Over Acting

'Worst June since the depression' has been observed in several reviews of the market. Talk about over acting. Now, this market may be heading south, but the professional trading machine of Wall Street is short. There will be no 'tag days' for hedge and trading shop operations on the day this market makes the low. Goldman already is leaking positive data regarding their current hedge fund's returns after a disastrous 2007. They are not making that money selling apples. No, these guys are short and that is the difference between June of 1930 and now. For the pros, this market is making them money. It is much more likely that this break may have the greatest percentage of shorts of any break since the Great Depression.

More Down

Markets continued to sell-off today as managers now have only one more trading session
to make whatever disaster they are managing look better. Bulls will look for any news this
weekend to support any chances of a potential bottom in the making.

Bear's New Friends

These markets are abosulutely operating on the least of expectations. In trading, whether in the pit or from the box, it is always a question of what each position will let you get away with. Upon initiating a new trade, a case builds for either hanging or banging. Right now, the bulls are eating their own as the play on Wall Street is to take this thing lower. After decades of buy bias, the markets now reflect the general nature of programs designed to buy and sell a variety of market setups. Pattern recognition, parasitic, and other strategies permeating from black boxes have enveloped electronic trading and are pushing the market's daily action. Being a designer I have know problem with pointing algorithms at the market and turning them on. What I find interesting is the spin pushed every day now by large brokerage firms confirming their bearishness given the state of banks, brokerage, and the energy markets. Why would anyone listen to anything coming from the very operations which got hammered by sub-prime trades because their risk spread legs were abstract fantasy? When their trades would not work, they had to be rescued by the Fed and others. Now their play is cash up, get out or get short. Oh, and don't worry, they will let you know when the bottom shows up. I find it strange these great free market (we all know how they vote) professionals are racing the market lower, and the faster the better. These guys do not have a clue.

Going Down Bid

Generally tired liquidating markets along with brokerage houses putting out sell recommendations on each other as well as big banks such as CIT. Wall Street has always been accused of not putting any emphasis on the sell side and now the ' careful what you wish for ' scenario unfolds as the brokerage firms recommend shorts on things they have already sold, exasperating the downside today.

Spinning Around

Volatile day of trading yesterday with pre and post Fed announcement. High frequency trading programs finding the joy the transaction but probably not any mileage on the profit side. Look for more of the same as the market works through the anxiety of banking, brokerage, and whatever.

Plenty Of Cash

There is no lack of money out there as Barclays is proving with their friends looking to invest in discounted banks. In fact the world is awash in cash due to expanding economic growth up till now and continued commodity market gains. The current price play in the indexes is a potential bears dream but the slightest shift in attitude could change it all quickly. The bulls hope some of the change will begin as the Fed holds rates steady but warns of the dangers of inflation. Underlying attitudes still look at these indexes as a battered uptrend as they hang above March lows.

Flinging Futures

There is some serious slapping going on in the SP500 futures electronic trade as the pros mangle ranges with a decidedly bearish pride. The flood into the futures is a direct result of opportunity interruptus created by the poor risk choices via the sub prime bombs. And selling is working. Goldman is obviously leaking stories about their great performance year to date on two funds which got hammered for about 40% last year and needed a mere three billion dollars to stay afloat. They must have junked their not so good quant theories of last year for those that simply sell the shit out of everything stock related.

Fashion Shorts

The current play in the indexes is the 'short'.  Known for joining trades
in fashion, hedge funds and brokerage trading desks are piling on and selling.

Here is a look at stocks.
Top Losses  (From David Pierson June 19 Bloomberg)
===============================================================================
                            Short       Short                     Price
                           Interest    Interest       Float       Chg %
Tkr.  Name                    /Float %    (mln shrs)   (mln shrs) (5/12-6/10)
===============================================================================
MBI   MBIA Inc                  16.1         43.5        269.6       -49.1
LEH   Lehman Brothers           13.5         74.0        548.0       -38.5
WM    Washington Mutual         18.3        192.7       1051.4       -34.8
RF    Regions Financial          7.2         49.3        682.5       -33.8
WB    Wachovia Corp              5.7        120.5       2119.6       -30.0
CTX   Centex Corp               19.0         22.5        118.6       -27.6
DDS   Dillard's Inc             21.1         12.1         57.1       -26.8
F     Ford Motor Co             13.6        280.3       2060.3       -24.9
FITB  Fifth Third Bancorp        6.1         32.2        526.5       -22.7
CIT   CIT Group Inc             12.0         33.8        281.1       -22.6
BBT   BB&T Corp                  8.3         45.3        542.7       -22.2
NCC   National City Corp        18.6        139.8        751.0       -22.0
KBH   KB Home                   33.1         20.4         61.6       -21.8
EK    Eastman Kodak Co          16.1         45.7        284.5       -21.2
MI    Marshall & Ilsley          6.2         15.8        256.0       -20.5
GT    Goodyear Tire              5.9         14.0        237.1       -20.0
DHI   DR Horton Inc             15.3         42.4        277.7       -19.7
HBAN  Huntington Bancsh.        13.9         50.2        361.1       -19.2
BC    Brunswick Corp            22.5         19.4         86.2       -19.2
GM    General Motors            17.8        100.6        564.4       -19.0
==============================================================================

Still Worthy?

Measuring the strength of the long term technical trend
over the last several years shows the NQ100 still worthy
while the SP500's trend is toppy.

Sliding Charts

SP500
Fed begins meeting today. Since the Fed began fighting the business habits of Wall Street and rising prices, stocks are down, inflation is up. The DJI and SP500 are continuing the slide.


DJI

Day Session Begins

Day session of stock index trade has begun with little change as predominately bearish attitudes
play the market. News of Saudi production increases to meet demand have met with such negative coverage one cannot help but want to take a shot at selling it. Political positioning by the presidential candidates add no flavor to the markets either other than the fear of new speculative regulations in energy trade as well as some added transparency to various debt instruments.

Sneak Up

A rally will have to sneak up on the indexes because even the bulls are bearish. All, it seems, have capitulated to the ultimate fate of recession, inflation, and infestation as the market is bumping along record low sentiment readings. Deeply oversold markets reflect the collective decision to buy the market lower as all continue to witness the demise of the banks, insurers, and brokerage houses. The price of oil has become a convenient tool for the unthinking, and like staring at a car accident, traders have decided to look but not help in any concerted effort in reviving this market. Of course rallies begin in gloom and it would not be the first time a bottom appeared despite the certitude of the general trading population.

Models vs Benchmarks

We calculate a buy/sell model SP500 futures benchmark against the SP500 spot futures benchmark. The models filter out all that bull/bear noise to consistently outperform the market. They are long and taking heat this week.

Trading Price Bias

Update of a chart that represents price bias. What is the SP500 telling us? While market is obsessively bearish, the price bias is still bullish. Price bias means the market's ability to trade prices that represent bullish or bearish daily price targets for each
bias.

Market Hands

Indexes with the exception of the NQ100 had mild recovery from the previous day's selling. There is some nervousness about the meetings this weekend of the oil folks but markets right now really in the grips of a death's door attitude regarding prices for stocks. Bad news always bottoms before price and that is what the market is experiencing currently as the weakest hands are finally selling and shorting the market. Quadruple expiration is in play today so volatility shall be a factor.

Time And Money

Sell-off continued yesterday as DJI in particular had troubles getting any footing. Markets probably already reflect the discounting due to just about every negative financial revelation but that does not mean market sentiment will agree and take prices higher. There are large shorts in these market along with historic negative sentiment readings and that can take time to work through.

Nowhere Fast

The three indexes; DJI, SP500, and NQ100 have been choppy and inhabited by the transactioanal faction. The trading entities designed to travel over the least amount of range while over trading for transactional purposes. It is always a sign of both bull and bear frustration in not being unable to attain their directional rewards. If the price will not travel a distance, then it is in the best interests of some to participate heavily in minute (high frequency) trading opportunities. The CME Group appreciates anything over done on the volume end.

Any chance to establish a powerful reason for trend has been utilized by the bulls and bears with
even greater vigor this year. The bulls have had claim to a long term trend while the bears have been armed with the complete incompetence of banking and brokerage in the sub-prime fiasco. Not to mention the current high prices of commodities and a weak dollar. But when looking at the market since the close of the last millennium, here are the numbers; DJI +5.5%, SP500 spot futures -8.9%, and NQ100 spot futures -47.6%. Nearly a decade of little change, (not counting .com idiots). For the bulls it is sobering lesson in hype. For the bears it is a warning about beating a dead horse.

Inflation Buyer

There is a bid underlying the SP500 futures which has been a thorn in the side of the bears just when they were maneuvering for a test of the lows. Managers really see the indexes as being a play over time and are viewed as being cheap against the rest of the world's investments whether they be commodities or whatever. Index pricing will go hand and hand with inflation as long as inflation is a manageable opportunity and not a real threat to corporate profits.

More Thin Action

Price action had some nervous holes in it last week when illiquid pockets would appear as rotation from June to Sept contracts took place along with sneaky bottom hopes. Commodity action in oil and legitimately in the weather related grains fanned continued notions of inflation. On the other hand, serious predictions of recession were presented to the market by numerous economist considering the general state of the consumer. On the leader board, nothing much was accomplished for the bulls last week as the DJI struggles continued, the 500 chopped, and the NQ100 attempted and failed to fight off the break that began on June 6th. Look for more of the same as the bulls need to avoid taking out last weeks lows.

Choppy Trade

Low volume choppy trade has been the feature of late with last trading day of week offering the same. Oil seems to have found an upper range resistance and the US dollar has discovered an eager buyers market. Technically the indexes are iffy as the DJI had an inside day yesterday while the SP500 and NQ100 had lower highs and lower lows.

Hoping To Hold

Indexes trying to hold onto better part of gains as of mid session but bears may feel bullet proof if the markets approach the lows in the last hour of trading. Extremely light volume is not making the bulls confident about gains and anything is possible. Some timers will be looking for next week to be the best chance for a bottom of the current break.

Bulls Looking For Shelter

The bulls has been left to fend for themselves with little support from even the most ridiculous upside cheerleaders on business news stations. Even the Fed has told Wall Street not to expect any more help soon now that it believes financial institutions have at least weathered the worst of it. The current administration and it's Treasury seem lost to financial concerns as they have been to most issues over their term and have no interest in defending this market despite the Plunge Protection Team theorists wishes. The natural buy hedge structure of stock markets, created by the long only strategies and ever vigilant MBA's concerned with shareholder profits, has always been a hard nut to crack for the bears. Except for the occasional death dive plunge in prices, indexes such as the DJI have become forces built on the thundering legions of cash from pensions and hedge funds. Faced with the growing fear of rising interest rates, a potentially hostile future administration, and continuing bad news from banks and brokerage, the bulls are searching for shelter.

Defensive

Various bits of data will start to be released today and Thursday. Action has been defensive as the bears believe they have the upper hand on trend. Even the NQ100 has given up significant gains to now appear vulnerable to a downside slide. Bears need to pound the weekly to get any more traction.

The Three

The three elements of the market are up, down, and volatility.
This chart represents the three trading elements in our model's daily performance. The green represents the strength of the up bias, the red the down bias and the yellow, volatility. Thus the model presents an investable bet daily on the up, down, and vol. Up bias over vol. represents and confirms up trends. Down bias under both up bias and vol. represents lack of bear conviction. While the bears have much work to do, the base action of this year is being challenged.

Bears In Charge

Indexes slid early then recovered late yesterday on better volume. This morning the slide is on again, tagged by Bernanke pledging to fight inflation by raising rates now that he believes the worst of the debt crisis is over. A hard break here for the indexes would be welcomed by the bears who have continually struggled to show they have a case for disaster.

Waiting For Break?

Bears hoping the weekend drumbeat of bad news, re-hashed Friday's dive, and general oil freaking would provide a sharply lower overnight beginning of today's trade. Waiting for a move is always dangerous but the bears have had enough of markets that ignore the supposedly horrific state of economic affairs and so accordingly they believe we should be much lower. Well, waiting for the obvious can be expensive but we are at a level where it is put up (down in this case), or cover.

Over Play

Bears took hold in an orderly break pressured heavily by expiration and sank the indexes to levels well within the range bound area traversed since January. There was much hand wringing about oil as it continued a two day rally of approx. 16 dollars per barrel, but it only closed 2.5% above the all time high.

Just as the bears felt uneasy about last Friday's closing rally, this Friday's bulls
are anxious. Both sides have been pressing for big moves and to a large extent they have achieved wide ranges, yet over the same ground. Whether it is the particular inability to make money as a bear without a mindless crash or the absence of a needed moronic upward trend for the bull, one is not quite sure. What we end up with is the over playing and over trading of ranges along with inaccurate hyperbole by business network analysts.

Here is the data for the FTM (for the move) numbers on the DJI average, SP500 and NQ100 spot futures.

DJI -14% off all time high + 5% off FTM low . Last time closed here 3/28

SP500 -14.3% off all time high +8.5 off FTM low. Last time closed here 4/10

NQ100 -59% off all time high/ -11.7% off of FTM high +19% off FTM low. Last time closed here 5/2

Unemployment Edge

Unemployment data this morning giving the bears something to hope for after yesterday's action. Continued pricing of stocks yesterday put a relentless bid in the market and now the question is whether additional pricing can fight off the edge bears have been given early. The key still remains the NQ100's ability to provide leadership for the indexes. The DJI is heavy despite Thursday's gains with no confirmation by the SP500 that the overall range bound action is over.

NQ100 Strength

NQ100 keeps putting the pressure on the bears with moderate pricing and occasional upside runs.
It will have to drag the DJI and less so the SP500 to get rallies over 12800 and 1423 respectively. The DJ Transportation Index continues to dance between double top or break out. Dow Theorists have a strong track record of confirming bottoms as the transportation sector many time does lead the broader indexes higher. All of this is leading to a volatile day tomorrow when the markets get a look at the unemployment data.

Bears Keep Trying

Bears were able to stick some down on the indexes as financial stocks remained on the critical list. Another rally off the daily lows however again spoiled the break as short covering erupted in the last hour of trade. Bears have a bunch of catching up to do if their rhetoric is going to match prices. Some believe this will happen if commodity prices join in a lock step deflationary break over the coming months. With the two party candidates able to frame their strategies, the markets will try to determine the odds of victory for each. As for the overall market indexes, NQ100 is still marginally predicting higher index prices over the coming months.

Range Dog

Moderate selling in the indexes yesterday without any follow through. Continued bank in the tank
data along with ratings worries added to the negative tone. NQ100 is providing best relative performance and will be the leader if these markets are any good. Range dogging is more likely however for all indexes.

June Begins

June arrives with the index markets stuck between the generally bad economic news and trading ranges which have been slightly supportive since the end of January. Macro bears have repeatedly laid-out the downside argument without much result while the bulls seem content simply not having a price disaster. No one is expecting much of any positive news from the unemployment report this Friday but the bears still may need to get any downside work done early in the week. If not, they could find themselves back against the rally side of dull but not harmful economic data.