Buzz Bits: Dow and Nasdaq End in the Red
Your daily Buzz & Banter highlights.
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Goose, Goose, Duck! - Todd Harrison - 2:57 PM
- We've been talking about a massive move for a week as a function of the credit-equity dichotomy. Last Friday, CNBC broadcast a rumor of a bond bailout that failed to materialize and quite possibly may have triggered the squeeze that preceded this wheeze.
- Of course, risk remains two-sided as a function of the unknown but, as discussed this morning, the credit side of the equation, coupled with a few other elements, sorta felt like a 500 point drubbing.
- For my part, I came in holding some financial puts and, as chronicled on the Buzz, bought some Baidu (BIDU) for a trade. As I get ready to sneak out the door, I'm paring both sides of that ride and will enter the weekend with a few small situations and alotta dry powder.
- Yes, BIDU wants to trade ten points higher--the fact that it's flat with the tape off 300 points speaks to that--but it may have picked the wrong day to be a superstar. If the tape continues to act fugly and fuglier, you're gonna hear alotta Black Friday chatter starting. Not here, mind you, but still. I'll be going home flat the name.
- I almost bought some metal equity puts near the opening but decided that there might be better fights to pick. Still, with all the folks hiding in commodities, I wouldn't be shocked to see a meaty shake-out.
- With that, I'm gonna selfishly excuse myself. I sincerely hope you're hanging tough and playing rough. Smart decisions into the close, please as the risk profile you go home with will be the one you'll wake up with on Monday.
- May peace be with you.
Position in BIDU (and held for sale)
Digestion Period for Q's - Michael Paulenoff - 1:45 PM
Thus far, the Q's (QQQQ) have managed to plunge from the top of the coil pattern (44.50) to the bottom of the coil pattern (43.15). Apart from the volatility exhibited within the range, let's notice that for the past two weeks, rallies have failed at roughly the same price, which have created a horizontal top plateau at 44.50, which is juxtaposed against a series of rising lows. The vast majority of the time, a "flat top" versus "rising lows" resolves itself with the price structure pushing above the flat top.
From a slightly long term perspective, my pattern work continues to "warn" me that the initial upmove from the 1/23 low at 41.62 to the 2/01 high at 46.03 is very significant, and represents the first part of a larger recovery period that will emerge prior to a resumption of sustained weakness. In other words, all of the wicked rangebound action from the 2/01 high at 46.03 to this moment (see light green demarcation lines) represents an "intervening" digestion period prior to another powerful recovery upleg. Based on my work, the question is how much deeper this decline presses prior to the emergence of the anticipated second upleg? We shall find out soon, I suspect.
Click to enlarge
People Trading the VIX also Watched... - Adam Warner - 1:34 PM
OptionsExpress (OXPS) runs an Amazon (AMZN)-like feature where it lets you pop in a name, and it'll tell you what else "traders in XYZ" choose to trade. So Bill at VIX and More hit up VIX, and here's what he found.
"Not surprisingly, VIX traders are aggressive risk takers. In aggregate, they appear to be hoarding gold (GLD) and short the double inverse ETFs for real estate (SRS) and the NASDAQ-100 index (QID). It's just a guess about the direction of some holdings, but the other positions appear to fall squarely in the short finance and technology camp: SPY, Wachovia (WB), Apple (AAPL), Yahoo (YHOO), and NVIDIA (NVDA). The one finding that I find somewhat surprising is the presence of the ProShares Ultrashort Oil & Gas ETF (DUG)".
Maybe there's an arb there. Go long double short Real Estate and buy VIX puts.
If nothing else, that will keep you busy trying to figure out what exactly to root for.
OK, the actual point would be that players in the VIX do not appear to be the risk averse/hedge the portfolio type, rather ones on the more speculative side.
The writedowns are coming! The writedowns are coming!!!! - Bennet Sedacca - 8:22 AM
Buckle up Minyans, the write downs are coming. Evidence AIG (AIG) last night with $11 billion.
Next week or the week after should be the brokers. The fiscal quarter ends for Lehman (LEH), Merrill (MER), etc today.
The problem is that now the garbage on the balance sheets is starting to trade, much much lower. This triggers an avalanche of writedowns. And, no, there is no amount of liquidity or Fed intervention that can stop it.
Imagine a large boulder (the nearly $50 trillion CDS market plus all the CDO's and levered loans) starts rolling down the mountain at you. It runs you over, right?
That is where we are. Sadly, the unwind is now in progress. And Boom Boom can't stop it.
Issuance will likely heat up in a big way. We remain short credit in front of it.
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