Your weak gold/falling oil/strong dollar scenario sounds like a great backdrop for equities for the rest of this year?

I wonder....will those commodities be falling due to falling demand/slowing econ/recession?

Maye be great at first but it isn't a good story going forward.....

Stagflation is a weird bird.

SPY 139...twiggs targeting 138.50 for confirmation of downtrend...

Any suggestions for the best fund to use to short oil?

While not everybody is long oil, there's much more optimism as of late.

From Bloomberg:
"Crude oil may rise next week as investors buy futures after banks raised price forecasts and U.S. stockpiles declined. This is the first time in 20 weeks that analysts forecast an increase in prices.

Fourteen of 29 analysts surveyed by Bloomberg News, or 48 percent, said prices will rise through May 30. Twelve of the respondents, or 41 percent, said oil will fall and three forecast little change. Last week, 47 percent said futures would decline.

Societe Generale SA and Credit Suisse lifted their price forecasts on May 20 and Goldman Sachs Group Inc. raised its outlook to $141 a barrel for the second half of 2008 on May 16. "

All that optimism, combined with that attractive DUG chart... I'm salivating over that volume!

Unfortunately got stopped out of SKF while on vacation last week, but i got back in for a partial ride.

Allen

I have been using the ETF "DUG"

Say hi to pharaoh for me!

Bloomberg has a story up that the market is expecting poor existing home sales numbers this morning.

I'm dubious as there have been recent reports here in the SF Bay Area about a recent surge in home sales. While this may be a temporary blip, I expect it will contribute to a better-than-expected report.

In any case, there are larger forces weighing on the market today. And the housing crisis is far from over.

Volume is nonexistent.

shorting USO/DUG sounds good...would stay away from DCR...

Cara 100 Update:

NTES - Upgraded to Buy @ Pali Research

QT, thanks for the suggestion. I said hi to the pharaoh on your behalf, noted you are a fellow member of the FXP dive club, and told him about DUG...

breaking 1385 on SPY->downside should accelerate...

Allen

:-)

FXP is on it's way up.... the big problem you'll face in the near future is when you get close to your cost basis, will you sell or hold and ride it higher for a profit? That'll be an agonizing decision.

we are down around 600 point from intraday monday
high

UCR/DCR- investors either won big or lost big:

http://tinyurl.com/6nagls

"In early April, we pointed out the DCR/UCR trade to Bespoke readers, noting that if oil closed above $111 for three consecutive days, the two notes would hit termination at the end of the quarter at wherever their NAVs were trading. UCR is the "oil up" note and its NAV is calculated by dividing the price of oil by three. DCR is the "oil down" note and it is calculated by subtracting UCR's NAV from 40.

Once oil closed above $111 for three days in a row (seems so long ago), the termination triggered, so at the end of this quarter, the notes will be distributed to holders at their NAVs. But now that oil is trading above $120, DCR has no NAV [40-(120/3)=0]. Surprisingly, DCR's price is still trading at a premium to its NAV, and if oil is above $120 at the end of the quarter, owners will lose all of their money, effectively making it an option play on oil's decline at this point. UCR, on the other hand, will distribute $40 per share if oil is above $120, even though its price is trading at $37.26."

SMN/DUG-> pulling into the ultra fast lane...question is do they get going this time, or do they pull right back behind the others?

Weak gold and oil and strong dollar is deflationary and that would kill equities more than stagflation. A weak dollar is absolutely key IMO to propping up the equity markets in the US on the back of foreign currency gains, that is why it is allowed.

The Friday before the King Holiday in Jan we had a nice sell off if I remember correctly. Then that Monday when we were closed, the foreign markets sold off hard. That Tuesday when we opened the Feds did an emergency .75 basis rate cut to stop the bleeding in our own markets that day. Wonder if the same thing could happen again next week minus the emergency rate cut?

QT, it's tempting to sell once the loss is reduced to a psychologically painless level (less than 5%). But like conditions before an earthquake, there's a lot of negative pressure building up. Squeezed earnings, spent out consumers, deteriorating bank balance sheets, upward pressure on interest rates. So, I'd be inclined to hold for a bigger unwind.

Remember, Bill said commodities and gold would be the last dancers on the floor, and then we get the Dow 10,000 to 11,000 drop.

How about you?

if DCR is now essentially an option play on oil closing below 120 by june 25, then we have some serious gamers out there...

SMN- taking a little of at 29.98...

'off'

OK, they're accelerating...

FXP headed back into the seventies...

Good call yesterday on the selloff 2nd_ave.

Out of FXP at 70.27, rode it for a 10 point gain.

Keeping QID over the weekend

Jeff Cooper is saying that there won't be support until the weekly swing chart turns down. That happened with trade under 1384 so we could see a small rally from here next week.

QT, Allen... that's the problem with holding underwater position. I didn't want to comment on it while pressure on you was so strong. Now that you have some relief in sight, let me quote from http://tinyurl.com/37q6od blog post:

"Now, even if not for shorts being called in, would you be able to sit out such ride? I highly doubt it (unless you ARE from Mars that is). Chances are, you would have given up long before it was over, and the closer to the top your capitulation occured the more insulting it would have been. Worse yet: let's suppose blue-eyed miracle happened and against all odds you did manage to sit tight through this experience (nothing short of being made to watch Inconvinient Truth five times a day two weeks in a row). Do you think you would be able to profit from subsequent price drop? I wager Victoria, biggest crater on Mars , that as soon as KTEL dropped closer to $20 making you even, you would have covered your short with sigh of relief loud enough to be heard from that same crater. And if I am right about this, then all this horrible risk and gut-wrenching experience was for what, to get out about flat? Give or take couple millions nerve cells?"

Really, stop at the point where chart tells you are were on a wrong side and re-entry when new signal appears is more profitable and health-protecting way...

moab- thank you..sometimes the nose (knows...

Allen

What ever I tell you now will be all talk. I just hope I have the guts when I get near my entry point to keep riding it up. G-d only knows I was under water long enough and I should compensate myself with some profits for it. :-)

I'll let you know as we get closer.

Colin Twiggs says breaking that 1385 level would confirm the previous rise was a bull trap and we could test 11750. Were at 1378 now. This could be a nice ride for those of us who short.

Maybe ride the mo that is getting you back to even....afterall it is now rising.....then a tight trailing stop to keep you on top and capture any possible profits?

agree with vad- (btw, i believe the brain processes sensory input from the nose faster than you are able to 'understand' the reaction)...

Mom&Pop Stuff:

My last entry proclaimed the reciept of my better half’s tax rebate check and listed the partial expenditures of same. Well since that time my $300 ’bate’ was received bringing the total to $900.

To make a long story short, the balance of both windfalls were blown on a mid Gulf Coast Florida vacation in a small beach town with a zip code both Indian Rocks Beach and Indian Shores use.

It appears transportation costs will outweigh the price paid to rent the villa directly on the beach. We rented a car to make the trip, our old jalopies’ were not trustworthy for the journey and the FORD pickup uses toooo much gas.

Some local financal news of interest:

Reg. Gas=$3.84

St. Petersburg Times headlines:

*State revenue falls $91.7 Million. April tax collections miss a downsized estimate. The state may tap an emergency fund.

*USF (University of South FL) to cut 450 jobs as 1st step to cope with a $35.6 million loss in state funding.

The Sunshine state has a few clouds as well as the rest of the nation.

Have a safe Memorial Day Weekend.

CT may be right, but I bet we get a bounce back to nominal next week...(the mean), maybe off one of the American holiday sell-offs in Europe/Asia Monday while we grill expensive ground beef.

I totally second Vad's above post. Trading is supposed to be an uncomfortable feeling, not an excruciating one.

closing out SMN for now at 30.37...

Beef report from South Africa ...

My favorite butcher (called Fruit and Veg City here!) has a special on Porterhouse steaks this weekend ...

ZAR 39.99 per kg, approx. USD 2.50 per pound.

Mince/groundbeef generally costs more than that here.

They cut it to my specification and vacumn pack it for me, so I avoid freezing any.

That is the only good news I can report from here.

Lehman is getting crushed the last few days, especially today. Once it lost that 42 level it has accelerated downhill.

Maybe Ben will be working the long weekend bailing out LEH and selling it to GS or? while backing it with OUR $ of course....

"State revenue falls $91.7 Million. April tax collections miss a downsized estimate. The state may tap an emergency fund."

How sad is that? What's the emergency? $4/gallon gas? What are they going to do if this slowdown persists? Or gas goes to $5/gallon? Or, heaven forbid, there is a real emergency?

Does any state actually run a surplus anymore? Correct me if I'm wrong, but aren't we coming off a 3 year bull market of good times, and even then these politicians couldn't balance a budget?

I'm sure you've all heard of Schwarzenegger proclaiming that they should have such an 'emergency fund' that they 'pay into during good times and fall back on during hard times'. Of course, coming off good times where all they've done is increase spending, they have to start by issuing $15B in bonds to fund it.

At first I thought, 'geez, how dumb is that, taking on debt just to have emergency cash lying around'. But then it struck me, maybe this was a genius move because in a year when they do need the 'emergency cash' they'll be in such bad shape, nobody would buy their bonds.

At any rate, the nearsightedness of todays leaders is painful to observe...

Our late entry from last night's postings:

The S&P 500 rose 14.6% from its mid-March lows to its recent peak just above 1440. So the bulls had their way for two months in response to the Fed's rescue of Bear Stearns. However, the move to the upside may now be over.

Today's collapse in the number of very strong stocks along with a higher than normal number of very weak stocks has put the market back into a technically weak position. That means any upside should be limited.

Two short-term positives though are the upcoming U.S. holiday and then month-end right after the holiday. If the market cannot rally and repair its current technically weak position over the next two weeks then the writing will be on the wall: the downside will be back in play.

With Meg Whitney of Oppenheimer saying that financial services firms have another $170 billion in reserve builds to go by the end of 2009 (compared to the $95 billion in write-downs and reserve builds already taken), we believe the odds of meaningful price declines in the U.S. stock market are high.

JW
http://www.2globalmarkets.com

Bill Gross (PIMCO) has an interesting article on US stated inflation rates compared to rates worldwide, and possible market implications if international investors reprice American assets based on a more realistic (higher) inflation rate.
http://tinyurl.com/52vfy2

Hat tip to JMF at:
http://immobilienblasen.blogspot.com/

I'm no gold bug, Bill. But looks like we are going into contango across the board on almost all commodities. Inflation expectations could fuel a rise in gold price from here. I do not think the Fed is in any position to raise rates with CMBS, consumer credit card debt and credit derivative losses on the horizon.

In case you missed this
Buffett v. Schulich: The biggest bet out there
Globe and Mail Update:
May 3, 2008 at 6:00 AM EDT

From: Seymour Schulich "seymour@richboy.ca"

To: Warren Buffett "warren@cheapskate.com"

Subject: The road to riches is paved with oil (and wheat, and...)

Warren,

Seymour Schulich from Toronto here. I was talking to some kids at one of the universities here, and telling them that in 46 years of investing, I've never seen anything like this market. Never. Oil, rice, potash, wheat, gold, sugar – it's a commodity investor's dream. Manna for guys like me!

So I got to thinking, I wonder what Buffett says about all this? You've never been a fan of these commodity things. Shoot, you're out there buying big chunks of Wrigley and Kraft Foods. I don't get it. These guys are going to get killed by inflation. Didn't sugar prices go up something like 50 per cent in the space of a few months? By how much do you think Kraft can raise the price of a box of Oreos? Commodities rule, fella.

Anyway, getting to my point. You like giving away your money. So do I. I'm proposing a wager. We each set aside $10-million. In two years, the guy with the best return picks the charity that gets the pile.

What do you say? A little fun for a good cause?

Sincerely,

Seymour Schulich, CFA

From: Warren Buffett "warren@cheapskate.com"

To: Seymour Schulich "seymour@richboy.ca"

Subject: You're on

Dear Seymour,

Thanks for your note. I like visiting Toronto. It reminds me of Omaha, only quieter.

Your proposition is interesting and I'll take the bet. I had my research team (by which I mean, Charlie) dig up some details. A business magazine says you're worth $1.3-billion. Not bad for a guy who made his money in oil and mining.

Those commodity producers are minting money now. But most of them have no sustainable advantage over the competition. Wheat is wheat; oil is oil. There's no way to differentiate it. There's a supply and demand issue right now, but this too shall pass. I see gold is almost back down to where it peaked in 1980. When you adjust for inflation, oil is still not much higher than it was in the late 1970s. Not much of a real return there.

Hey, you know my shtick. I like stable businesses, brand names, rising profits and high returns on capital. Coca-Cola's still making 30 cents for every dollar in shareholders' equity. Wrigley's making 25 cents on the dollar, and doing it with almost no debt. What does it matter if sugar is a bit more expensive? They're great businesses.

Gotta run. It's annual meeting day. The adoring masses await.

Best regards,

Warren

p.s. Is that $10-million in Canadian or U.S. currency?

From: Seymour Schulich

To: Warren Buffett

Subject: RE: You're on

Dear Warren,

Glad to hear you're taking the bet. Let's make it in Canadian dollars. I don't want my charities getting U.S. pesos!

Look, I hate to question the wisdom of the world's richest man. But as I often remind people, my family's motto is, "Often wrong, but never in doubt." And there's no doubt in my mind that it's different this time. By the way, if you're keeping score, ExxonMobil's return on equity was higher last year than Coke's or Wrigley's.

I've seen it with my own eyes. The China story is real and could last for the next 20 years. You wouldn't be wrong to say that mining was a crummy business for a long time, and oil has had its bad spells, too. But that was when the U.S. was the world's only major customer for stuff you dig out of the ground. It ain't so any more.

You always like to talk about See's Candies and what a great find it was for you. But why? Because you could raise prices all the time without reinventing the damn thing. Chocolate's chocolate. But it's the guys producing the cocoa who've got the leverage now.

Come and see me the next time you're in Toronto. We've got to get you weaned off bridge and into poker. Now that's a man's game.

SS

From: Warren Buffett

To: Seymour Schulich

Subject: Never invite 24,000 people to your annual meeting

Honestly, it takes more Cherry Cokes to get me through this event every year.

I'm not averse to commodity companies when they're bargain-priced. We made a very large profit on PetroChina. I just don't think you'll find many like that any more.

The kind of businesses we like look as cheap as they've been in a long time. We bought almost 3 per cent of Wells Fargo last year. We tripled our investment in Johnson & Johnson. We're certain their profits will be a lot higher 10 years from now. Can you say that about your gold miners?

Best,

Warren

From: Seymour Schulich

To: Warren Buffett

Subject: Rocks beat Wrigley

Warren,

Glad to see you're sticking to your style. The university students of Canada thank you in advance for your donation.

You'd better watch out. When gold gets to $10,000 an ounce and oil hits $700 a barrel, I just might pass you on the Forbes billionaire's list! LOL.

Best regards,

Seymour

From: Warren Buffett

To: Seymour Schulich

Subject: BUD beats barley

Seymour,

I'll let Bill and Melinda know to expect your cheque in 2010. Regarding the Forbes list – to pass me, you'll have to outlive me. And I intend to challenge Methuselah's record.

Sincerely,

Warren Buffett

Viso: great post. For those who are unfamiliar with Mr. Schulich, this article may help. As the article points out, he recently made a $29 million dollar investment with funds in his RRSP.
http://www.thestar.com/Business/article/410508

FXP- out for now at 70+...

DUG/QID-> out also...back to fence-sitting...

(what kind of president would that make?)

Precident or President?

Viso
Great post thank you.

Excavator1

Shark, it's not excruciating. It's only 10% of my liquid assets. Waiting is not a problem IF I think the wait is worth it.

Vadym, I guess I can't agree that it would make sense to sell now. I bought after a peak, and watched FXP go way down on a broad rally. Fundamentals deteriorated due to continuing credit crisis, credit contraction, housing, energy and food prices. One estimates the odds and risks, takes positions, and sometimes one has to wait for a while. I'm an old fan of Soros's Alchemy of Finance, and know that this is not just a psychological game. Fundamentals matter, as do earnings, as do prices. Time can work in ones favor or against a position; I've taken the view that it will work in my favor on this one. I don't mean this aggressively; I just have a style that returns something like 20% a year, am risk tolerant, don't mind being patient, and don't get upset over a position that turns against me for a while. Note that in the past, I've held AES underwater at about $2 to $3 during some periods to sell a few years later at $20, and bought IF, MF and TTF in late spring 1998 only to take a hair cut and have to wait a few years to do well on those positions.

U.S. begins to ration Silver Eagle coins...

"The government rationed food during World War II and gasoline in the 1970s. Now it's imposing quotas on another precious commodity: 2008 dollar coins known as silver eagles.

The coins, each containing about an ounce of silver, have become so popular among investors seeking alternatives to stocks and real estate that the U.S. Mint can't make them fast enough. In March the mint stopped taking orders for the bullion coins. Late last month it began limiting how many coins its 13 authorized buyers worldwide are allowed to purchase.

"This came out of nowhere," says Mark Oliari, owner of Coins 'N Things Inc. in Bridgewater, Mass., one of the biggest buyers of silver eagles. With customers demanding twice as many as they did last year, Mr. Oliari would like to buy 500,000 a week. But the mint will sell him only around 100,000.

The mint, a bureau of the U.S. Treasury, has offered little explanation beyond a memo last month to its dealers. "The unprecedented demand for American Eagle Silver Bullion Coins necessitates our allocating these coins on a weekly basis until we are able to meet demand," the mint wrote. A spokesman declined to elaborate."

http://tinyurl.com/5c3jc5

LOL..wouldn't want to set the precedent of being indecisive as president...

If someone is willing to hold a stock for years because it has gone a bit underwater initially, why not consider writing LEAP calls every year, especially if the stock is volatile? I think the premium is at least approx. 10 to 15% of the stock price.

When the market was turning south a couple of days ago, I wrote slightly out-of-the-money Oct calls against my long term holdings (INTC, ASML, etc.). For example, the ASML calls expiring in a few months gave me a ~10% downside protection -- not bad for options that expire in about 5 months.

"I guess I can't agree that it would make sense to sell now"

Oh, that's not what I am saying at all Allen.

I understand where you are coming from, and the difference in our time frames influences decisions to a great degree.

The point I was making: it would be more profitable and less frustrating to get stopped out when chart said that entry timing was wrong, and re-enter later. Of course your fundamental analysis were and are correct, I don't think there is a single person on this blog who would argue otherwise (unless they are from Mars? :)
It's just price action should have precedence when deciding on particular entry, because fundamental analysis is directionaal tool but not a timing tool - IMO. Technical analysis can be complementary or stand-alone, but without it errors in timing can be quite substantial.

Just blabbing away, looking forward to relaxing long weekend :)

allen- you could be right...you should have turned around a few miles down the wrong road, but you were able to hole up in a seedy hotel for so long that you're actually going in the right direction now...

Vadym:

Hi. Remember I was asking you about IYR? It looks like it is testing support in the $68 area.

Allen

Something for you watch while you wait for FXP to break the 71 barrier....

Since you are in the "Land OF Tut", I thought this to be appropriate.

http://www.youtube.com/watch?v=ti7OHd_cymw

Vadym, you're probably right about getting stopped out. I have never used stops, because I tend to be a long term investor, and don't want to be shaken out by manipulators who shoot for the stops. With something like FXP, it's different, because of the leverage and resetting mechanism.

I don't have time to make several trades a day, so I need to use at minimum a few weeks of horizon. I don't really have time for watching intra-week price action. What I make on "day trading" is so much less than on chosing good LT positions. I was in gold last year, cash at the end of the year, and used FXP as a short to play short term cycles. It's just that the price action on the move from $110 to $77 (my average price) was "deceptively attractive", meaning I bought a bigger position than I probably should have. It would have been better to be stopped out at $70, but not at $75 given the tendency of the big players to shoot for the stops.
That's my logic, for what it's worth...

hi Teich,

I remember we talked about it... Looking at daily - it's weaker than the market overall; it's touching on lower band with voulme drying up; feels like bounce is in order; I would see short entry on that bounce, verifying it with volume. Ideally, bounce closer to 70, not breaking it anymore so it serves as a nice tight stop level; then flush through today's support into 65.50 or so where I would have covered half, trailed stop to just above the high of the "flush" day, and try to ride it for loss of 65 followed by sharp spike down where I would have happily closed it.

Just my description of trading plan I would deploy on this one. Don't let me influence your thinking if your idea is different.

Allen,

thank you, this is very fascinating to me. I guess the very idea of trading without stops is what is so foreign to me, it's ingrained in me at the bone marrow level, LOL.

As for 70 or 75 for a stop placement, that's totally up to one's trading system and time horizon. In general, I agree that stop placement should include certain "padding" to avoid being shaken out at the obvious level where a lot of others place their stops.

Hi Vadym.

Thanks for your advice.

1. By the way, my brokers won't let me short IYR. I opened an IYR Sept $71/$80 bear call spread instead. If the trade works against me (with IYR closing above $71 by expiration), my sold calls turn into shorted shares :) This is the only way I know that I can short IYR shares.

2. Since IYR has fairly strong support at ~$68 (also based on the potential bounce you just mentioned), I closed my bear call trade profitably. Will re-enter if IYR bounces.

I don't agree oil will fall back to 100 or gold will fall to 800.

I see the market taking a huge hit beginning next week, oil to 150, and Gold a moonshot to 1100 near term.

Been wrong before.

Vadym: I appreciate your posts here. My trading timeframe is more like Allen's, being more a swing/position trader. However, I did make more than enough money on a RIM day trade to purchase your book "Techniques of a Tape Reader". I have numerous books on trading, and find yours one of the easiest reads, yet with valuable content. I have only skimmed it, but hope to get into it in more depth over this weekend.

Freedom,

thank you for good words. As for easy read, I suspect the reason is my English vocabulary is limited to two-syllable words, so I keep it rather simple (Grin)

Don Coxe's weekly webcast is available for listening. One of the items he dealt with today was stagflation. One key point he made was that he believed any major bull market move must be underpinned with the financials leading. He also stated that the $BKX (Philadelphia Bank Index) must hold the 75 level, or there could be considerable more downside.

http://events.startcast.com/events/199/B0003/D

ST play on DUG this am...was late in getting up...west coast handicap. Anyone have any ideas on which way the flag that has formed since 11 EST might break???

Re the discussion of UW positions, I am getting stopped out of a position. I don't know if its a function of my inexperience placing stops or the more volatile nature of my picks. I have been stopped out of SLW, BEXP, USU and WGW this week. As Vad says, I can pick a better (for me) entry point and try again. I feel ok that those positions are closed. Better than the ones I did not put stops on that are underwater.

Thanks too to 2nd
Comments like his about when you start to "hope" it comes back being a good time to get out.
Comment to Tradergirl and others re lack of posts...please share your trades or fantasy trades. Bill is oh so right that the collective is more observant and intelligent than the individual.
Thanks to Bill...for snapshots from Paradise, for a forum for discussion without flames and for your concise summaries. I can easily convince myself its "different this time" or that gold has corrected enough ( my fear of missing an opportunity). Thank you for your polite reminders.
Peace from North Puget Sound

How many of you utilize straddles? If there seems to be such strong opposition on both sides of a price swing why not leverage your position and see if you can profit on the volatility.

We have the durable goods and GDP figures coming in next week. If we are going to see anything reflecting a further weakness in the dollar and continued economic downturn (a flight to commodities and PM) shouldn't we see it next week?

The nuts and bolts of it are getting past the break even point of having to pay commissions on two positions. Seeing how much prices have been moving it might not be a bad position to be in.

Thoughts?

As Taoist, I never pay too much attention to money other than to cover basic needs for others in my life.

Money is a human form of perception: of value and interchange.

In trading I find it an interesting practice: Not unlike many of my other Taoist practices which I explore life with.

So I jumped into trading to explore more about life than about the trading.

Look at the interchange on the board, and the degree of social concern, and learning to let go of emotion, watching patterns to understand what might be: All of this is very Taoist on one level.

The tricky part is attachment: Taoist have no attachment to anything except kindness and enjoying life. Fulfilling in the exploration of what it is to be ourself.

To be a successful trader is to live in a contradiction. You must drop attachments: other wise emotions will override the reality of what is happening in the now.

However, you have to maintain an attachment: Trading is very much about "profit" which is an attachment, an attachment Taoist drop.
Side note trading could be about sharing: exchanging in needs to help everyone: this is the path to social equity that Bill wants to walk I believe)

So in effect to be a successful trader is to maintain oneself in a very unstable position. Between both detachment and attachment.

Since if you take detachment all the way: you would not be a trader, since money wouldn't matter (the reason I never became a trader,except now for the reason to learn more), but if you attach too much, to emotion, to the flow, it will sweep you away.

I find this board to be even more of interest, since most of the members are trying to stay true to socially responsible thought and action also. Something also which if you take the trading to extreme one could easily lose that aspect of humanity in their life. Look at most of wall street and you will find little true positive social aspects of humanity, lost in the greed of attachment.
I find everyone here very admirable and have respect for people here for this reason.

So here is my question of the day: how do you manage this contradiction in your life as a day trader? I would be curious to hear what practices and manner people here use to balance their life with.

Thanks!

Casey

Transports $TRAN made double top at 5500!
Bearish omen.

Trading can be about energy. Energy flows, comes, goes, it is transient.

It is all in how we look at it. Perception.

Money holds energy, like in a battery.
As Kaimu notes, some batteries are better or hold more energy than others.
Still, the energy contained in the money is transient.

TO = Omaha?

:0

Casey, It also depends on your perceived timeline.

All things must pass and you can't take it with you, so *all* energy is transient, no?

Posted by QT: "2nd: If you buy FXP then this will automatically make you President of the FXP club, since the rest of us are all underwater. So lead us to higher ground ok?"

That's what our team needed -- a captain! Now FXP is moving. :)

DavidV

Casey,

this is inetresting question you ask.

I trade for as living so my motivations are rather simple. I don't need to be attached to money in order to trade and make profits, I simply trade for profits providing for myself and family. I, however, see your question as very important one, so I will try to "detach" myself from the fact above and offer the asnwer as I see it.

Being detached from money (which I am during trading process anyway, in order to maintain objectivity and not let emotions govern my trading), I remain fascinated and attracted by the process and feeling "being in tune" - feeling the current, flowing with it, being the water. Being in harmony with bigger entity, not perceiving the development as hostile toward me even when it goes against me. Keeping ego in check, staying humble, not placing blame anywhere, staying fully responsible for the outcome.

This mentak state is very liberating and extremely satisfying in and of itself. To make it short - feeling of being in harmony with market is my reward. Money or not, I cherish this feeling; I also firmly believe that this position, this mindset is imperative in money-making process for me - "trade right and money will follow as natural reward".

mebea

Since you said

"How many of you utilize straddles? If there seems to be such strong opposition on both sides of a price swing why not leverage your position and see if you can profit on the volatility"

1. If the "opposition" is strong, I think one would enter a strangle instead of a straddle.

As we know, to enter a strangle is to short implied volatility (IV), while to enter a straddle is to long IV.

3. To "leverage your position", which I assume you are referring to writing calls or puts against the underlying (long or short equity, respectively), one is essentially setting up a strangle.

casey- there is no contradiction, IMO...the freedom to engage in "kindness and the enjoyment of life" requires a certain amount of financial security-> without it, i guarantee your mindset would be different...trading is as "Taoist" as martial arts, writing, or music...each one is an art, each one requires a lifetime to master, and each one rewards you with the quality of 'effortlessness' when mastered...i don't think most of us become 'attached' to trading or profits- i know that competing with other traders is not what it's about for me-> i've always thought the element of competition would negate whatever edge i have, as it would interfere with my read of the market...as with most things in life, all of the above can also be (mis-)used, and there are plenty of traders/artists/musicians with distorted intentions...but then, what's new?

Testimony of Michael W. Masters Managing Member / Portfolio Manager Masters Capital Management, LLC before the Committee on Homeland Security and Governmental Affairs United States Senate .
http://tinyurl.com/45opwu

Eoin Treacy:

The fact that testimonies such as this one are being listened to should be a warning, that if the futures markets are not functioning as the hedging mechanism they were designed to be, then government intervention becomes extremely likely

Scottraders

Any use the new Velocity & Forces screen on the Scottrade Elite?

make that "Anyone"

everyone: I appreciate the answer so far, :)

I have to ponder some of them

2nd ave: contradictions are issues of perception. in that they go away depending on how you look at the target of the contradiction.

For example light in physics: is it a wave or particle: it has aspects of both depending on how you measure it. In reality it's neither a wave nor a particle but something which has qualities of both.

So you resolve the contradiction I mentioned in the way you actually live life: That is awesome. And I think the right way to resolve that issue of detachment / attachment

Rebuttal on Masters' testimony by Prof. Hamilton:

http://www.econbrowser.com/archives/2008/05/oil_speculation.html

"I believe that this speculation has resulted in a slight decrease in the quantity demanded that has required some modest supply reductions or accumulation of inventory by producers."

ALOHA !!

Just to reiterate a common misconception with commodities such as gas and food. For sure these are essential to everyone of us for daily survival. You can live the rest of your life without an iPod.

THE PRICES ARE NOT GOING UP THE VALUE OF YOUR DOLLAR IS GOING DOWN ...

That's MONEY 101 ...

ON BUFFET
It is not odd that Warren Buffet who got his ass whacked a few years ago for his attempt to short the USDX and had all his 130mil ounces of silver taken away(to save GeneralRe)is bearish on commodities. What a shock! He was trying to pull off a "straddle" of his own(real wealth vs false wealth)and when you are a revered icon of investing those in power cannot have him succeeding in any market other than stocks! To me Buffet has capitulated his past commodity ventures not by his own choosing ...

What is odd is that neither one of the two "betters" even mentioned the role of the US government and the FED in their bets! It doesn't take a genius to figure out that translates to a CONFIDENCE crisis ... Real wealth always wins out under such circumstances and the times are no different now in terms of "risk" and the rush to avoid unending risk in the near term future.

Good luck on your bet Warren!

MY BET
I pick MER to collapse next ...

The basis of my choice of MER is the ENRON SYNDROME ... He who yells the loudest they are OKAY and has their CEO quit will be ENRONED! So far MER seems to be yelling the loudest about how they don't need any FED bailout money(temp? loans) ...

Bill, you are a very credible source, so I am following your advice on gold and waiting until it corrects down to the $800 level before "loading the boat".

Being a Goldbug for 5 years now it is hard to sit and wait. Especially when there is a big move like this last week. Hopefully, patience will payoff.

[Bill Cara note: Patience is a virtue when it comes to trading. You need the patience of an investor (investing is what traders call a trade that's gone bad!) and the ability to seize the opportunities that you are prepared for when they arrive.]

BillySundance posted 2 weeks ago on Friday May 9th "Bought LEH Jul 40 put". LEH closed about 44 that day. No idea if you held that position or not, but at $35 today, you're looking brilliant. Hats off.

[Bill Cara note: It was in March (Feb?) when I removed Lehman Bros from the Cara 100, but it was about a year and a half ago that I called the humungous share buy-back at Lehman Bros a ridiculous move. What we have today is proof of concept.
http://tinyurl.com/3ljjh9 ]

I am waiting for a move up on gold so I can short GG/ABX around $45 if it makes since at the time next week.

Bought more: DIA calls JUN 130 as a way of protecting the price of FXP

I am hoping FXP goes up, but if it falls I will take profits from Dow call to buy more.

Happy Memorial Weekend from Tennessee, 88F here!

Kaimu:
I want to bet against your "MY BET I pick MER to collapse next ..."

Merill Owns 20% of Bloomberg(Worth $4 Billion) and 49% of Backrock (worth $13 billion).

I am not long MER, but looking to add if it comes under $38.

Correction: Blackrock (BLK)

David/allen/QT-> FXP- if you guys are looking for a 'captain,' how about 'robbie fields?' reference his 1038a post- while the rest of us were debating the finer points, looks like he quietly navigated a 10 point gain?

Brief market comment

Senior gold stocks have diverged from gold metal. If there is a sell off in oil and the general stock market, I expect senior gold stocks to head down with them.

We have a weekly outside reversal down in the general indices. The bears are back. For beginners, you can go to stockcharts.com, enter the ticker $SPX for the S&P 500 or $INDU for the Dow Jones Industrial Average, change the chart to weekly; and you can see how the latest weekly bar is both higher and lower than the previous weekly bar, and this week's closing prices are below all of last week's prices. I interpret that as very bearish price action.

It would be nice on this blog to see more solid, basic nuts and bolts of trading. Assume there are beginners everyday to this site who could learn some new skills. Chart and price data are what matter, not stories and opinions.

[Bill Cara note: I agree with SteveC, but the truth is I have been on hiatus for three weeks, and I am chilling out in The Bahamas. I needed the break. In a couple weeks, I will get back into normal mode and try to focus more on "basic nuts and bolts of trading".]

i see bets on the table (aurator, kaimu, jogyp)...i'll take the other side of aurator's bet-> think oil hits 120 before it hits 150, and gold hits 800 before it hits 1100...no opinion on MER...adding one of my own:

i'm ready to re-enter CAF on weakness...i really believe beijing has an entire committee devoted to moving the market higher by august...if i were in charge, i would make sure every hostess, every waiter, every cabdriver, every doorman/bellboy/busboy/ticket-taker is feeling prosperous, happy, and patriotic to the hilt by the end of july...can't buy happiness? OK, but you can buy a month of national contentment by driving the market to old highs (surpassing them even)-> i would use every tool (lower rates, margin, subsidies) available to do it...could be wrong, but i would be very surpirsed if i am...they are not going to screw up the olympics...

bet is SSEC >6000 by the end of july...

all in fun, OK?

Gold: Bill says we're going to $800, Sinclair says we're going to $1,200. This could be a PPV event.

[Bill Cara note: I'm not doing this blog for the sake of being entertaining, but the idea of WWE Smackdown is interesting. Right now I'm the underdog--probably 6 to 1 from the way I think traders are seeing it.]

i'll take 6:1 odds...LOL

ALOHA !!

JoyP ... I am assuming you meant to type "Blackrock"! Ask the Chinese how well thats working for them!!!

Go to the folowing link from Merril Lynch's own 10-Q and you will see they admit they are exposed to $50bil in "NON-INVESTMENT GRADE HOLDINGS AND HIGHLY LEVERAGED TRANSACTIONS" ... (Page 109)

Link: http://tinyurl.com/5jkbs5

That more than wipes out the $17bil that Blackrock and Bloomberg may be worth! We won't count the

I won't even add in the multitude of laswuits Merrill Lynch is facing now.

If you plan to add MER at $38, you better set stops at $37.999!

SteveC ... How well did your charts work on BSC that Friday before they collapsed to $2.48USD? I would bet your charts were telling you that BSC was in the "AZ" and then with Cramer on TV yelling out "BSC is a BUY" what else do you need to know that BSC was a great buy on Friday?

Charts don't work on bank defaults. Even the FDIC forbids any prior public notification that wouykld warn the public of an impending bank closure. So stories and opinions work just as well as charts in some situations.

ALOHA !!

JoyP ... More on MER!!

BANK IMPLODE-O-METER

Your play-by-play for the end game of modern banking.

Merrill Lynch - $32.2B

Posted on May 22nd, 2008 in writedowns and distress

2008-05-22 Write Downs Count of a Different Sort:

We have been keeping a running tally of write downs and other credit related distress taken by the major banks since 2007. But here come a write down count of a different sort, how much in writedowns and credit losses firms have written off per wholesale banking employee.

Merrill Lynch - $31.7bn, 48,100, $659,044 per employee

2008-05-21 - Leaving London:

It is probability the best thing the bank could do, may be the only thing, but now there is one less subprime lender in the UK. In fact all the banks including Merrill Lynch have severely limited credit flow to all borrowers. This is how a contagion spreads

2008-05-19 - Off Balance:

Banks are not writing down their write downs and getting away with it. Instead they are writing them down in the balance sheet and there is a distinction.

Merrill Lynch was hiding $5.3 billion on the balance sheet, but we will balance thing out for them by adding $5.3 billion to their existing $32.2 total bringing them up to $37.2 billion.

2008-05-14 - Sisyphus and Leveraged Loans:

In the hey day of the credit bubble and the carry trade Goldman Sachs, Morgan Stanley, Merrill Lynch and Lehman Brothers took in mountains of money making loans for leveraged buy outs. Banks make money by lending money so fewer loans usually looks like less profits. But in the topsy turvey aftermath of the credit bubble when all loans are suspect and leverage loans among the most toxic, banks are trying to rein in their balance sheets.

That’s why the cancellation of Cumulus Media’s $1.3 billion buyout looks like good news for Merrill Lynch’s heavy loan book. Already Merrill has reduced its corporate loan book by 20%.

Merrill Lynch still has $14 billion exposure to high risk loans.

2008-05-08 - Sleight of Hand:

Minyanville reports that Merrill’s level three assets have ballooned to 225% of shareholder equity. Problem solved, or sword of Damocles?

2008-05-06 - The New Default Swap:

Merrill Lynch is swapping the mortgaged backed assets in danger of default into its level 3 accounting column. The increase in level 3 liabilities from Q4 of 2007 to Q1 of 2008 amounted to $17.7 billion; an increase of nearly 70 per cent.

2008-04-17 - Caught:

Merrill Lynch and CEO John Thain sought to get out in front by playing fast and loose with reckless disregard for other people’s money and today those other people saw that risk catch up:

Merrill Lynch & Co. posted its third straight quarterly loss and said it will cut about 3,000 more jobs after the credit seizure forced the investment bank to write down at least $6.5 billion of debt.

For the fiscal first quarter 2008 Merrill wrote down $6.6 billion to CDOs and another $3.1 billion to the plummeting value of mortgage-related securities on hold at its U.S. banks, giving a total of $9.7 billion written down this year so far.

In the bigger picture the company has written down $18 billion on CDOs alone in the past nine months, and has also
written off about $29 billion worth of risky asset-backed securities and leveraged loans.

The reality for Merrill Lynch is as it was for Bear Stearns–STARK. John Thain was hired as chief executive four months ago, but not to save the company. For a major bank that rose to the top on Ponzi finance, and which knows only that finance system nowadays, in the end of days of Ponzi finance has no salvation. No, it is more likely the only reason Thain is in is “to hit one out of the park.” That best explains psychotic frenzy of risky double down dealing that Thain has engaged his company in since his arrival. It is a low-probability desperate attempt to squeeze a few cents out of each share for the cadre of elite insiders, ala Bear Stearns, but it is no rescue, you can be sure of that. In fact you may as well chalk Merrill up as ailing, or better yet get a new category –Dead Man Walkin’.

2008-04-16 - Caution to the Wind:

Merrill Lynch is due to report earnings for the fiscal first quarter on Thursday along with mortgage securities write-offs of another $6 billion to $8 billion. Perhaps it would be more appropriate to have Merrill, Thain and company explain themselves, but don’t count on it.

2008-03-26:

Don’t look now, but Bloomberg reports in a long article on credit lines that Merrill has about $59.3 billion of undrawn credit line commitments (or at least, did at year-end 2007. For comparison, however, Citigroup had $471B and JP Morgan had $251B). This is much worse a fact than it would seem in isolation, since now more than at any other time in living memory, corporate borrowers need to draw down those credit lines (which is the main point of the article).

Money center banks collectively have $1.4 trillion of untapped credit committments. We don’t think they have $1.4 trillion of capital, however.

2008-03-19:

We can add it now or add it latter, but we will add it because (from Mish):

Let’s face the facts. When you file a $3.1 billion lawsuit against someone who is insolvent, you can all but kiss $3.1 billion goodbye.

Merrill Lynch is not going to collect a dime from this lawsuit for the simple reason the guarantee of XL Capital Assurance Inc. is likely worthless.

Say so long to another $3.1 billion.

2008-02-21:

Merrill Lynch has been pegged by Oppenheimer analyst Meredith Whitney for an estimated $19 billion more in write-downs due to leveraged loans. There is probably more to come.

2008-02-04:

Merrill (along with UBS) is in trouble with a veritable hornets nest of suddenly-angry regulators:

The SEC, deepening its own set of investigations into whether Wall Street firms improperly mispriced mortgage securities, recently upgraded probes of UBS and Merrill Lynch & Co. into formal investigations, people familiar with the matter say.

…

The investigations could raise the stakes for Wall Street in the multiple probes examining whether financial firms deliberately misvalued, or “mismarked,” massive holdings of mortgage securities. Most of the current investigations into mortgage matters involve civil authorities; the U.S. attorney launches criminal investigations and has a history of prosecuting Wall Street-related matters.

…

Other regulators led by the SEC are examining whether financial firms should have told investors earlier about the declining value of such securities and how they priced them on their books, people close to the matter say.

In its investigations, the SEC also is delving into whether Wall Street firms placed higher values on securities they own than those they placed in customer holdings, the people say. The SEC previously has said it has opened roughly three dozen investigations tied to the downturn of the subprime market, which primarily is tied to borrowers with poor credit histories.

We hope you kept your noses clean, boyz.

Initial Writeup, Feb. 3, 2008:

Merrill Lynch has been one of the hardest-hit banks by the credit crunch and subprime debacle. As per their Q-4 2007 report, the bank wrote down about $7.9B in the third quarter and a whopping $11.5B in the fourth quarter — an amount “bested” only by UBS. There was also $310M written down due to the collapse of bond insurer ACA. This brings the total loss in these areas for 2007 (as reported so far) to almost $20B.

The bank reports a continuing $4.8B exposure to subprime CDOs, over $43B of held subprime RMBS, $1.6B of direct subprime loans, $13.8B in subprime-linked CDS, and $1.6B of exposure to ACA remaining. Suffice it to say, we expect more writedowns to come out of these exposures.

Also worth noting is a general $23B of derivatives exposure to counterparties with AA-or-lower ratings. That represents 70% of Merrill’s tangible equity. This could turn out to be a huge source of future earnings risk for the bank.

By way of review, Merrill was one of the top pushers of subprime product in the frenzy of the past few years, even purchasing major nationwide subprime lender First Franklin in late 2006 in an attempt to have more of the bonanza of profits for itself. That purchase turns out to have been ill-fated, as the company’s post on the Mortgage Lender Implode-o-Meter thoroughly illustrates. Volume is now essentially non-existant.

Merrill jettisoned its CEO Stan O’Neal to pay for the company’s subprime sins (this apparently had nothing to do with “punishing” O’Neal — who received a $160M golden parachute on his way out). However, all indications are that there will be much more purgatory to pay. For example, as Mish reports, Merrill is having to take back some of the junk they dealt, especially that sold to public entities. Mish argues (and we agree) that this action may start a trend, not just at Merrill but any other banks that put out similar product, and especially as municipalities find themselves effectively broke.

And that means there’s a lot more “off-balance sheet exposure” lurking.

One Response to “Merrill Lynch - $32.2B”

2nd, I like CAF for a trade when it fills the gap. I played PTR previously of the bottom and got lucky. PTR has filled its gap, but I prefer other energy stocks here such as SLB & RIG though extended. Going forward their fundamentals should only become stronger price volatility notwithstanding.

Kaimu, I think the Chinese lost big in the Blackstone (BX) IPO not Blackrock

ALOHA !!

Telestar3d ... As I said "Ask the Chinese how well thats working for them!!!"

In essence when the foreigners lose so do US Banks who have already gone begging foreigners to bail them out. Fool me once ... blah, blah!! Thats how that works! Do you really think the Chinese will be there for the next Blackrock IPO? The Chinese and OPEC are getting so burned by the fraud of HB&B and the US Peso that they will turn to the only "real wealth" there is on Planet Earth and the US Treasury holds ZERO of that! Like the Social Security Trust Fund the US Treasury is stacked to the ceiling full of IOUs ...

Its boiling down to "CONFIDENCE" and once thats lost all is lost! Which is probably what it will take to wake up Americans ... the GAO US Comptroller General quiting went totally unnoticed by 99% of the American Idol audience!

ALOHA !!

For some reason Goldman Sachs has been covering a lot of their gold short positions on the TOCOM. They are net short 7,972 contracts and net long 685 on the May 22 TOCOM session.

Their long position keeps on growing and is now higher than it has ever been since they began tarding on the TOCOM. Even though their net long is much smaller than their net short it is a reversal in their usual TOCOM playbook!

In the past they would cover shorts but not add to longs ... Hummmmmm ... just FYI stuff!

Lets review ... GOLDMAN announced crude will be at $150USD soon and all the while on the TOCOM they are covering gold short contracts rapidly. Too bad there's no "real time" on the TOCOM!! It smells like a set-up!

I agree w/ SteveC and Bill re:
"It would be nice on this blog to see more solid, basic nuts and bolts of trading. "
I'm an avowed neophyte BUT, I don't know what I don't know. I am currently trying to research if muni's are the same kind of bonds that Bill says will be part of the TOG. Merrill is recommending munis as a safe haven. Municipalities are going bankrupt. How can municipal backed bonds be high yield? I don't expect long discourse on each aspect of the market. I would like to see a short discription or defense of a position. Sometimes I can deduce intent from results but thats a dangerous way to learn anything and, the market can fool me longer than my money will last.
Thanks to all who post

ALOHA !!

As I have said in the past I buy POG and POS dips. My last gold buy was at $864USD so that is a 16.5% dip from the high of $1,033USD.

From 2003 to 2008 there have been one 9%+ dip each year. The biggest dip was in May 2006 and ended up being a 23% dip from $750USD to $565USD.

FIVE YEAR DIPS
2003 - 16% dip $380USD to $320USD in Feb.
2004 - 12% dip $425USD to $370USD in March
2005 - 9.5% dip $540USD to $490USD in Dec.
2006 - 23% dip $740USD to $565USD in May
2007 - 9.5% dip $850USD to $770USD in Nov.
2008 - 17.5% dip $1033USD to $848USD in March

Whenever there has been a really big dip in one year there was never another dip of equal or lower percentage.

Looking at the 10 year POG chart shows only two times in ten years when the 200 day moving average has ever been "strongly" broken. Once in 1999 and another time in 2006(7 years). The 200 day moving average on a ten year chart looks pretty solid in terms of calling bottoms! Right now the ten year 200 day moving average is showing a bottom of $860USD. Buying at $864USD is as close as I could get to buying this current dip at the 200 day moving average. That's close to a $170USD discount off the $1033USD high.

10year link: http://tinyurl.com/5lvj39

Follow the link above and you can see the same technical charts for silver.

ALOHA !!

Remember? This is what the Republican leadership was saying in 1968! What's the difference now? Are we waiting until 50,000 US soldiers die like in Vietnam?

http://www.youtube.com/watch?v=g5fE2tXxBOw

Hi,

I have been away fo personal reasons, but I would like to make 2 comments here:

1. Recently I sold my Dec 08 850 gold call options that I had bought on May 2nd, because I see the oscillators overbought and starting to turn down, which to me is a sell signal.

By the way, the same is happening with oil, in case you have not noticed it: try to look at the charts with sme distancing.

This morning I am doing some TA and trying to decide if I will short PoG and PoO Monday evening / Tuesday morning (GMT time), before the US market reopens. Still have not made up my mind.

2. IMO, Bill is right, and PoG wll correct some more before the next upswing begins.

Enjoy your weekend.

http://tinyurl.com/5smu3w

Weekend chart check-up and other stupid stuff.

Great charts and photos Ron.

Large and in charge is a beauty.

Is there a way to buy puts on the price of oil? On the oil contract itself, not individual or index oil/gas stocks.

kaimu:

I don't like the 200 mov avg for placing trades, but I agree that March was a good play for the price of gold to go down. Before PDAC in Toronto I took a short play on gold going down. Initially did not work out and became a loss and then it turned around after PDAC. I should have averaged down after I attended PDAC in March, but too chicken. In the end it worked out as I sold May 2nd for a 28% gain in the retirement fund, but held on in the trading account (because I "thought" it would go down more) for a 14% gain as I sold on May 9th. This is a volatile market and you got to trade rather than buy and hold. In looking at the charts of stocks (Canadian), I am looking at going back into this trade for another "short-term" correction down.

maromatics:

Thank you for the gold outlook.

Oil: I have already put on a short bet on this coiled spring. "Short-term", I am also negative. But my short of May 2nd is underwater by 30% (small position as I like to have some skin in the game to get a feel for it that you can't get by paper trading). Added to my position yesterday as I am usually early by two weeks and two weeks have passed. Next Monday and Tuesday may well be the tell and I will average up from here. Canadian Oil stocks look negative on the charts for price and volume (if stocks are looking 6 months out).

SteveC:

I agree that it would be valuable to see more technical analysis, but unfortunately TA is more an art than a science. What works for me won't necessarily work for you. I couldn't tell you what the price of Oil, Gold or Silver will be next week or month. But since I have focused on "Prices" I find that I am much more successful.

Technical Analysis:

Trends are great but they change all the time. So I usually try to anticipate a change of trend, but most beginners would be well advised to wait for the trend to change and risk that the trade initiated will continue with it and get out if the trend reverses. Unfortunately, trends in 2008 are not well defined and volatility can whip your emotions to the point where you are afraid to trade.

If you want to learn TA, than search this blog for Bill Cara's commentary on this aspect of trading. It has helped me focus on MACD, Stochastic Oscillator, Bollinger Bands, moving averages and RSI. Plus look at at least three different time frames such as daily, weekly and monthly.

Cash: Just a reminder that there is nothing wrong if you are mainly in cash now. It is hard on my emotions to be mostly in cash and see so many good trades on the charts that I "could" have made. But with cash I can place smaller trades and keep a focus on the markets. [047]

just posted an updated 6 month chart of Gold
with some simple TA to highlight a possible downward move towards a new uptrend line. the presence of bullish divergence across 3 indicators (STO, RSI and MACD)is a good sign.

on the flipside: volume has been limp during the recent rise and gold shares have not shown advanced strength, which is usually a negative sign

coupled w/ a possible dump in crude oil prices im careful about chasing the price action at this point.

chart is posted here:

http://jglobal.blogspot.com

Kaimu -

On MER, a very good recount of the recent history. I would add that the Black Rock's CEO (can't remember hsi name) turn down the CEO job at MER. He must've know something bad.

I wonder if MS is just as black. According to Miyanville, GS, MS & LEH all have significant rising L3 assets. LEH and MS are being exposed this week. Will GS be next, like your prediction MER?

Every down turn the financial made, FED is at the corner to catch them. This is hardly fair to the average investors. How many tricks/candies do you think FED has left if financials make another turn for worse?

On Oil/Index/Brokerage Firms - A hypothesis:

It's been reported in the news and testified to the congress that the big money's bet/speculation has driven the oil to bubblish high. GS called crude to $150 when it was still under $110. I'd bet their traders are bidding up crude to that effect.

In the meantime, Whitney of Oppenheimer cut the earning on the brokerage firms citing their "potential" loss in Q2 due to their bet against the Index. The index rallied for two straight months until this week.

So one theory came to mind is that the big money bets against the equity at the beginning of Q2, but the market went up instead. So, they drove up the commodity/oil which in term drive down the index. In the end, the double whammy turned into a profitable hit & run. We have one more week left for Q2, and if this theory has any merit, the index will stay down at least for another week, oil will see more profit taking and the brokerage firms might actually have some up-side in the Q2 earning, contrary to Whitney's crystal ball?

Just a theory.