Elliott Wave 2010 Report Notes Important Wave Formation, Retracements

First off, full disclosure, I'm an affiliate of Elliott Wave International and visit their site often for their thoughts on the market. They use the Elliot wave principle (wave patterns on charts) to aid with market timing. They are out with a free 13 page annual report on how to position for 2010.
Free 13-page Report: Robert Prechter's firm Elliott Wave International has just released its annual "Most Important Report of 2010." Inside, Prechter delivers hard facts, eye-opening charts and straightforward commentary to help you take advantage of the opportunities – and avoid the dangerous pitfalls – that you will face in 2010. You'll get analysis and forecasts you can act on, and you'll learn what the government's unprecedented involvement in the financial markets will mean for your portfolio in 2010 and beyond. Learn more and download your free report now..
Prechter sees this as a bear market rally and notes that the market retraced the same amount (around 53%) as the 1929 stock market crash so far. He's definitely fading the consensus view that we continue higher with a minor correction along the way. As is said, history doesn't always repeat but it sometimes rhymes. If he's right, "motive" wave C could be right around the corner.

Below is a headline feed from their site:

Chavez Fights 25% Inflation: Devalues Bolivar, Threatens Speculators, Raises Minimum Wage and If You Get Caught Raising Prices, Ownership Transfers To Employees ($VEB/USD)

By devaluing the Bolivar by 50%, Chavez is trying to discourage imports, boost domestic production and aid oil revenue. He's using a dual exchange rate system to control the movement of capital by using 2.6($VEB/USD) for essential goods and 4.3 ($VEB/USD) for non-essential imports (Bloomberg). Venezuela is currently dealing with a recession, 25% inflation and power outages due to energy rationing. To prevent price increases Chavez said the National Guard would step in to control speculation.. and if business owners got caught raising prices, he'd transfer ownership to the employees! (AFP). Sounds like a chapter in Commanding Heights. Lets hope they don't end up like this ($ZWD). In other news, Chavez raises the minimum wage by 25%.

Venezuelan Bolivar Sinks as Central Bank Skips Dollar Auction (BusinessWeek)
Embattled Chavez lifts minimum wage (UKPA)
Chavez Deems Whale Sperm, Pickles ‘Essential’ Items (Bloomberg)
Some Prices Rise In Venezuela Despite Chavez Seizure Threats (WSJ)
Venezuela military shutters store amid devaluation panic (AFP)
Chavez suspends power cuts in Caracas (AFP)
Venezuelan consumers fear inflation, dump cash after Chávez devalues bolivar (WashPost)
Chavez Devalues Bolivar 50%, First Time Since 2005 (Bloomberg)
US critics of China seize on Venezuela devaluation (Reuters)

7.0 Earthquake Hits Haiti, Video Footage, News, Donate Through Google

Videos below show horrific destruction from the 7.0-magnitude earthquake that hit Haiti on January 12. Some videos contain graphic footage. They need help, Make a donation through Google Crisis Response (http://www.google.com/relief/haitiearthquake/).

US takes control of Haiti airport to speed aid (Reuters)
Haiti death toll could reach 200,000 (CBC.ca)
Haiti: MSF Treats 2,000 Patients; Working to Expand Surgical Capacity (doctorswithoutborders)
Looters roam streets of Port-au-Prince; death toll mounts (MSNBC)
France proposes strategies for building Haiti's future after earthquake (Washington Post)
UN: Time Running Out for Quake Victims in Haiti (VOANews)
Government IT Scrambles To Help Haiti (InformationWeek)
U.S. texting raises $11 million for Haiti (Reuters)
Major hospitals in Haiti paralyzed for lack of staff, medicines (chinaview.cn)
4000 prisoners loose as Haiti earthquake quake topples jail (Australian)

Jon Stewart: Banks Are Made of Balsa Wood Held Together By Baby Tears

LOL h/t zero hedge.

The Daily Show With Jon Stewart
Mon - Thurs 11p / 10c
Clusterf#@k to the Poor House - Wall Street Bonuses

Daily Show
Full Episodes

Political Humor
Health Care Crisis

Also watch Jon Stewart vs. Jim Cramer (uncensored) here on March 15, 2008. They talk about hidden risk.

Lloyd Blankfein, Dimon Testify on Causes of 2008 Financial Collapse

For the archive: Wall Street investment banks testified before the Financial Crisis Inquiry Commission on CSPAN. Featuring Lloyd Blanfein (CEO of Goldman Sachs), John Mack (Morgan Stanley) and Jamie Dimon (CEO of JP Morgan Chase).

I think you all should see the biggest hedge funds testify. John Paulson (Paulson & Co.), James Simons (Renaissance Technologies), George Soros (Soros Fund Management) and Ken Griffin (Citadel) testified before Congress in 2008. The video is provided on this post: Nov 28, 2008: Paulson, Soros, Simons, Falcone, Griffin Testify Before Congress (Video), Ackman On Charlie Rose.

Also, here is a video of the same bank CEOs testifying before a House committee in February 2008 and a video of marketeer Lloyd Blankfein talking about the probabilities/possibilities of recovery on 6/10/2009.

Marc Faber Is Going Against Barron's Roundtable Consensus, Time to Take Chips Off Table (Talks About Wheat, Oil, Asia, Dollar, Farmland and Gold)

Marc Faber changed his mind after participating in a Barron's Round-table. In the video below Marc sees a correction coming sooner than the March/June consensus and also gives his thoughts on oil, gold, bonds, Asia, wheat, farmland and the US Dollar, both on a long and short term perspective. This is embedded courtesy of Tech Ticker.

Marc Faber: Money Printing Spree Coming When Interest Rates Rise (Video)

Even though PM/Fed Chairman Bernanke made $52 billion in profits last year, the Federal debt increased by $1.6 trillion to $12.3T. Marc Faber was on Tech Ticker saying that a massive money printing spree is coming when the Fed has to monetize debt to service higher interest payments. He still thinks we are going to war. He writes the Gloom Boom Doom report so he's always net we're all going down. IMO, there's only one solution for all of this, legalize marijuana to pay off the Federal debt, save California, Illinois et al and prevent a war. No?

TRAN, INDU, RUT, SPX Fighting Downtrend Demon From 2007 (IYT, SPY, DIA, IWM, Nasdaq an Outlier)

The Transportation Index ($TRAN, $IYT), Industrials ($INDU, $DIA), Russell 2000 Small Caps ($RUT, $IWM) and S&P 500 ($SPX, $SPY) are at war with the downtrend demon from the October 2007 peak. $TRAN peaked in 2008. The only index that conquered its downtrend is the tech index, Nasdaq ($COMPQ, $QQQQ). The Nasdaq almost doubled so far off the March lows! So US equity indexes need to defeat their bear market downtrends to confirm a structural change imo. Will the downtrend demon walk away without a fight? Meaning will the supply of shares overtake demand and even overpower Fed driven liquidity?

Speaking of transports, I saw that there was large volume on the February $75 Put.  12,433 total contracts traded with 85 open and it closed at $2.10.  IYT closed at $75.89 today.  The put/call ratio is at 0.81, the lowest it's been since March, 2009.  Short interest, at 3.22 Million, has been rising with price since October and is around the highs of the year.  The volume put/call ratio is at the lowest level since the March bottom.  Right before the March bottom the put/call volume ratio hit 18.37!  So what do you fade here, short interest OR put/call ratios, volatility and the chart.  Hmm...

$SPX (S&P 500 Large Cap Index ) (Courtesy of Stockcharts.com)

$RUT (Russell 2000 Small Cap Index)

Google Detects Attack on Gmail Originated From China, Human Rights Related

Whoa, black swan in internet land? This was posted today on Google's blog. A rep from Google was just on Kudlow explaining what happened. It looks to be human rights related.
"Like many other well-known organizations, we face cyber attacks of varying degrees on a regular basis. In mid-December, we detected a highly sophisticated and targeted attack on our corporate infrastructure originating from China that resulted in the theft of intellectual property from Google. However, it soon became clear that what at first appeared to be solely a security incident--albeit a significant one--was something quite different.

First, this attack was not just on Google. As part of our investigation we have discovered that at least twenty other large companies from a wide range of businesses--including the Internet, finance, technology, media and chemical sectors--have been similarly targeted. We are currently in the process of notifying those companies, and we are also working with the relevant U.S. authorities.

Second, we have evidence to suggest that a primary goal of the attackers was accessing the Gmail accounts of Chinese human rights activists. Based on our investigation to date we believe their attack did not achieve that objective. Only two Gmail accounts appear to have been accessed, and that activity was limited to account information (such as the date the account was created) and subject line, rather than the content of emails themselves.
" (Read full post at the Official Google Blog).

More information:
E-mail leak has Google threatening to leave China (AP)
Google, Citing Cyber Attack, Threatens to Exit China (New York Times)
Google May Pull out of China After Cyberattacks (PC World)
Google to stop censoring in China, may pull out (CNET)
Google may exit China following 'highly targeted' attack (Register)

*On a more interesting note: Google to Sell Billboard Ad Space in Street Views and Maps, says Report (PC World). Talk about unlocking virtual ad inventory.

June 2010 UUP Call Spread $23 to 26, Closed at 22.72

This was an interesting trade today in UUP found at Crimson Mind.  According to CM, someone bought a UUP June $23-26 call spread for a net $0.52.  UUP (US Dollar ETF) closed at 22.72 today.  If the US Dollar continues to rally and $UUP hangs on to it's 50 day moving average, the spread could net some gains and/or protect a short position if above $23.50 by June expiration.  I'm not sure of the exact DNA makeup of the trade.  It will be interesting to see what happens with the $USD/S&P over the next 6 months.
"It appears that strategist(s) initiated June 23/26 call spread. June 23 calls were purchased for 0.58 (15K) and $0.60 (5K) against the sale of June 26 calls for $0.08 (15K) and $0.10 (5K), a net debit of approximately $0.52 per spread. Total of 54157 calls and 2134 puts traded." (Crimson Mind Activity Watch, for January 12 no direct link)

UUP (US Dollar Index Bullish Fund) - Stockcharts.com

Hedge Fund Manager of 2009: Ben Bernanke ($52 Billion Profit, Up 47%)

Last year Dvol & Associates gave John Paulson of Paulson & Co. the hedge fund MVP award for 2007-2008 for appropriately timing the credit/derivative bubble. This year you'd think Dvol would award David Tepper of Appaloosa the MVP for scooping up BAC and C at the March lows and clocking $7 Billion by December.  Hellz no.

"Release Date: January 12, 2010
For immediate release

The Federal Reserve Board on Tuesday announced preliminary unaudited results indicating that the Reserve Banks provided for payments of approximately $46.1 billion of their estimated 2009 net income of $52.1 billion to the U.S. Treasury. This represents a $14.4 billion increase over the 2008 results ($31.7 billion of $35.5 billion of net income). The increase was primarily due to increased earnings on securities holdings during 2009.

Under the Board's policy, the Reserve Banks are required to transfer their net income to the U.S. Treasury after providing for the payment of statutory dividends to member banks and equating surplus to paid-in capital. In 2009, statutory dividends totaled $1.4 billion and approximately $4.6 billion of earnings were used to equate surplus to paid-in capital.

The Federal Reserve Banks' 2009 net earnings were derived primarily from $46.1 billion in earnings on securities acquired through open market operations (U.S. Treasury securities, government-sponsored enterprise (GSE) debt securities, and federal agency and GSE mortgage-backed securities), $5.5 billion in net earnings from consolidated limited liability companies (LLCs), which were created in response to the financial crisis, and $2.9 billion in earnings on loans extended to depository institutions, primary dealers, and others. The significant increase in earnings on securities was primarily due to increased securities holdings as a result of the Federal Reserve's response to the severe economic downturn. Net earnings from currency swap arrangements, which have been established with 14 central banks, and investments denominated in foreign currencies totaled $2.6 billion. Additional net earnings of $1.5 billion were derived primarily from fees of $0.7 billion for the provision of priced services to depository institutions.

Operating expenses of the twelve Reserve Banks, net of amounts reimbursed by the U.S. Treasury and other entities for services the Reserve Banks provided as fiscal agents, totaled $3.4 billion in 2009. In addition, the interest paid to depository institutions on reserve balances totaled $2.2 billion. The Reserve Banks were assessed for Board expenditures, including the cost of new currency, totaling $0.9 billion.

The preliminary results include valuation adjustments through September 30 for loans and consolidated LLCs. The final results, which will be presented in the Reserve Banks' annual financial reports and the Board of Governors' Annual Report, will reflect valuation adjustments through December 31." (Source: FederalReserve.gov)

Deutsche Bank Upgrades DryBulk Shippers On China Coal, Iron Ore Demand (DRYS, DSX, GNK, MMM, ESEA)

Deutsche Bank "believes iron ore and coal will be in strong demand from China and the recoveries in Japan and Europe will keep rates at healthy levels". Deutsche had a buy rating and $10 target on December 3, 2009, "believing potential cash flows are undervalued by the market". It's still being squeezed in a symmetrical triangle, keep watching the chart. I'm wondering if monetary policy tightening in China will affect commodity demand. Is there a bearish research piece out anywhere? The Video below is from MarketNewsVideo.com. Previous blog posts:

Jan 11: DRYS Feb 7s Active, Not Getting Love From SEA Breakout or Up Market
Jan 10: Second Chance For $DRYS, Testing Downtrend Again, $SEA Comparison

Bubble Warning: Economist Cover 1/7/2010

Economist cover story for Jan, 7, titled "Bubble Warning: Why Assets Are Overvalued. Markets are too dependent on unsustainable government stimulus. Something’s got to give". Interesting Economist. Remember Newsweek's cover in August, 2009 titled "The Recession is Over"?

Full article: http://www.economist.com/opinion/displaystory.cfm?story_id=15213157

Hat Tip Big Picture.

Rep Alan Grayson Asks Fed Lawyer If They Are Buying S&P Futures, Equities

Fed Lawyer Scott Alvarez
This is interesting. Congressman Alan Grayson asked the Federal Reserve General Counsel Scott Alvarez if the Federal Reserve was manipulating the stock and futures market. Alvarez did mention that the Federal Reserve Bank of New York uses primary dealers (JP Morgan Chase as his example) to execute trades. Can they seriously buy S&P futures and SPY?

The mystery movie doesn't stop there. Charles Biderman, CEO of TrimTabs (specializing in data-mining and equity market liquidity) was on BNN recently explaining that someone is juicing the S&P futures and he thinks it's the Government. Hat tip Zero Hedge. What the flip is going on here?

DRYS Feb 7s Active, Not Getting Love From SEA Breakout or Up Market (DryShips, Shipping ETF)

Continuing from my previous post yesterday:  Second Chance For $DRYS, Testing Downtrend Again, $SEA Comparison (DryShips Put/Call Activity, Charts, Volatility, Short Interest).  I keep reporting about DRYS because I believe a catalyst will come and move this stock + or - 25 to 30%.  It's at $6.60 and has chopped around in a symmetrical triangle for 9 months now and the vertex point is getting tighter and tighter.   It's been between $6 and 7 since November, 2009.  Today DRYS pierced through downtrend resistance at the open but then sold off 2%.  It's gaining traction with volume from the lows with big blocks hitting after 3:00 but not much price action.

The Feb $7 Calls saw volume of 30,000 today with 46,493 open.  Maybe OptionMonster knows if they were closed out or fresh longs.  The call is at 0.28.  The Feb $7 Put saw volume of 10,729 with 11,818 open.  Check that as well.  It looks like the shipping ETF (SEA) confirmed a breakout today (unless it closes in the red).  It is up 2.8% to $15.  DRYS is officially not getting love from the market or the shipping index.  What the deal?  Live streaming DRYS and SEA charts below with trends. You might need Microsoft Silverlight software to view the live charts from BATS Exchange.

Is One-Month LIBOR Bottoming Out? $LIBOR and EuroDollar Future Chart

Remember Overnight LIBOR hit 5.09% in October, 2008 and moved 50% in a day?  Here is a blog post with 1-Month LIBOR at 4.5%.  Insane...  Things were REALLY bad at that time.  Now 427 basis points later, 1-Month LIBOR is chilling at 0.23.  Are we now at the point where borrowing costs are too low?  1-Month LIBOR made a higher low from 12/31/09 to 1/7/2010 (.23090 and .23130) and stood at .23331 on Friday. Check out the chart of $LIBOR (London Interbank Offered Rate 1-Month) and 1-Month Eurodollar Futures.

1-Month LIBOR Rate (Stockcharts.com)

1-Month EURODOLLAR Future (CMEGroup)

Second Chance For $DRYS, Testing Downtrend Again, $SEA Comparison (DryShips Put/Call Activity, Charts, Volatility, Short Interest)

DRYS (DryShips Inc) has been dead money for the past few months.  It saw activity in it's calls in mid November (which was a failed call spread I believe) but the main focus was the chart.  DRYS has been bouncing around in a symmetrical triangle since early September.  This means that lows are getting higher and highs are getting lower, forming a decision point. A surprise $300 Million issuance of convertible notes forced a retest of $6 support. You can see on the 6 month chart that DRYS is testing the upper portion (resistance) of the downtrend for the 4th time.  DRYS tested support 3 times so far, so at some point a level will strike out.   If buying gathers momentum and kills the downtrend it could see a decent rush towards $8 imo.  There are still near term ceiling resistance levels to take out $7, $7.50. 

It looks like traders bought $7 Feb calls and sold $7 puts for a net credit in February (Options Update: Back-Month Bull Bets DryShips Inc. Can Conquer Resistance, 1/6 Schaeffers Research).  DRYS closed at $6.77 Friday. Just like November, DRYS appeared on the most active call/put list on the ISE.  It had 7,407 calls vs. 154 opened on the ISE and WhatsTrading noted strong activity on the Feb 7 calls on the ask. Also DRYS saw nice volume (covering?) from the $5.80 low.  Another factoid, the DRYS put/call ratio has been steadily increasing since December (0.26 to 0.33).  It's still a third of calls though.  Plus the DRYS VIX, although at lows not seen since 2008, rose since Christmas WITH price (0.45 to 0.55).  From 12/1 to 12/15/2009 6 million shares were covered to 11.25 million.  Interesting.

The Shipping ETF ($SEA) pierced through resistance on Friday. There was big volume not too long ago in the ETF. Will DRYS follow SEA?  We'll see folks!!!!!

$DRYS 6 Month (Stockcharts.com)

2010 Outlook By RanSquawk (Back To Basics)

Interesting report out by RanSquawk on the US Dollar, UK, S&P, Fed, Commodities, CRE, EU, etc.
"2010 Outlook…Back to basics
Fri, Jan 8 2010, 16:30 GMT
by RANsquawk Research Team

The fake sound of progress

The past twelve months have witnessed extreme trading patterns. The beginning of the year saw market participants flee the equity markets to such an extent that it seemed the bottom would never be reached. However once the bottom was found in March, investors never looked back and drove stocks higher for the remainder of the year..." (Read more at FXStreet.com).

CES 2010: Intel InfoScape Touchscreen, 3D TVs and Ford Sync (Videos)

Check out the videos below from the 2010 Consumer Electronics Show. Including my favorite, the double HD 9-foot Intel InfoScape Touchscreen, 3D TV reviews and Ford Sync technology. Convergence gone wild. Which 3D TV will take off? (Stocks and ETFs to watch: QQQQ, XLK, F, INTC, MSFT, PC, SNE, SHCAY).
"Inside the Intel booth at the 2010 Consumer Electronics Show, the Internet was displayed in double HD. Running on an Intel Core i7 processor, the touchscreen measures 9x9 feet and vividly displayed in 1920 x 1920 resolution, dynamically pulling in 500 snackable nuggets of information, photos, tweets and blog posts from the Internet." (ChannelIntel on Youtube)

What Are CDOs, Credit Default Swaps and Total Return Swaps? For Next Time

Here are credit derivatives explained by Janet Tavakoli of Tavakoli Structured Finance. Forms of credit protection, synthetic financing, collateralized debt instruments etc.  Aka, cool over-the-counter institutional contracts originated by our bailed out banks that made themselves and hedge funds billions at the expense of our financial system and Federal Reserve balance sheet. LOL. On a positive note, for systemic risk/transparency (kind of), there is a new clearing house for CDS contracts at the CMEGroup to check out.

2I65BYCJ2 2014 - Jun 100
2I65BYBX2 2014 - Dec 100

Markit.com also provides a hub for CDS index pricing and analysis with 1 month price/spread charts here.  Charts longer than a month would be nice.  So for next time...

Introduction to Collateralized Debt Obligations (find full pdf) (Tavakoli Structured Finance)

"A Collateralized Debt Obligation (CDO) is backed by portfolios of assets that may include a combination of bonds, loans, securitized receivables, asset-backed securities, tranches of other collateralized debt obligations, or credit derivatives referencing any of the former."

Introduction to Credit Default Swaps

"Credit default swaps, CDSs, are the most common type of credit derivatives transaction. This very simplified article explains the importance of the counterparty protection provider in these transactions."

Introduction to Total Return Swaps

"Total Return Swaps, TRSs (also known as Total Rate of Return Swaps, TRORS), are a less commonly known form of credit derivative transaction. They are also synthetic financings."

Also this is good stuff:  Janet Tavakoli: Clawback Subsidized GS Bonuses For Selling Hot Air!