Bill,
I have posted an indicator on my site that's nearly 100% sensitive to short-term tops. It is pointing to one today.

I'm one of the guys that has been screaming about the crazy option activity.

Its not just in the US either - there have been some INSANE options written in the European markets too, all for September.

There is no odd activity in the out months - only in the front month.

The 10,000 contract lots traded on the SPY were all coded as spreads; one of the users on my forum called the OCC and verified them - they're not a bad print - they're real. This leads one to believe that they are not covered calls (e.g. a "pin" of the SPY price without actually selling $1.7 billion worth of it into the market, massively disrupting the price) but rather a play on a crash. While they were sold net-net at par (in other words, at a straight $5/contract differential) this leaves two possibilities open, both bad:

1. A bear call spread. A "someone knows something" play - but a play that can't pay off unless the market tanks by 30% - within the next couple of weeks!

2. Someone is in BIG trouble and is using the option MMs to effectively write themselves a huge short-term loan. Clearing costs make this unattractive - unless its the only money you can get, and whoever is doing it has a wink-wink-nod-nod on ignoring margin requirements!

Neither is good; the latter portends the potential collapse of a major market participant in the options space. "Saved by our own failure"? That'd be interesting.

The SPX 700 contract is even more troubling, as I can't find an offsetting position that makes this look sane. Never mind the odd trades in the European space.

Of course there are no guarantees. Someone bought a buttload of PUTs on CFC for July expiration a few weeks ago. July expiration came and went, the PUTs went out worthless..... THEN CFC imploded.

Their bet was a zero, but they weren't "wrong" per-se - only early by - literally - a few days.

I don't know what all this odd trading means, but when I see stuff like this my ears perk up. The most benign explanation is "pinning" the current price, which is bearish in and of itself - someone wanting today's price really bad because they're quite sure tomorrow's will be worse.

All of the other explanations go from bearish to frightening in a big hurry.

Be careful.

Bill,

I just saw on CNBC that the Stelco saga has completed its course. Today it was bought by US Steel for $1.1 billion. I'm not shocked but I am surprised just how accurate your predictions for this ended up.

Thanks,
Brian

Genesis,

With that action, and Bill's short term bullish, but longer term bearish. Why not buy up a few Jan. SPX puts? maybe something near the money either way, just to see what happens in the coming months?

There seems to be an Oct SPX 1250 put .SZPVJ for $680'ish.

Yen spot:

http://quotes.ino.com/chart/history.gif?s=CME_JY.Y$$&t=l&w=15&a=50&v=d12

Funny thing I find about the markets is that you can be totally right until you're proven totally wrong. Add money to that, and somebody might be taken to thinking they have some measure of control in the machinations.

If someone is convinced that terror will befall us in September, they had better be advised they are somewhat early on the scene and should wait a year. But then again, it would be equally terroristic to bomb Iranian facilities.

Goodmorning all,

I gather from the week in Review that Bill thinks that Technology will lead this week. Did anyone else gleaned this idea??? Please clarify for me in case I misread.

Thank you,

If this dip is a ST buying opp, certainly is taxing on the emotions....I would definitely be in the camp waiting for more strength prior to buying only to be doing so when it's time to sell. Delay a plan and it becomes the wrong plan.

Speaking of conviction...leaders stay leaders until proven otherwise. FXI fits that one....but who had the brass ones to buy on the last (few) dips. Buy high to go higher fits this one almost beyond belief.

Emotions, plans, actionable routine....Bill integrates them all. I guess that's why he's the pro.

fwiw...gold sector has a lot of negative buzz from the TA types, judging from a free introductory chart service that just dropped into my mailbox....the recent lows on the miners are being taken as broken support...however, I prefer to interpret as an extreme overshoot due to selling by hedge funds

moneygenie,

Yes, I took notice and thought ahead one week when Bill will quote his guidance to remind some that his mental computer ain't too bad.

Last night I created a buy list with this remark in mind.
pbe/bio tech
igm/tech
igw/semi

I'm trying to stay away from stocks but could get tempted. MU is the most obvious value? Fairly good range from low to high ytd returns on tech of the cara 100. Anyone have preferences?

Hello again,

Anyone watching MCO ?? What to do ?? Watch and wait or jump the gun ?? Looking for a clue and some moral support ..

Thanks I A

I have been watching MCO for awhile but have not yet gone long because of my concern they have not rated the subprime market correctly and I dont know why.
Cheers
Bob

Re: MCO
Its broken a 13 day downtrend today, and as Bill says, found support from 2005 around 43.70, but there's another downtrend currently around $56. Could be worth buying $50 calls for a quick pop, but fundamentals seem murky at best.

Yeah, the big problem I see with MCO is that Congress is breathing down ALL of these guys' necks right now.

Regardless of whether there is real culpability there or not, they are likely to get hammered in the short-to-intermediate term.

I'm short MCO right now but with a very tight leash on it; I will reverse that position once there's clarity on how this plays out, but for now, I think the trade to make is on the short side unless your time horizon is VERY long (3+ years)

Nothing in the housing, lending and construction space is safe right now on the long side. And, by the way, historically commercial R/E follows residential by 18 months or so - which means trying to hide there is potentially REALLY dangerous.

Re: MCO
I would not go near this stock. Although I pay attention to technicals, my investment decisions must first pass on fundamental considerations. On a fundamental basis my gut tells me that MCO will be in the same boat as the defendants in the asbestos lawsuits of years ago; discharge in bankruptcy. The defrauded plaintiffs will receive class action status and they will obtain judgments that will exceed MCO' net worth. Not only would I not purchase here in the low 40s, I also do not believe that the bearish P&F target of $34 will hold.
http://stockcharts.com/def/servlet/SC.pnf?chart=mco,PLTADANRBO[PA][D][F1!3!!!2!20]&pref=G

One of the micro-caps I've been holding, China Precision Steel (CPSL), is having a good day. Up sharply on high volume. But be careful, this is a volatile stock. Small float and high short interest.

I own it as a long-term speculative play on the surging industrial growth in mainland China. And I believe the short interest is a response to an S-3 filed by the company in June. I'm looking forward to the secondary offereing -- provided it gets priced right -- as it will allow the company to raise necessary capital while increasing the float.

Bill --

I must say your thoughtful response to cyderman was SOOTHING. Describing the trauma SO artfully really does help, bigtime.

I think you have been ahead of your time. Now, after the decline of employer health plans, pensions, and finally the debt crisis, more people will understand why you link the themes "capital markets and social equity".

In countries ever more committed to "market solutions", what more important social issue is there?

This perspective can also help us understand phenomena like Chavez, Correa, Morales, Kirchner -- and troubles I anticipate in Brazil and Mexico.

Privatizations pushed by Washington in the '90s had a perverse social impact. The world's richest man, Carlos Slim - whom I got to know during privatization of TELMEX - has wealth equalling 7% of Mexico's GDP. America's richest ever - John D. Rockefeller - never surpassed 1.5% of US GDP.

(these % from an op-ed in today's NY Times)

THANKS MUCH TO ALL FOR SPEEDY AND INSIGHTFUL RESPONSE.
I have gained clarity !!!!

Dear Mr. Cara,

Thank you for this most precious gift in the form of a Blog. what a concept!

Thank you all.

Lessmore -

Do you feel more positive about silver? 88% of demand is for fabrication in industrial, photographic, jewelry and silverware.

http://www.silverinstitute.org/supply/index.php

PLUS, governments don't hold significant amounts of it!

Yet, still there's the monetary aspect to this metal!

Good afternoon Jock:
I agree with you about silver.

MU - Anybody else notice today's nice little +2% move?

mu,
yes, wish I had acted on temptation this morning

adbe is the other one that has my interest. any thoughts?

I am confused about the movement in gold stocks over the past month. It seems that gold has held up well and the S&P 500 has come back well. Why haven't the gold stocks come back? I read that they were sold to raise funds in the recent market sell off, but that doesn't make sense as any stock could have been sold to raise funds.

It seems that the factors that have historically propelled gold and gold stocks higher are here in spades - weak dollar, inflation rising, de-hedging, risky international situation, etc. Why wouldn't gold stocks recover along with gold. Is there a new paradigm?

Does anyone have a theory?

ADBE - Jesse L. would want to see resistance broken (maybe 41.25?) before entering.

UNG - Nice bounce off 33.85 low this morning. Someone said a few days ago they'd be adding below 34. Hope he/she did. Now 34.69.

UNG: Bought Sep 32 calls this morning.

km

Be advised that gold/mining shares have a nasty habit of correcting along with the markets before establishing a recovery, sometimes up to 60% of the previous rise.

The gold/silver ratio has been indicating the correct proportion for a recovery of gold prices, gold down$1, silver down 20¢. (which changed by afternoon.)

Also a narrowing of the gold basis, the near futures price minus the spot price ~$9. This should improve as well before things get going.

So I looked at the momentum indicator on the XAU/GOLD chart and sure enough the weekly chart is showing a change in momentum back over the -100. RSI has also turned up. The daily has the same in great magnification:

http://stockcharts.com/h-sc/ui?s=$XAU:$GOLD&p=W&b=5&g=0&id=p72171742545

ALOHA !!

km ... I believe gold stocks are waiting for a POF confirmation above $700USD. Seems to be the magical line-in-the-sand for the US FED. With the defense of the US Dollar by the BIG players this may not come all that soon.

Meanwhile back in Switzerland ... The leader of the Swiss Central Bank seems to be tired of the constant manipulation of volatility. I have to agree that there has been a false sense of security for way too long in the markets that has led to a misallocation or riskier debt issues not only by the minions but HB&B as well! Only problems for the minions is we do not have the political clout to get a "get-out-of-bankruptcy-free-card"!!

READ ON:
SNB head Roth says market volatility should stay

Sun Aug 19, 2007 3:38am ET

ZURICH, Aug 19 (Reuters) - Central banks should not seek to eliminate market volatility otherwise markets risk becoming a one-way street leading to excess, Swiss central bank president Jean-Pierre Roth said in a newspaper interview on Sunday.

"We hope that volatility stays higher. What we had was not normal, namely, practicaly no volatility," Roth told the Neue Zuercher Zeitung in an interview.

"Markets cannot be a one-way street, or you will get excess," he told the newspaper. "The aim of central banks should not be to eliminate volatility again."

FranSix - All sectors were hit hard this month. My point was that most have recovered much more than gold stocks. I fully expect that gold stocks will move significantly higher in the next year or so. Just find it curious that they corrected with stocks but didn't recover with them.

Kaimu - I enjoy your thoughtful commentaries on this blog. Agree the powers want to keep gold under $700 for as long as possible. It will take alot of momentum to get over that hump, but I think it will come by the election. Perhaps renewed inflation from the huge amount of money created this month by the central banks will provide the catalyst.

Dear Bill,
RE:
"So forget the fact Stelco was not even insolvent, private equity got a judge to declare them bankrupt. Then before any Plan of Arrangement was agreed to by the remaining stakeholders, following the theft of the shareholders' rightful interest, the judge called an end to the hearings by stating he was retiring, and that it was his law that neither he, nor any of the participants could be sued over the matter.

Not surprisingly, since we cynics all expected it, the judge never retired. About two months later he joined the principal law firm responsible for the bankruptcy proceedings.

That's how things are done in Canada."

In the USA, judges decide,
"who be the PRESIDENT!"

The idea of "we the people" is now mythology of a once forgotten land.

Anyone have any insights into what moved the UTES (Dow Utilities) today? Big 3% move down on an otherwise non-noteworthy day.

glenn-mp
I am perhaps the least qualified here to answer your question, but it may be due to the expectation of higher interest rates to compensate for perceived risk in the debt markets.
Per Bill: Utes hate rising interest rates.
The real question it seems to me is if the Fed cuts in September, will this effect long rates?
If so then utes may rally, but if that cut is seen as fear on the part of the powers to be, long rates may well go higher.
I am not sure I have this right.
But Leisa seems to have handle on this so you might querry her.
Anyone smarter, here, please chime in.

ALOHA !!

Chavez is in trouble ... So get ready for some sort of military "solution" that of course won't work! Military solutions never solve economic problems. Eventually Venezuela will be Zimbabwe at this rate and that brings "country risk" into a major ALERT! For anyone who has been following the Zimbabwe mess gold producers are shut down because of government mandated "manufacturing price freezes" that make it impossible to mine gold for a profit. Gold producers in Zimbabwe must also sell their gold production to the government at a price a lot lower than spot which in turn also has payments delayed.

This classic hyperinflation Weimar stuff where people offload currency as fast as they get it and buy anything of perceived value, even a bottle of booze or a Fiat car.

READ ON:
We have a real-time confirmation that Venezuela inflation is running at 25%.

Link: http://online.wsj.com/article/SB118817255017309334.html?mod=googlenews_wsj

At a crowded Fiat dealership in Caracas's posh Las Mercedes neighborhood, would-be buyers add their names to three-month waiting lists. They are so eager to purchase they don't care what model or color they get, as long as they get it soon, says sales manager Beatríz Machado. Some used Fiats sell for more than new ones because they are available on the spot, she says.

"They don't want a car. They want a place to put their money," says Ms. Machado, who wears a red blouse and earrings to show her support for Mr. Chávez, whom she credits with helping the poor. She, too, has doubts about the economy, and says she spends her bolívars quickly. Using a bolívar loan, she bought an apartment and a car. Recently, she says, she loaded up on imported champagne and whiskey.

glenn mp-

If you comb the list of % movers today, you will see they were selling some builders and developers and mortgage companies down 5 and 6% today. Is the rate cut/ all is well meme in doubt?

On another matter, and proving that it's the well-intentioned acts that are punished the harshest, I enter a period of blackout as the market model I developed is considered by a group for use. So no market comments and no calls unfortunately.

Thanks to all who listened and put up with me.

Good on ya, MarkM, your calls have been nuanced and mostly right.
I am sure we shall all miss your input. Hope you will return some day with your much larger portfolio, no pressure, and a wish to share, much like Bill.
What could be better? So please negotiate hard for a brief non-compete.
Good luck and thanks for all you have contributed.

MarkM

Always enjoyed your comments. Good luck and hope to hear from you soon

MarkM,

We're so glad that you have been posting on Bill's blog.

After this necessary departure, we all will welcome you back with (dare I say?) a certain...exuberance?

We'll all be waiting.

Kaimu,
I find it very difficult to get any accurate information about Venezuela, since there seems to be media bias on both sides.

For instance see article, "Inflation Drops Significantly in July in Venezuela."
http://www.venezuelanalysis.com/news.php?newsno=2371

Without a good understanding of the politics or economy in Venezuela it becomes a very difficult place to invest. Having said this I have a small position in KRY. GLTA, JMHO

Re miner weakness;

I can buy gold etfs, why risk buying a mining company stock that MAY have exposure in things like Coventree (see ABX, IVN) where they can't get their money back? That is a major reason for miner weakness during this time of credit derivative issues.

Good luck Mark and take good care of the girls. Loo forward to hearing about your future success.

Mr. Cara, found your site by accident when searching for some info. Very informative, thank you very much for this site.

DL

Re Anatolia:

Here's a year old research report from Raymond James:
http://tinyurl.com/2xhae3

I'm a little concerned about operations in Turkey as a result of the suspension of operations at Eldorado's Kisladag mine there.
The Rio Tinto connection seems like a big positive.

ALOHA !!

indptrader ... I'm not sure who to beleieve the Venezuelan Central Bank run by Chavez or the WSJ reporter? Although in the article it did say official inflation dropped to 17% from 19%! I mean I don't even believe my own government's CPI numbers! In actuality I have always believed the SWI(Sea World Index)currently at 11%, last price increase for a ticket to Sea World San Diego!

ALOHA !!

Your friends place at Long Bay seems a little underpriced to me, unless it is priced in British pounds! I am sure the oceanfront residential property is much more pricey ... Just curious what are the annual costs of utilities, maintenance and property tax ... ballpark?

Kaimu, with all due respect, the strident anti-Chavez bias of the WSJ is unmistakable.

Even so, deep into the article you will find this:

"But the longer-term prognosis is far from clear. Mark Weisbrot, co-director of the Center for Economic and Policy Research, a Washington think tank, who is generally supportive of Mr. Chávez, says the government has time to boost economic growth by investing in industries outside the oil sector. Other economists are more skeptical. They contend that the government isn't making enough long-term investments, such as building factories, and that it remains far too dependent on oil revenue."

(I don't think you'll find many KRY investors who disagree with that sentiment. Hey, Sr. Chavez, maybe opening up the Las Cristinas project might help expand economic development beyond oil. You think?)

Of course, the WSJ author cites an economist who has his doubts about VZ, none other than the senior Latin American economist at ... try to guess now ... Goldman Sachs.

Finally, reading the full story I couldn't help but be struck by the irony of the author's claims Venezuelans are trying to move their money into dollars. Isn't high inflation and the unprecedented debt of the U.S. government one of the primary drivers of the rise in price of precious metals?

Oh, if only Chavez could sell treasuries to the Chinese to keep his own currency from collapsing!

Anyway, country risk high for KRY. But it is also absolutely magnified by the U.S. press. And with this risk, there is also the prospect of a large reward. These are common attributes of speculative investments, and the key is to balance your investment (depreciating) $'s accordingly.

ALOHA !!

For those who still believe the US government can do no wrong or that somehow our leaders spend days and weeks and months in debate and consult with "experts" then please take note of this phone recording of LBJ talking about Vietnam in 1964 ...

LBJ: "What in the hell am I ordering them out there for?"

LBJ: "It's damned easy to get in a war, but it's going to be awfully hard to ever extricate yourself if you get in."

Yet, right after this phone call he ordered up troop strength and some 58,000 US soldiers died.

Did anyone ever see the movie Gallipoli?

None of this is new yet the same mistakes are repeated time and again, whether it is a Presidents decision for war, the military leaders vanity or stock market greed. It always ends the same way too ...

Please view YouTube presentation ...

Link: http://tinyurl.com/327b4r

number2son ... The Venezuelan Bolivar or the US Peso ... whats the difference? In terms of Chavez he surely loves himself like a good dictator should, but if he makes the mistake of just sitting on oil revenues and surviving politically on handouts to the poor without creating a working middle class with actual jobs then let Zimbabwe begin!!! I see his direction and it is making aliances with the likes of the Russians, the Chinese and Castro ... in other words BIG SOCIALISM! Anyway if he cuts off oil to the USA then get ready for the return of GUN BOAT DIPLOMACY! I am not sure the Russians and the Chinese would want to engage in warfare in the Americas not even to save Chavez! Russia surely does need the oil and China can get oil with less resistance from Africa! My one BIG memory of living in Venezuela all those years in the 1960s as a kid was the military presence. Militaristic countries always have high inflation ...