Waiting for Jobs Number

Market traded with little action today waiting for tomorrow's job numbers. However the NQ100 futures staged a late surge. Volume in stocks has been less than usual and the CME has been pounded a bit as many expect to see diminished transactional income as trade activity falls behind the three month average.
STI (UP)

Smacked

A commodity frenzy smacked the indexes around today. Gold bulls, the bottom of the trading animal family, joined with oil and ags to help raise the inflation flag, convinced the Fed will keep on plowing money into the financial system. Even if they do not, the demand, the demand, the demand. Commodities today seemed much like the first day of stock trading in 2000. Basically it was just a matter of buying in January because stocks would be up at least ten percent by December 31. Well, we know how that ended.
Tags SP500Mch 1465.75 NQ100 2091.5 STI D

Bubble Boys

Soybeans are trying to rally into the teens for the first time. Hiding in plain site are the bubble boys whose insightful trading skills brought about the sub-prime disaster. Now the same creative crowd marches in single file in the soybean aisle at Bubbleland. At least a fundamental case can be made at times in a transparent analysis against soybean consumption and the resulting carry-over supply. But either way it usually results in a 'gaming' of the carry-over number. Some years 300 million bu carryover is enough, sometimes 100 million bu is enough. The greater fool theory here is played using the China card, which is the ultimately the face of global consumption. Reasoning, if China needs just a little more, that equals a lot more. Further, if South America or the US cannot continue to produce great crops one after the other, the supply rationing will justify the current squeeze higher. So the bubble boys are betting that somewhere in the near future the production machine will slip up and save the current price bubble. Good luck. These price constructs always end with the same guys shouldering the heavy weight of trade ideas grown old. Remember that commodity markets have a habit of making illiquidity an art form when comes time to head south.

Hedge Types

Last trading day of a year that saw the many one way positions with lousy risk managers get trashed. Risky underwriting usually means putting up less to in the hope of getting more. Being positioned correctly entails adaptive management with enough margin to back illiquidity during volatility. So many of the higher profile hedge types became vulnerable to every trader's nightmare, large position no market. The damage has rippled across Wall Street as described in an article about the smart money community.
Tags SP500 1480.75 NQ100 2114.25 STI D

Same Lesson

Designing trading models which are adaptive to a wide set of risk parameters is always a challenge. Beatings the hedge funds took this year always reveal liquidity issues which develop when models are implemented and ramped to achieve a high dollar returns. A net per unit return performance as represented in this chart allows for limited trade clock exposure and rampage. The debt models and their leg positions were helpless targets to trend reversals, squeezes, and poor management. Over trading big or small will eventually break your heart.

Markets Ending 07

Retreating index markets slid to a fall back position for the week. DJI currently up 7.23% for the year and is just six points from closing higher on the month. It has had lower monthly closes only four times this year with June and July being the only two consecutive. The SP5oo cash sits up 4.24% higher on the year and 6.2% off its October 11th high. The Nasdaq 100 spot futures made a weekly recovery high this week since the lows of November and now is 5.8% from o7 highs. The Nasdaq 100 cash is just under six percent from it's highs.
The bulls are still depending on the tech sector to save the rest of the market while the bears are building on a chart trail of three potential rally rollovers. There is enough downside to make o8 interesting but the bear has yet to drive the bull away.

Price Tags

Price Tags are not predicted ranges but rather price value areas from the previous day's trade which will usually be played during the next session.
Short Term Indicator (STI) Up, Down, Neutral.

Market Indicators

Yesterdays Score

Journey to Lower

The collective energies of various economies have made the bear's journey to 'lower' a tough task. Whether it be global bank maneuverings or new announcements regarding cash infusions to aid stock positions, all have helped place a bid underneath the market. It is clear that parts of the outside world are awash in cash and the mortgage related sell-off in stocks has revealed an appetite to invest stake money, especially in the brokerage business. Whether this is all enough to stem the bear's prediction that the market has not priced in the coming downturn in the economy is yet to be seen. The bear has placed a few technical roadblocks in front of the bull certainly, (DJI 13780 and 13962, SP500 1526.5 and 1558.5) and failure to recapture at least the bottom of those ranges soon will add some downside momentum. The tech side of the markets has an easier path with much less resistance. A close over 2151.5 in the NQ100 will provide some upside courage for the broader indexes. The VIX however continues to wane as wide ranges have become the norm and bets that a range bound market will be the eventual outcome.

Lower But

Bears turned the market last week as the DJI and SP500 retreated on Fed and inflation news. For all the bear action however, the overall stock markets continue to absorb the selling helped by trend buying for 2008. The VIX has softened as ranges stay wide indicating that if the downside becomes the trend, it will be a grinder. There is no lack of bearish sentiment out there but technically the trend is sill the bulls to surrender.

Week Compass

The week ahead shall probably determine the direction of the market for the remaining weeks of 2007. The DJI sits 540 points or 3.8% from it's all time highs. Whats more, it is only 337 points from closing above the October 31 high which would be a rejection of the October/November break. The bear camp has grown substantially in the last six weeks as the news of mortgage problems seemed to worsen. Other than the perennial bears, there is some genuine interest in the downside for the first time in years. Should the DJI make new highs this month, the bears will have to move their positions uncomfortably into 2008. This may prove to be a better bet as the current Fed activity will have played itself out, but shorts will be tired.