End of Jubilee Days

Markets had a bad week with Bernanke deciding on Wednesday to speed up the  end of jubilee days after being virtually fired by President Obama Tuesday.  DJIA and SP500 dropped back to the idiots only break out level of April and now are poised to see whether they continue to slide now or wait till fall.  At the least,  DJIA will test the 14350 area with SP500 coming into 1550.

Bears Running Out of Room In AAPL

AAPL has now come into a value area where establishing long positions is a better option than being short.  It will now begin to retrace some of the declines made over the last several months but will be disappoint the koolaid bulls and have to become a great stock fairly priced.  Buyers will be able to establish longs between 385 and 420.  Having been bearish for sometime, those late to the party may trot out the 300 target, but they should have sold it long ago.

Good Luck. Again

S&P500 closed at a record high with every indication the great rally will never end.  Now the valuations of market indexes such as the 500 are rarely wrong.  Well except almost always.  Back in September and October of 2007 when I called the bubble then, same dopes were chiding me for evidence of any breaks.  This time the markets are in a unique position of having a fund raiser rooting from the Fed instead of the usual retail buyers who usually take the professionals positions from them at record highs; the position the pros bought long ago.  This time however the pros will have to sell back to their own kind as the generational risk averse stance of the boomers will be unyielding in their rejection of this market.  Their view; better to avoid a loss and than seek a gain.

This market is bubble time.  Good luck again.

When Padding Becomes Pudding

Both the ECB and U.S. Congress believe the markets have enough padding in gains that the policy makers can be uncompromising in their stands on debt relief for the former and debt ceilings for the latter.  This is a serious miscalculation as any savvy market professional can tell you the velocity of the downside is significantly greater than any upside move.  The meandering of the upside's relentless grind is easily eclipsed by the fall.

The old saying on the trading floor;  Eat like a  bird,  s__t like an elephant.

Overbought/ AAPL or GOOG?

It would seem GOOG would be the obvious choice here given it is up 15% YTD and AAPL is down 15% YTD.  But data from QRiskValue would still say it is AAPL on a percentage basis of current value.

QRiskValue's metric supposes there is a premium one would be willing to receive to give up on the upside prospects for a stock.  Conversely one would have to paid a monetary incentive to purchase a stock in order to protect oneself on the downside. 

As for AAPL and GOOG, while the dollar amount would be higher for GOOG to give up your upside; ($260), the percentage is roughly about 36% of current value.  On the other hand it would take about $189 to give up on the AAPL's upside or about a 41% of current value.  However it does tell you the koolaid test is held by GOOG where sentiment about the prospects for new highs are strong, while the AAPL prospects, adding payout premium, is shy of record price of over $700. 

What you would have to be paid to get out of your love position and how incentive protection it would take to get one to buy a stock tells much about the riskvalue of the market. 

Truth in Selling

The underlying truth about value is always being distorted by those wishing to benefit from the disinformation.  S&P rating agency knew packaged mortgages were of substandard grade when giving them top ratings because they new the truth about what it took to perpetuate their own business model.  The Fed new the world banking system had run out of money essentially funding a growth model the Fed itself had endorsed through its governance and guidance.  So much money had been put into play on debt that there was no where to turn when the big bet failed.  To fund the next leg and possible the last leg of US/world growth required taking the future savings of a nation to inflate the paper assets of banks and their clients.  The truth is those paper assets are worth substantially less than the size of the obligations required to settle accounts on world debt given the markets trading those assets have act as a liquidator to claim them.  The truth is markets act as a pricing tool to transact a sale and selling is the end game.

Bloated Cows

Bloated cows seen floating above ground in Bubblelot as stock and index prices ascend.   Even pigs like AAPL and F have been seen grazing on bear as short position feed lots are near empty.   Ben of Bernacke has not been seen, seeking to use this time to estimate the duration of punishment to hand out to fixed income bulls.  Bear hopes have eyes cast to the Black Knight of Overnight where it is believed a catastrophe from the land of  Sovereign Failure is approaching.   

HFT to Reversion : The Greatest Marginal Advantage

Having been a part of building operations which are strictly HFT and absolutely reversion, here are a few observations.

 As we know, from HFT to reversion, the slightest edge, informational or strategic can make the difference.  For HFT it is doing whatever it takes to get a peak at momentum or over weighting the probable.  With reversion it is under weighting an event which will occur but no one knows where or when.   HFT will not accept the market's underlying volatility and is a market taker while reversion accepts it and conversely is a market maker.   Unlike most investors, HFT is risk seeking with gains for very short durations in time and are risk averse with losses over longer durations in time.  Time to reversion is not meaningless but definitely not as important.  So markets in time are always looking for the great marginal advantage (GMA). 

In reversion time, here is QRiskValue's Over/Under Values along with GMA leanings.

Operation Descending Exponential Twist

Ties that bind the banking community to the Fed and Treasury,  which help  bring about the near collapse of the world banking system in 2008, to the rescue through the secret terms of TARP, to the new Bernanke Bubble in 2013, the same outflow and inflow investment cycles prevail.   Fund outflows found the bottom in 2009 and now fund inflows funding the top in 2013.   Their entrance into the market comes after a DJIA rally of 114% from 2009 lows and a mere 33% higher since the Fed instituted Operation Twist in September of 2011 as the markets were about to renew their downside momentum.   But just as this blog warned of the AAPL bubble floating where ever in may, so to will the S&P 500 and the DJIA drift with the collective descriptions of wonder attached to their ascension.  But just as before, those subtle negative calculations begin to factor until a descending exponential event occurs sending markets lower. Same game.

In Bubbelot

Market continues to bubble-up in Bubbelot, a land of the great expectancy of continuing low rates, low volume, and lots of lowly.  This is the time of season when the impressive gaming occurs over the hills of  stock expectations. It is a thing of beauty where an analyst and the company he covers dance together over better than expected earnings.  What a surprise. There is joy everywhere.

And it came to pass in the land that there was plenty of talk about the how everyone had missed the big move in stocks.  This could not stand. Yet one might understand however why the folks in Bubbelot might be afraid of getting smoked by the great downside again after being so patient for anything good for the previous 10 years.  Their great hero, Ben of Bernanke, a tiny little man of great intervention, has committed himself to the struggles of the lessers by instituting what is being called the great wait and see.   There is much to live for in Bubbelot.