked like a target. On the 9 month chart it pierced through an uptrend channel (1) and is trading at 108.12, 3 points under the 50DMA 111.36 (2).  If the S&P stays weak $102.5 (3) and ultimately $95 (4) are support levels.  It's just a historical look at selling exhaustion which is now considered support. 

Next up $DIA (Dow):  Same type of deal, it broke through uptrend support and the 50dma however it is near a support level from October at $100.  That could easily get taken out but if there's a bounce it would be there in my opinion.  Minor support occurs at at 97.5 and 95 it looks like.  I'm thinking the 200DMA $93.20 is big support and if it breaks that $87.5 (June highs).  We'll see what happens.  There is always a chance it retests the downtrend demon again (long term downtrend).

S&P E-Mini Future Breaks Out During Obama State of Union (Live Chart Action During Speech)

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Below, watch the E-mini S&P 500 March Future break through ceiling resistance levels at various time frames. ESH10 is heading towards the 50 day moving average resistance level of 1,110. As I write it is trading at 1,103. It's interesting that the USDX (US Dollar Index) and $SSEC (China Shanghai Composite) pierced through their 200dmas on the upside and downside respectively (h/t Bespoke). Judgment day is near for the risk trade imo. I took a screen shot of an OptionsXpress Flexchart during Obama's State of the Union address (full speech video). Next time I'll play some Marilyn Manson for you loud in the background.

Obama State of the Union Speech Video 1/27/2010, Transcript

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Here is Barack Obama's 2010 State of the Union Address from 1/27/2010. I provided the full video and transcript. You can find everything at

Videos from iPad Keynote by Steve Jobs and Introduction Video

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iPad is set to be released in late March, 2010 for $499.  Here are videos from the keynote and iPad introduction.   Interesting piece of technology here.  The text below is from the iPad press release at
"iPad features 12 next-generation Multi-Touch applications. Every app works in both portrait and landscape, automatically animating between views as the user rotates iPad in any direction. The precise Multi-Touch interface makes surfing the web on iPad an entirely new experience, dramatically more interactive and intimate than on a computer. Reading and sending email is fun and easy on iPad’s large screen and almost full-size “soft” keyboard. Import photos from a Mac®, PC or digital camera, see them organized as albums, and enjoy and share them using iPad’s elegant slideshows. Watch movies, TV shows and YouTube, all in HD or flip through pages of an e-book you downloaded from Apple’s new iBookstore while listening to your music collection."
"Pricing & Availability

iPad will be available in late March worldwide for a suggested retail price of $499 (US) for the 16GB model, $599 (US) for the 32GB model, $699 (US) for the 64GB model. The Wi-Fi + 3G models of iPad will be available in April in the US and selected countries for a suggested retail price of $629 (US) for the 16GB model, $729 (US) for the 32GB model and $829 (US) for the 64GB model. iPad will be sold in the US through the Apple Store® (, Apple’s retail stores and select Apple Authorized Resellers. International pricing and worldwide availability will be announced at a later date. iBookstore will be available in the US at launch.

FOMC STATEMENT 1/27/2010: Inflation Subdued, 0-1/4% Fed Rate, $SPY Short Squeeze, Triangles and Parallelograms

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FYI, not a surprise about 0-1/4. Nice short squeeze.  Shout out to triangles and parallelograms.  Intra-day chart courtesy of

"Federal Reserve Press Release

Release Date: January 27, 2010
For immediate release

Information received since the Federal Open Market Committee met in December suggests that economic activity has continued to strengthen and that the deterioration in the labor market is abating. Household spending is expanding at a moderate rate but remains constrained by a weak labor market, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software appears to be picking up, but investment in structures is still contracting and employers remain reluctant to add to payrolls. Firms have brought inventory stocks into better alignment with sales. While bank lending continues to contract, financial market conditions remain supportive of economic growth. Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability.

With substantial resource slack continuing to restrain cost pressures and with longer-term inflation expectations stable, inflation is likely to be subdued for some time.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve is in the process of purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. In order to promote a smooth transition in markets, the Committee is gradually slowing the pace of these purchases, and it anticipates that these transactions will be executed by the end of the first quarter. The Committee will continue to evaluate its purchases of securities in light of the evolving economic outlook and conditions in financial markets.

In light of improved functioning of financial markets, the Federal Reserve will be closing the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, the Commercial Paper Funding Facility, the Primary Dealer Credit Facility, and the Term Securities Lending Facility on February 1, as previously announced. In addition, the temporary liquidity swap arrangements between the Federal Reserve and other central banks will expire on February 1. The Federal Reserve is in the process of winding down its Term Auction Facility: $50 billion in 28-day credit will be offered on February 8 and $25 billion in 28-day credit wil be offered at the final auction on March 8. The anticipated expiration dates for the Term Asset-Backed Securities Loan Facility remain set at June 30 for loans backed by new-issue commercial mortgage-backed securities and March 31 for loans backed by all other types of collateral. The Federal Reserve is prepared to modify these plans if necessary to support financial stability and economic growth.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh. Voting against the policy action was Thomas M. Hoenig, who believed that economic and financial conditions had changed sufficiently that the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted."

Video: Nouriel Roubini on Economy, Pre-State of Union (CitizenTube)

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From Newsweek on Youtube.

For a more in depth 2010 economic outlook by Nouriel Roubini see his speech in Hong Kong at the
Asian Financial Forum.

A Ratio Put Spread Traded on SPY Today (120K/240K)

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Big volume in SPY put options are always interesting. I remember back in July, 2009, a total of 740,000 SPY puts traded in one day and was the largest trade ever conducted on the options market. According to articles and institutional traders it was an out of the money ratio put back-spread rolled from August to December.  If it was in fact a back-spread they bought cheap downside protection and sold the higher strike to fully hedge the purchase if SPY kept rising.  Which is exactly what happened.

Today I saw that SPY was on the most actives list on the ISE put/call widget on the sidebar.  Digging deeper, according to Crimson Mind, 120,000 March $100 puts and 240,000 March $85 puts traded with 283,000 and 379,000 open respectively.  They noted that puts were rolled from December to March in October, 2009.
"note that on Oct 20 one investor rolled Dec 95/82 ratio put spread (120K/240K) to March 100/85 ratio put spread (120K/240K) - Oct 20 - 120,000 March 10 puts traded at $3.21 and 240,000 March 85 puts traded at $1.01 (120k) and $1.02 (120k)" (CrimsonMind)

No idea about the ticks but here are some ideas. Chris McKhann of OptionMonster thought it was a protective ratio put spread but did mention it could have been "buying back" an existing back-spread given the open interest (video). Fred Ruffy at thought it was a new backspread (link). The S&P March e-mini future is down again tonight, -0.66%.

FXI Under 200DMA, China Has Mini Real Estate Bubble According to NAI

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FXI broke below an uptrend channel and most recently the 200 day moving average. I remember traders were playing with near term FXI puts last August and economist Andy Xie said China was overvalued. For the last 6 months FXI bounced around between $38-$45. FXI closed at $38.55 today so it is unchanged on a 6 month basis. Still it broke some barriers on decent volume and could be anticipating a slowdown in China. Recently China reported very strong productivity numbers (December HSBC China Manufacturing PMI Hit 56.1 vs. 44.8 in March (Chart)). However, with the Bank of China tightening bank reserve requirements and underlying market jitters about a possible rate hike and/or Yuan de-peg from the $US (Goldman's O'Neill Says China Yuan May Rise More Than 5%), volatility could continue as the flow of goods/capital adapt to the different environment, imho.

6-Month FXI (iShares FTSE/Xinhua China 25) -

FXI 1-Year Chart

FXI 3-Year Chart

2010 Detroit Auto Show, Year of Electric Car (Video on Electric Avenue)

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Video courtesy of ClearSkiesNews. See cars on Electric Avenue at the 2010 International Auto Show in Detroit. Also, they showed the first electric car built in 1922.

Paul Kedrosky Talks About Riding Macro Trends on MissTrade TV (Video)

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Paul Kedrosky (research consultant at hedge fund Ten Asset Management, venture capitalist and blogger at Infectious Greed) talks about riding macro trends w/ Matt Davio on MissTrade TV. Interesting conversation. Find the full video here.

Bob Prechter on CNBC 1/26/2010, Signals Similar to Top of 2007

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He is seeing signals similar to the top of 2007 (extreme optimism, extreme valuation, low dividend yields, high P/E). He says wait for the ultimate buying opportunity.

I'm an affiliate of his firm, E-wave International, here is a free 2010

DVtv 1/26/2010: IWM Broke 50DMA, SPY, DIA, SRS, VIX Into Close

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At a coffee shop I put up a live screenr of showing SPY, IWM, DIA, SRS, VIX trading activity, technicals on multiple time frames. There's a little coffee shop volatility in the background. $IWM (Russell 2000 Index ETF) took out the 50 day moving average today, following everybody else. Interesting day indeed folks. The 2007 downtrend demon injured a few ETFs. Where are the market paramedics? It also looks like someone is protecting a large portfolio of Spdrs ($SPY) which I'll write about later. Today goes well with the recent ride in $VIX. The last few weeks were a decent time to run with put protection. Ladies and gentleman I present to you DVtv Episode #2 on Screenr. Once I get 4G I can do a post on top of the bean.

Episode #1, 1/24/2010: Technical Analysis on SPY, DIA, IWM, SRS, IYT, DRYS, DXY, VIX

S&P E-Mini Future Down .6%, China Raised Bank Reserve Ratio By .5% (ES_F, IWM)

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This will be an interesting week for the markets.

Overnight the March S&P E-Mini future is down 0.6%. All major index ETFs (SPY, DIA, QQQQ, IYT) are under their 50 day moving average except for $IWM (Russell 2000).  So keep an eye on the Russell 2000 index imo.  IWM is right around October support after piercing it.

ESH10, 1 Year (E-Mini S&P March Future) Courtesy of Optionsxpress

$IWM (Russell 2000 iShares) Courtesy of