Bill Cara’s Blog for Sep 3, 2012

CTA Trading Desk Morning Report

[7:00am ET] Good morning.

Here are the 7:00am ET snapshots of the latest equity market trading results for Europe, and futures prices plus 5-minute charts of the futures for S&P 500, 30-year US Treasury Bond, US Dollar index, Gold and Crude Oil.

Symbol Name Last Trade Change Related Info
^ATX ATX 2,025.72 6:44AM EDT Up 9.17 (0.45%) Components, Chart, More
^BFX BEL-20 2,358.90 5:03AM EDT Up 7.90 (0.34%) Components, Chart, More
^FCHI CAC 40 3,431.71 6:59AM EDT Up 18.64 (0.55%) Components, Chart, More
^GDAXI DAX 7,002.11 6:45AM EDT Up 31.32 (0.45%) Components, Chart, More
AEX.AS AEX General 331.00 6:44AM EDT Up 1.72 (0.52%) Components, Chart, More
^OSEAX OSE All Share 488.43 6:45AM EDT Up 2.40 (0.49%) Components, Chart, More
^OMXSPI Stockholm General 323.18 6:43AM EDT Up 1.36 (0.42%) Components, Chart, More
^SSMI Swiss Market 6,422.33 6:45AM EDT Up 34.32 (0.54%) Components, Chart, More
^FTSE FTSE 100 5,748.74 6:45AM EDT Up 37.26 (0.65%) Components, Chart, More
FPXAA.PR PX Index 954.80 7:00AM EDT Up 2.80 (0.29%) Chart, More
MICEXINDEXCF.ME MICEX Index 1,437.50 6:45AM EDT Up 15.12 (1.06%) Chart, More
GD.AT Athex Composite Share Price Index 649.61 6:44AM EDT Up 2.79 (0.43%) Chart, More

http://finviz.com/futures.ashx

http://finviz.com/fut_chart.ashx?p=m5&t=ES

http://finviz.com/fut_chart.ashx?p=m5&t=ZB

http://finviz.com/fut_chart.ashx?p=m5&t=DX

http://finviz.com/fut_chart.ashx?p=m5&t=GC

http://finviz.com/fut_chart.ashx?p=m5&t=SI

http://finviz.com/fut_chart.ashx?p=m5&t=CL

The team will check in during the day, reporting in the Discourse when there is a new entry.

Enjoy your day.

  1. 2 in Accumulation Zone 1 in Distribution Zone 4 in Sell... [#112892]
    By: davefairtex (5215 comments) Go to top ↑
    • 2 in Accumulation Zone
    • 1 in Distribution Zone
    • 4 in Sell alert

    Accumulation Zone (6%): Monthly 5, Weekly 2, Daily 13
    Distribution Zone (13%): Monthly 13, Weekly 18, Daily 8

  2. Commenting on this Community Chat will be automatically... [#112894]
    By: Grym (5469 comments) Go to top ↑

    Commenting on this Community Chat will be automatically closed on September 7, 2012.

    • Grym, I presume it's because there is a conversion of the... [#112895]
      By: Bill Cara (4105 comments) Go to top ↑

      Grym,

      I presume it’s because there is a conversion of the old platform to the new.

      But, it could also be a decision that korvus has made because spammers are finding ways to get into our system, and so we are going to cut off additional comments to all four-day old blogs.

      We intend to continue the Discourse section of the blog because it is a feature of the Cara Community!

      • Thanks for the quick response, Bill. I understand your... [#112896]
        By: Grym (5469 comments) Go to top ↑

        Thanks for the quick response, Bill. I understand your concerns.

        Twice now I’ve received a message requiring me to reenter my password when signing on due to possible attempt to tinker with cookies.

        As a practice I often dump all cookies.

        For every good advancement there are those who will find a way to misuse it, I guess.

        Grym

  3. Markit manufacturing PMI continues to show contraction in... [#112897]
    By: Les (7233 comments) Go to top ↑

    Markit manufacturing PMI continues to show contraction in Europe, even in Germany, but the German data reveals the first MoM rise since January

    http://www.markiteconomics.com/MarkitFiles/Pages/V

    Speigel took up the story

    http://www.spiegel.de/international/business/germa

    Bill’s been laying out a bullish case for the short-term in recent WIR. Couldn’t help but notice $GDOW:TLT returning to the depths of the 2009 low, with bullish divergences apparent in both monthly and weekly time frames.

    Don’t remember if Bill was looking at this particular pair and whether it is valid. I’m guessing it’s valid, as hot money flows from global investments back to Uncle Sam during the “risk off” periods.

    If it’s anything like 2009, then I could expect some ugly little sell offs to shake the cages of investors before we head higher – the lead up to November sounds like a decent time frame target.

    But here we are at the highs of the market, not the lows like 2009… curious. see attached.

    • Les, The $GDOW:TLT ratio chart is a very good indicator... [#112899]
      By: Bill Cara (4105 comments) Go to top ↑

      Les,

      The $GDOW:TLT ratio chart is a very good indicator, almost the same as $SPX:$USB, the reverse of what I used. But, thanks. I’ll add it to the list.

      When I did the list the first time, it was a matter of the ones that came into my head first. But what I’d like to do is compile a list of favorites used in this community. Writing up the full list could be an e-book project for this winter!

  4. ... [#112898]
    By: davefairtex (5215 comments) Go to top ↑
    • Dave, IMO, no QE to infinity is going to materialize. Two... [#112901]
      By: Vadym Graifer (4341 comments) Go to top ↑

      Dave,

      IMO, no QE to infinity is going to materialize. Two factors combined stand in the way of it and will undermine it even if the Fed seriously intends that. First is what you point out – enormous expansion of the balance sheet inevitably attracting too much attention way before we approach even such measly (tongue firmly in cheek) share of TCMDO as 10%. Second, triggered by the first, is what The Economist mentioned in their review of Ben’s speech: “…doing too much, with activism that prompts a backlash against the institution, constraining its ability to act…” (http://www.economist.com/blogs/freeexchange/2012/0…).

      Either election will lead to replacing Ben with someone who doesn’t believe in salvation through inflation, or continuation of such policies will lead to a backlash from various slices of population that feel increasingly frightened by the debt burden. Either way IMO open-ended QE will be stopped in its tracks (as it well should be).

      Oh and LOL about “the beatings will continue until morale improves” – exactly how it was characterized in our trading room.

      • "Either way IMO open-ended QE will be stopped in its tracks... [#112904]
        By: Dr. Strangelove (2004 comments) Go to top ↑

        “Either way IMO open-ended QE will be stopped in its tracks (as it well should be).”

        That’s dangerously close to a prediction, Vad. I disagree. The Fed has devalued the currency since its creation in 1913. Is there an expiration (tongue firmly in cheek) on debasement at the century mark? Stop QE and just watch debt interest go through the roof to attract capital until it exceeds 100% of federal outlays? Or do you stop QE by resetting the gold price north of $10k/oz, re-establishing some form of gold standard to stabilize treasuries while all the fat cats convert to the metal and drain Fort Knox? How about just repudiate the debt and start WWIII with Asia?

        Time will tell.

        • "That's dangerously close to a prediction" Missed twice... [#112905]
          By: Vadym Graifer (4341 comments) Go to top ↑

          “That’s dangerously close to a prediction”

          Missed twice repeated “IMO” in my post, which makes all the difference vs “This and that WILL happen” which constitutes prediction? There is world of difference between expressing a view and predicting an event.

          • Symantics, IMO. If your opinion holds a prediction, such... [#112906]
            By: Dr. Strangelove (2004 comments) Go to top ↑

            Symantics, IMO.

            If your opinion holds a prediction, such that “open-ended QE will be stopped in its tracks (as it well should be)” and it was in your own words, you’ve entered into a Catch-22.

            Heller’s Catch-22: “A problematic situation for which the only solution is denied by a circumstance inherent in the problem or by a rule.”

            Halting QE or When the Money Dies … could be a sequel to Dr. Strangelove Or: How I learned to Stop Worrying and Love the Bomb.

          • ... [#112908]
            By: Grym (5469 comments) Go to top ↑
          • The difference is far from "symantics" (sic), and was... [#112909]
            By: Vadym Graifer (4341 comments) Go to top ↑

            The difference is far from “symantics” (sic), and was explained on more than one occasions before. The latest, and quite eloquent, by Dave:

            as they say predicting things – especially about the future – is hard. Its the kind of thing that Vad suggests we don’t do because (and I’m paraphrasing here) it can trap our thoughts into a fixed path of expectation because ego gets tied up and being “right” tends to become more important than following where the evidence leads.
            http://caracommunity.com/content/bill-caras-blog-a

            Think of it as the difference between forming an opinion and acting on it vs forming a set of scenarios and following the road signs pointing to the one that takes place – whatever your personal opinion of the most likely one is. No Catch-22. No semantics. Rather deliberate choice of the way of thinking in scenarios and odds and verifying your mental map against actual territory as territory unfolds – as opposite to plotting one road forward and sticking with it without regarding any other possibilities and closing one’s mind to the fact that nothing is 100% certain.

          • Vad - Sorry about the spelling error and I do appreciate... [#112911]
            By: Dr. Strangelove (2004 comments) Go to top ↑

            Vad -

            Sorry about the spelling error and I do appreciate your response. I have not closed my mind to the fact that nothing is 100% certain. That is why I suggested several scenarios opposing the halt of QE. I just cannot find any historic resolution to ending QE without those outlined by me and oft discussed in the media.

            I repeat: “The Fed has devalued the currency since its creation in 1913. Is there an expiration (tongue firmly in cheek) on debasement at the century mark? Stop QE and just watch debt interest go through the roof to attract capital until it exceeds 100% of federal outlays? Or do you stop QE by resetting the gold price north of $10k/oz, re-establishing some form of gold standard to stabilize treasuries while all the fat cats convert to the metal and drain Fort Knox? How about just repudiate the debt and start WWIII with Asia?”

            Are you blocking out such possibilities? Semantics aside, I understand your approach as stated by dave and obviously it is logical for intraday techinical trades as well as all other durations. I just don’t understand why any possibilities stated by me are immediately dismissed. If I said it was my opinion that everything could also be coming up roses would you then say I’m being more balanced? It appears that you are denying the QE to Infinity opinion of Sinclair which I agree is his bet on the future but I ask you is it completely invalid?

          • 1. I don't think you can refer to Fed devaluing the... [#112912]
            By: Vadym Graifer (4341 comments) Go to top ↑

            1. I don’t think you can refer to Fed devaluing the currency since its creation in 1913 as QE, and use this as proof of your “QE to infinity” war cry. QE refers to extraordinary monetary policy, not to garden variety inflation of 2% annual rate targeted by Fed. So far we had two rounds of such extraordinary policies implemented – aptly named (numbered?) QE1 and QE2; QE3 is being debated currently. If you want to define QE as routine policy targeting 2% annual rate of inflation, then the whole discussion becomes pointless – no one ever denied that Fed wants and will maintain this routine policy.

            2. I don’t dismiss any possibilities you state. I reply to your routine of “predictions vs..” etc, repeated on regular basis and addressing me by name.

            3. I just explained my approach – why would you ask me again if I am “blocking out,” denying,” or considering something “completely invalid”? I thought it was exceedingly clear that I do none of those things – I merely assign higher odds to another scenario. I don’t want to speak for Dave but it seems to me that he says same thing – he sees lower probabilities of infinite QE, and that he sees no evidence of this taking place.

          • The FED is only one player in the steady inflation of the... [#112945]
            By: mayhem991 (199 comments) Go to top ↑

            The FED is only one player in the steady inflation of the U.S. Dollar. The biggest offenders have been wars which are inflationary and leaving the gold standard for fiat money.

  5. I just booked my Porter flight from NYC to Toronto. BARGAIN... [#112900]
    By: papadynamite (446 comments) Go to top ↑

    I just booked my Porter flight from NYC to Toronto. BARGAIN PRICES at 50% discount, round trip, $233.28 including all taxes and fees.

    • papadynamite, You will love the Porter experience. Looking... [#112902]
      By: Bill Cara (4105 comments) Go to top ↑

      papadynamite,

      You will love the Porter experience. Looking forward to meeting you.

      System-wide 50% off base fare sale ends on Sept 7.

  6. FXI, I consider this to be a broken ETF, like FB, GM and... [#112903]
    By: ea32da32 (2362 comments) Go to top ↑

    FXI, I consider this to be a broken ETF, like FB, GM and really watching IBM which is in a long term H&S at the 200dma, shorter term inverse H&S but still at the 200dma – which way will it go?… currently hedged both long and short this market with 60% cash – plan to add more YANG this week. I have my empty chair sitting in my front yard LOL – a national metaphor movement…;-).

    take care,
    Earl

  7. Ny metropolitan opera is hosting summer series outdoor hd... [#112907]
    By: NYUGrad (4750 comments) Go to top ↑

    Ny metropolitan opera is hosting summer series outdoor hd theater of Anna Bolena. Free!

    My lady and I are here enjoying. Starts at 7:30

  8. ... [#112913]
    By: Telestar3d (636 comments) Go to top ↑

    http://www.businessinsider.com/why-billionaire-fra

    Edit: Frank talks about the QE question. His basic premise is print or default. He thinks politicians will op for printing.

    He also notes that we are about $16 trillion in debt (US) adding about $1 trillion per year and if rates rise significantly it will consume our revenues (paraphrasing) again leading to printing. FWIW

    • No prediction from me, just a statement of fact and a... [#112914]
      By: Ilya (572 comments) Go to top ↑

      No prediction from me, just a statement of fact and a question.

      Call it inflation or the debasement of the purchasing value of the dollar but it has run rampant with fits and starts for over 100 years.

      What great denouement will cause the hoi poloi to DEMAND a stable currency?
      When asked about the success of the TARP, 99% of the people I interact with everyday are of the opinion that the best ones should be waterproof.

      OK, never again will I refer to ‘inflation’, but I will simply call it the declining purchasing value of funny colored paper or the digital ‘chits’ as represented by same. We have a fiat exchange system, physical paper to digital. Samo Samo.

      The competitive devaluation of money, so called, is the game de jure. The social and political consequences of having the strongest currency cannot be allowed in any social democracy simply because the’have nots’are not only allowed to vote, they are whipped into a frenzy to do so.

      Who would ever vote themselves unbenefits?

  9. ... [#112915]
    By: Les (7233 comments) Go to top ↑
  10. An informative post which is so important to me...!!!... [#112917]
    By: willsonandy (1 comments) Go to top ↑

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  11. Since this is so late in the day, I'll probably copy this... [#112916]
    By: davefairtex (5215 comments) Go to top ↑

    Since this is so late in the day, I’ll probably copy this to tomorrow’s blog just because.

    Vad is right, I’m not saying QE to Infinity won’t happen. It might. And because I’m keeping my mind open to the possibility, I actively seek out and post articles that provide evidence that such a beast might be on the way.

    By occasionally poking fun at Sinclair’s favorite mantra, I’m really not looking to “win the argument” or prove him (or Dr S) wrong, I’m just trying to avoid having my mind fogged up by people who have 100% certainty on exactly one future outcome that absolutely must happen. Let’s just call it “keeping things real.” When the weight of evidence starts to tilt in favor of repeated and/or infinite QE, I’m happy to more heavily weight that outcome.

    This last article causes me to assign a slightly higher probability to the “QE to Infinity” column, but even more to the column where “the Fed ends up with 30-50% of all outstanding treasury debt.” Bloomberg stated that 4 Fed Presidents (out of 12) are currently in favor of some kind of outcome-driven QE program. Supporting the Fed are the majority of Congress who are likely neutral to positive, since they like easy fixes that let them avoid difficult decisions. Particularly useful to them is that if it all goes sideways they can always jump on the Tea Party bandwagon and throw the Fed under the bus. (Do we imagine the Fed is unaware of this?)

    Countervailing the outcome-driven QE support are the Ron Paul supporters and the Tea Party (and all those newly elected Congressmen) who feel that QE is antithetical to their belief systems. While they are a minority in Congress, they are a very driven and vocal minority. The Tea Party has led to upsets of both Dems and mainstream Reps, and as such they cannot be ignored. Mainstream Reps were so nervous about Ron Paul they wouldn’t let him speak at the convention even though he’s clearly got a whole lot of very vocal and motivated supporters that would be quite useful in a general election. I’m guessing that behind the scenes Ron Paul refused to drop his focus on his core issues and support a vacuous “more of the same” Romney candidacy and so he was sidelined. “By their actions shall ye know them.” Or something like that.

    The Fed has demonstrated that it believes it must step cautiously for quite some time now in a number of different ways. They actively seek to appear more transparent, to write their press releases so that they appear to be supporters of people (creating jobs & reviving the economy vs saving the banking system), and to generally head off any loss of power that might come about from a cynically “angry” Congress serving them up as scapegoats.

    The 22,000 people (@ $110k/year total cost each) who work in the Federal Reserve System want to keep working there. The TBTF banks want to retain the “regulator” that they own and its place in the system. So while Bernanke the academic might want to print like a crazy man, the bureaucracy and politically powerful set of interests currently in place that really wants only to survive will try to keep him from taking actions that might threaten the status quo.

    That is my assessment of the forces in play. And as Vad says, I keep a bunch of outcomes in mind, and assign percentages to each outcome.

    It might be an interesting exercise to come up with a list of those outcomes, and percentages assigned over the next 5 year period – the period covered both by a standard Credit Default Swap and coincidentally the Soviet Union’s standard national economic planning timeframe.

    2% QE to Infinity (40+ trillion or more – hyperinflationary outcome, money supply doubled; deficit 2T+ per year fully monetized, Fed buys all existing mortgage & govt debt (fed, state, & local), vacant housing, equities, soggy receipts pulled from the pockets of your wet laundry, etc; 8T+ per year. Velocity of money likely goes nuts)
    15% Substantial QE (10-15 trillion – Fed buys half of all mortgages & outstanding treasury debt)
    35% Moderate QE (3-7 trillion – Fed monetizes all new treasury debt)
    25% Restrained QE (< 3 trillion – Fed partially monetizes new treasury debt)
    20% Only Once More (1 trillion – Fed does QE3, and then a disgusted Tea Party turns off the spigot)
    3% No More QE

    I’d like to point out that based on history’s 2.3T QE over the last 4 years, we’re on course for either Restrained or Moderate QE. Naturally, if the eurozone blows up or we have an auction failure, that could change but as it stands, that’s where I see things headed.

  12. I think it reflects a general shift in culture." When Julie... [#113048]
    By: Adalgiso (1 comments) Go to top ↑

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