As alluded to yesterday, the euro showed relative weakness to the ES on new highs, which signaled yesterday’s bull trap, and led to the overnight sell-off in equities and the euro, on renewed fears of European bank problems. Also mentioned, was the possibility large players were squeezing the weak handed shorts out of the market in order to cover their longs and get short, in front of today’s numbers. The scenario played out, as this morning, CPI came in hot at 0.5% M/M and 3.6% Y/Y and Jobless Claims disappointed, leaving many to wonder if this is not evidence of the worst of all worlds, stagflation. As the market gapped down, liquidity was pulled (chart 1), and a quick flush ensued. Liquidity returned to normal after the break and the market traded in the bottom half of the range for the rest of the day, holding the monthly value area low (chart 3), and then rallying 18 handles at the end of the day to close on the VWAP (chart 2), as trapped shorts ran to cover. A very oversold market with high bearish sentiment readings as low as 60 at 10:50 this morning, and a still a very bearish 76 on the close, implies the market may have more to go on the upside, before the bear resumes.
Last edited by tigertrader; August 18th, 2011 at 06:21 PM.
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With stocks down sharply in the last two weeks and volatility on the rise, you would think that investors would be throwing up their hands and just giving up. Not so. This week's survey from the American Association of Individual Investors (AAII) showed that bullish sentiment rose for the second straight week from 33.4% to 35.6%
Courtesy of Bespoke - Thursday August 18, 2011
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I was waiting for a bigger bounce, which so far hasn't materialized.... If we were to close below last week tomorrow, i will take a short. Its going against my rules, but closing below that hammer on the weekly, will screw alot of people. I will do smaller size since im shorting into weakness instead of strength. I want to see weakness on the Naz and Russ as well.
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I later found out that it wasn't norway, but the US regulations thats preventing me to invest in some norwegian stocks. Looks like i was wrong. Do you know any other way around it. Was looking for relatively low beta, high yield. So far he gave me statoil, orkla, and norks hydro. Norsk hydro has anemic volume. Orkla looks a bit better.
He said the only way he knows how is through goldman. Us laws prohibit me from opening an account with him at his firm.
Last edited by Michael.H; August 19th, 2011 at 02:13 AM.
After having rallied late in the day to close near the VWAP, the ES and Euro sold off last evening and traded as low 1117.25( tested low of value area) on carry-over weakness from yesterday's sharp sell-off . Weakening global economic growth, the European debt crisis, and concern about the European banking system are still the headlines that concern the markets, however, they are extremely over-sold along with very bearish near term sentiment. Ironically, longer term sentiment is still bullish. Therefore, a relief rally is expected. Resistance is 1153.00, 1167.00, and 1185. However, the ES is showing early relative weakness to the Euro, which may be op ex related, but may be an indication of underlying weakness in the ES.
Last edited by tigertrader; August 19th, 2011 at 09:29 AM.
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This market continues to move within it's measured move while multiple micro moves are taking place providing for great intra-day trade opportunities. Market finally closed below the 1128 level (just barely) but still within somewhat of a supported area. The market had a bumpy ride down this afternoon but ended up closing near the low of the day.
Looking at the daily chart, everything is moving as expected to take out the swing low of 1077. We'll see how it goes of course as there's no sure thing in the markets. But if we do break below 1077, I would think we would get to around the 1022 area as I mentioned before.
Looking at the VIX, we touched the same area high as May 2010 and would think we would break higher then that should things progress to the downside. Things are definitely getting interesting in many aspects. My favorite BAC is still stranded on it's second bearish island. They've made announcements of job cuts of 3,500 but I'm sure that number will grow as things heat up for them.
Looking forward to next week!
Last edited by Private Banker; August 19th, 2011 at 10:46 PM.
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An over-sold ES rallied to the aforementioned 1153 level and failed, only to trade down once more to my original downside target of 1120, closing down in excess of 0.5%. Historically, a one-way move lower immediately following a downside gap generally leads to a bit more follow-through over the next 1-3 sessions. As you can see from the 60 min chart (chart 1), the volume profile shows little support below this level, so if this area were to be taken out, the shorts would most likely have 1100.00 in their sights or the absolute low of 1077 and 1060-1040 below that level.
Next week’s focus will be on reports which include Durable Goods and the first revision to Q2 GDP, (although it is extremely doubtful that either number could disappoint more than the Philly Fed Index did this week), along with continued concerns about the weakening global economic growth, the European debt crisis, and concern about the European banking system. With a 9% decline this week, it wasn't pretty for the European banking sector. Based on the Bloomberg Index of European banks and financial services stocks, the sector is down 25% in less than a month and has now given up 70% of its gains off the March 2009 lows. Last week, regulators in Europe tried to stem the bleeding in the sector by suggesting a ban on short selling of stocks in the sector. After a brief rally following the news, European banks resumed their downtrend and closed out the week at a new low.
What we are now faced with is a market with a very bearish short term sentiment, but a bullish long term sentiment. Intraday numbers reached as low as 59 today at 9:50 this morning and were at 69 at 4:15 PM, however the 20day and 50day moving averages still have bullish readings, along with the AAII sentiment readings showing bullish sentiment rising for the second straight week. The overall chart of $VIX remains in an uptrend, and that is another intermediate-term bearish indicator, along with very negative, but oversold breadth indicators. Both large specs (smart money) and small specs (dumb money) are extremely short (chart 3), with open interest at levels where swing bottoms can take place, which leaves the market vulnerable to sudden corrective moves to the upside.
While the Bernanke and Obama would lead us to believe that the economy is stronger than we believe, this earnings season was more than two and a half times as bad as the previous worst earnings season. Sixty-percent of companies that reported went down in response to their reports, and nearly 30% went down more than 5%. Which of course, leaves us wondering when, or more appropriately, in what form will QE3 take place (chart 6). The closer we get to the election, the higher the political cost, large scale asset purchases may carry. So QE3 may have begun to take shape in the form of dollar liquidity swaps. A central bank liquidity swap is is a type of currency swap used by a country's central bank to provide liquidity of its currency to another country's central bank (att. 4). The swap lines are designed to improve liquidity conditions in U.S. and foreign financial markets by providing foreign central banks with the capacity to deliver U.S. dollar funding to institutions in their jurisdictions during times of market stress. As reported by Zero Hedge, the FRBNY announced it lent out $200MM to the SNB (chart 5), which may have been taken as a signal that the liquidity crisis is about to take an exponential step further.
Last edited by tigertrader; August 20th, 2011 at 01:03 PM.
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However, some of the most interesting "Norwegian" companies listed on OSE (in my years of trading) have been those of shipping tycoon John Fredriksen. His companies are mostly based out of Bermuda (and Cyprus), however, so they are not technically Norwegian. Some of his companies have dual listings (Frontline and Seadrill are listed on NYSE, and Golar on Nasdaq, in addition to being listed on OSE, of course)
This might not be the best time to get in, though. I've always viewed SDRL ( Stock information - Hugin - Seadrill ) as my path to retirement. JF always structures his companies very lean, and pays out substantial dividends. I think both SDRL and GOL will give substantial returns over a long horizon, but we might have some troublesome years ahead in the global markets. Therefore please don't take this post as investment advice. Statoil and Orkla should fare well, too. I've also had a position on in DNO for years (they found oil in Iraq), that I consider my "lottery ticket". But as I said earlier, you very might be given the opportunity to buy those companies at a substantial discount in the near future. I am merely commenting on the viability of these companies over the next decades. The world will still run on oil and the increasing middle class of the BRIC countries will lead to higher demand. Thus SDRL remains one of my favorite stocks for the long-term future, but I am actively trading in and out of it. In addition, I think FRO will rekindle its glory days a few years down the line.
As for trading/investing on OSE, you need a VPS account. My brokers did not seem to offer an English sign-up page, but the largest bank in Norway, DnB NOR, does have information in English. As far as I can tell, it is possible to for US citizens to open an account there (see attachment)
Keep in mind that the OSE is closely linked to oil, so it has some pretty wild swings. It seems most global moves have an exaggerated effect on the Norwegian market. I don't trade much intraday on OSE (due to liquidity/spread and other factors), but it is one of my favorite exchanges for swing trading stocks.
Btw, NHY is one of the heavily traded companies on OSE, and volume is definitely not "anemic".
I apologize for derailing the POMO thread...
Last edited by Lornz; August 20th, 2011 at 06:12 PM.
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