Bullitt's Account Talk

[Bullitt]

Bullitt,

It really looked ugly the last few days.... This selling could be margin calls and forced liquidation. Any thoughts on this?

Just saw the damage done a few minutes ago. Market free day today. Ughhh, I felt like I walked into a bad shift at work when I checked on today's action.

Hedge Funds are pure crooks. This is an opinion I've come to based on a few books and research papers I've read. Every one of them is engaged in some type of derogatory trading behavior. They strong arm a company, learn all the ins and outs and trade on news that they cause. (ie: buyout rumors, bankruptcy rumors, unable to make margin).

As for Cramer pumping NLY, just take a look at what he's done with SHLD over the past year.

There's still a lot of cash on the sidelines. I can't imagine too many weak hands are still in the market at this point, but a retest would surely have some popping rolaids. I blame the recent gap up/gap down kind of action on three things.

1. The ability of the retail investor to short the general market by way of numerous ETF's.
2. The ability of the retail investor to buy commodities by way of ETF's. Whether it's right or wrong, the ETF company needs to buy these commodities at whatever prices the ETF correlates to.
3. Hedge Funds piling in, plunging the market, and taking out stops along the way with the abolishment of the uptick rule.

 

[Tomncath]

I blame the recent gap up/gap down kind of action on three things.

3. Hedge Funds piling in, plunging the market, and taking out stops along the way with the abolishment of the uptick rule.

This one I can definitely agree with!

 

[Bullitt]

The proof is in the pudding: The Crooks have been manipulating the arket action recently. For the record, I don't consider CNBC crooks. For me, they are just a bunch of fools who react to the market by conveniently plugging in news pieces as they deem fit in order to 'help' the uninformed investor understand why the market moves in mysterious ways.

Written in yesterday's WSJ that the SEC is actively looking to enforce the act of Naked Short Sales.

Securities regulators voted 3-0 to propose a rule intended to crack down on lingering abuses involving so-called naked short sales and failures to deliver shares that have been used in such sales. Even with a regulation in place, the SEC received hundreds of complaints last year about alleged abuses involving short sales. While most trades settle within three days, as required, the SEC estimates about 1% of shares that
change hands daily, or about $1 billion, are subject to delivery failures.

Kind of a difficult concept to understand unless you engage in the act of short selling on a hedge fund level, so investopedia does a good job explaining this concept.
http://www.investopedia.com/terms/n/nakedshorting.asp

 

[robo]

The proof is in the pudding: The Crooks have been manipulating the arket action recently. For the record, I don't consider CNBC crooks. For me, they are just a bunch of fools who react to the market by conveniently plugging in news pieces as they deem fit in order to 'help' the uninformed investor understand why the market moves in mysterious ways.

Written in yesterday's WSJ that the SEC is actively looking to enforce the act of Naked Short Sales.

Securities regulators voted 3-0 to propose a rule intended to crack down on lingering abuses involving so-called naked short sales and failures to deliver shares that have been used in such sales. Even with a regulation in place, the SEC received hundreds of complaints last year about alleged abuses involving short sales. While most trades settle within three days, as required, the SEC estimates about 1% of shares that
change hands daily, or about $1 billion, are subject to delivery failures.

Kind of a difficult concept to understand unless you engage in the act of short selling on a hedge fund level, so investopedia does a good job explaining this concept.
http://www.investopedia.com/terms/n/nakedshorting.asp

Bullitt,

From Technical Watch Discussion Forums.

Robo


Some may recall last July (2007) the "powers that be" decided the uptick rule for short selling was no longer necessary. Several months later, it appears there is a possibility the table was being set last July for exploiting the coming trouble in the US equity markets.



http://forums.technicalwatch.com/tool/post/fib_1618/vpost?id=2519375

 

[Tomncath]

Some may recall last July (2007) the "powers that be" decided the uptick rule for short selling was no longer necessary. Several months later, it appears there is a possibility the table was being set last July for exploiting the coming trouble in the US equity markets.

http://forums.technicalwatch.com/tool/post/fib_1618/vpost?id=2519375

Well, if that chart doesn't open everyones eyes I don't know what will...would you say the markets have a seizure or a heart attack?

 

[Show-me]

Bullitt,

From Technical Watch Discussion Forums.

Robo


Some may recall last July (2007) the "powers that be" decided the uptick rule for short selling was no longer necessary. Several months later, it appears there is a possibility the table was being set last July for exploiting the coming trouble in the US equity markets.



http://forums.technicalwatch.com/tool/post/fib_1618/vpost?id=2519375

How about that, the big boyz make'n loop holes in the system so that they have a edge over everyone else.

 

[Bullitt]

I'm sure the ones that make a market knew about the 'short on the downtick' adjustment well in advance and positioned themselves righteously prior to the announcement. The run we had in 2006 was overblown and any bad investing/trading decisions were easily covered up by the raging bull. The crooks no longer have access to the leverage they once had and are forced to rely more on trading ability and luck than their prior easy money ways. I don't see anything wrong with a good humbling every now and then.

Jeremy Siegel remains bullish on the long term but is not so sure about the short term. (Who is sure about the short run? Surely not the newsletters who claim to be 'neutral') He sees possibly a 5-10% drop ahead in equities but if that drop occurs, he claims it will be the buying opportunity of the decade for investors.

http://knowledge.wharton.upenn.edu/...OKEN=11601321&jsessionid=a830b6f44df22a373165

However long it takes for the commodity bubble to pop...

 

[Bullitt]

Once again, trading with the headlines will always keep you one step behind the money train. Sometimes you've just gotta stick your neck out and go against the herd. Chartists will probably be calling this the double bottom eventually. Still tons of non believers on the sidelines and tons short. NYSE set an all time high in short seller ratio in the back half of February so that's one good indicator as to which way the herd is heading.

Of course the non believers will say it's only a short covering rally, but inflows to the financials were tremendous today. Where was the volume on yesterday's 'meltdown'? Simple answer, institutions didn't bite. That leaves the retail investor completely scared stiff. With all the dread and nonsense to be heard on the news, it's a cinch for everyone to be an expert on the accounting methods of global banks.

I was thinking about making an IFT over the weekend from S Fund to I Fund. Ultimately decided that I'll hold on to my small amount in the S fund for diversification purposes.

This appears to be a good time for those who are more conservative (and especially those who demanded a retest) to begin scaling back into equities.

It's always darkest before dawn and the sun came out today. By the shape of that candle, looks like there's a whole lot more who didn't get a chance to join in before the bell sounded in this session. Today is a good sign that the bottom will hold.

PS: I still remain CNBC free.

 

[Corepuncher]

Once again, trading with the headlines will always keep you one step behind the money train. Sometimes you've just gotta stick your neck out and go against the herd. Chartists will probably be calling this the double bottom eventually. Still tons of non believers on the sidelines and tons short. NYSE set an all time high in short seller ratio in the back half of February so that's one good indicator as to which way the herd is heading.

Of course the non believers will say it's only a short covering rally, but inflows to the financials were tremendous today. Where was the volume on yesterday's 'meltdown'? Simple answer, institutions didn't bite. That leaves the retail investor completely scared stiff. With all the dread and nonsense to be heard on the news, it's a cinch for everyone to be an expert on the accounting methods of global banks.

I was thinking about making an IFT over the weekend from S Fund to I Fund. Ultimately decided that I'll hold on to my small amount in the S fund for diversification purposes.

This appears to be a good time for those who are more conservative (and especially those who demanded a retest) to begin scaling back into equities.

It's always darkest before dawn and the sun came out today. By the shape of that candle, looks like there's a whole lot more who didn't get a chance to join in before the bell sounded in this session. Today is a good sign that the bottom will hold.

PS: I still remain CNBC free.

Bullit, I applaud your CNBC-freeness, and can only hope to be there one day.

 

[Bullitt]

You know what Paladin, I actually miss Rick Santelli and Brian 'the brain' Faber's commentaries. They are two incredibly intelligent guys that have it figured out, but nobody listens to them because they don't provide stock picks. They do a little more than just sit there and deliver the company line.

Commentary: Monday may have marked end of the correction

I turn first to investment newsletter sentiment. A contrarian analysis of that data supports the notion that Monday was the end of the correction, since in recent sessions enough editors have turned bearish -- in effect throwing in the towel.

Consider the latest readings of the Hulbert Stock Newsletter Sentiment Index (HSNSI), which reflects the average recommended stock market exposure among a subset of several dozen short-term market timing newsletters tracked by the Hulbert Financial Digest. At minus 22.5%, the HSNSI is even lower than it was at the beginning of last week, when I had already concluded that the market was close to a bottom

Writing before the close on Tuesday, Russell wrote that, at Monday's close, "The market was severely oversold. But what interested me was that the market was not only oversold -- but it was severely oversold in the face of a flagrant non-confirmation on the part of the Transports. This unusually bullish combination provided the basis for a violent turnaround. In fact, it could turn out to be more than 'just a turnaround.' Ideally, what I'd like to see now is a 90% day on the upside. If that were to occur, we could be seeing a key reversal -- with the stock market perhaps having discounted the worst that can be seen ahead."

http://www.marketwatch.com/news/sto...-96C2-472D-BA1E-C8877BF40609}&dist=TNMostRead

Richard, looks like you got your 90% up day. Also, I'm planning for additional rate cuts on the horizon. Attack, attack, attack.

 

[robo]

Removed link... Covered by the Big Bull Birchtree in his link!

 

[Show-me]

For me I only watch CNBC for Rick. He usually in the one to report the ED in the morn.

 

[Bullitt]

Rick always keeps a cool head, unlike Jeff Macke. (I referred to David Faber as Brian in earlier post. I mixed em up, Brian F. is an actual friend of mine!)

 

[robo]

Rick always keeps a cool head, unlike Jeff Macke. (I referred to David Faber as Brian in earlier post. I mixed em up, Brian F. is an actual friend of mine!)

We have not watched CNBC since finding that Bloomberg TV has a free broadband stream available on the Internet via TVU networks. Although Bloomberg TV isn't perfect, it's a breath of fresh air compared to CNBC. Rick Santelli, the former pit trader in Chicago, is probably the only good reason to ever watch CNBC (and, half the time, Liesman talks over him, blathering on about some arcane economic point and obliterating Rick's pit-savvy words of wisdom). But, we did see an excerpt on another NBC network of an on-air argument today between a couple of CNBC-paid journalists, one from Forbes and the other from the Wall $treet Journal. It was almost a Saturday Night Live parody on business television. Maybe the inanity of CNBC might be a good sentiment measure, perhaps? Do they go completely nuts at the bottom of a bear market? Well, someone else can monitor them and let us know.

http://marketclues.blogspot.com/

 

[Bullitt]

I can't imagine how ridiculous CNBC must be today. I'm just wondering if there's anyone else out there still left to sell? The money inflows to financials on Tuesday were tremendous and unargueably provided a bullish case for a bottom. Wednesday and Thursday's inflows to financials were suspect and indicated more of a retail buying binge than that of institutional buying. It clearly wasn't following thru the way it should have been

Due to the crooks, looks like the only ones being bailed out today are the short sellers since the CPI today probably would have been a ray of bullish light. Whether you're making money, losing money, or sitting in cash today, here's a little something about the BSC crooks that everyone will enjoy.

I just read that on Tuesday, when BSC was trading for around $65, some crook purchased 50,000 March 30 Puts for .15 a contract. Think about it. Why would anybody in their right mind make a bet of that magnitude which would probably wipe them out if it went wrong?
http://www.thestreet.com/_yahoo/new...07812.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA

A famous WWII propaganda poster along the lines of loose lips..., but I like the way it fits in with the above scenario.

 

[Bullitt]

Article from today's WSJ by Brett Arends. The tentacles of panic are reaching out.

Regarding equities, Is it safe?
------------------

Is Bear's Woe a Good Sign for the Market?
March 15, 2008

A spectacular bankruptcy usually brings a crescendo of panicked selling and forces concerted intervention. Often, it marks the beginning of the end of a crash.

In this situation, the liquidity crisis is so bad that at one point early Friday a major bond institution couldn't even sell Treasurys for a bit. A senior figure there told me his usual buyers among the Wall Street houses had shut their windows in panic.

The Great Depression wasn't caused by the financial panic of 1929. It happened only because of a string of policy blunders including tariffs and a tightened money supply that followed the panic. Fed Chairman Ben Bernanke, a student of the Great Depression, knows this full well.

The worse the situation now, the more the federal government will have to step in to provide liquidity. And that can mean only one thing for inflation.

The big losers over time won't be those holding equities, which after all offer some hedge against inflation. It will be anyone rushing into Treasurys.

http://online.wsj.com/article/SB120552378650537331.html?mod=hpp_us_whats_news

 

[Bullitt]

I'd say JPM now has BSC by the you know what. JPM was in search of a trading desk to compete with the brokerages at BAC and C, and opportunity knocked. I think the purpose of the Fed announcement on Tuesday was to bail out BSC specifically, but as the week progressed, BSC realized it was taking on too much water to stay afloat until 3/27 and called for the SOS.

The heavy hitters are most likely kicking around their options this weekend in an attempt to decided whether or not the BSC and Carlyle Group collapses should signal a bottom. Economists have already decided we're in a recession, so how much worse can it get?

Should prove to be interesting this week, especially if we get a 100bps cut on Tuesday.

 

[robo]

Bullitt,

Next week we are headed down at least another 100 points in the S&P 500....

Well, maybe not.... It depends on who you ask I guess. To be honest, I have no idea what the market will do next week, but for now I'm still investing and trading it from the long side. Still buying the dips and selling the rallies and these days that's twice a week.

The herd is Bearish that's for sure. So most folks are calling for a down week.

My current TSP position: 75% C fund and 25% S Fund. A mix to mirror the total US stock market.


Robo



“Dumb” vs. “Smart” Money

These are two proprietary indicators from Jason Goepfert that amalgamate several sentiment and technical indicators. The “Dumb Money” indicator fell on Friday to 12.5% which means that to find it a friend, we would have to travel all the way back to early 1995 and August 1998. You remember the summer of 1998, right? when we were suffering through the Asian currency and LTCM crisis? …good times, good times.

According to Jason, the gap between the two indicators is also as wide as it has been since 1995 and 1998. Pull up some long term charts and you’ll see the significance of that.


News Headlines & Covers

Getting your umbrella out will do you no good. We have a torrential downpour of negative news and depressing headlines. To see what I mean, open any news website or newspaper. It is all doom and gloom. This or that hedge fund going belly-up, Bear Stearns pushing up the daisies, the mortgage market collapsing, the credit market in a spasms, consumer sentiment tunneling into the substrata, etc.

Even after the remarkable 90-90 up day we had on Tuesday, the majority are denying that it could potentially have any real bullish portent - although historical precedent says otherwise.

Here are a few recent covers from Business Week:


http://www.tradersnarrative.com/

 

[Bullitt]

Robo,

A 100 point drop is ok with me, as long as the SPX isn't swapping 4+ billion shares daily while it's doing it. I'm sure you've read Fisher's latest article already, but he seems to think this is another big head fake.

----------------------------------------

As I detailed last month, the market has shifted, as it did in the mid-1990s, into a period where the biggest stocks do best. We're in the first full correction of the new leg of the bull market. The Asian debt contagion then is the American debt contagion today. This debt crisis is, like the last one, a false alarm. By midyear we will awaken to an ever shrinking supply of equity and a growing economy. The market will be led by big companies.

http://www.forbes.com/free_forbes/2008/0324/168.html

 

[airlift]

Robo,
I found your post and the trader's narrative compelling. Thank you.