Equity market crack

Flat is the new up, apparently, as the SPX broke its early-year losing streak in the least spectacular way possible, closing up a paltry 1.64 points.  Still, after giving up early gains the index was comfortably down for most of the afternoon, so at least you can say that it showed a spark of life when 1900 was under serious threat.  If you've been short all year, it must look awfully tempting to book a few profits now that we're so close to the neckline/bottom of the range.

One asset that shows few signs of stopping to the downside is of course oil, which endured another shocker yesterday.  Perhaps one of the problems is that traders are conditioned to it moving a few bucks a day back when it was close to 100, which at the time represent only a few percent.  Fast forward to today and even a $1 move is 3%, which can be accomplished in a matter of a few minutes.
Somewhat ominously, we've now broken through the panic lows of 2008, only this time there is a real supply and demand dynamic behind it.  That the Saudis would conceivably cash in on some portion of Aramco rather than cut production to boost the crude price is as damning a statement as you can make on the future of the oil price, though of course we'll have to see what decisions are ultimately taken.


Regardless, one of the most enduring sectoral trends in equity land over the past few years has been long technology (embodied by FANG) and short energy.   In a way, it's ironic; in 2007 and the first half of '08, long energy (XLE) and short financials (XLF) was so alluring that Macro Man dubbed it "equity market crack".   This time around, there's a brand new drug, and for the last few years this "new crack" of long NDX and short XLE has given its adherents a wonderful high.

Of course, at some point this will come to an end, as all things of this nature do.  If we expand the time horizon of the chart we see that the current level is nowhere near the all-time high (not that one would use late-90's tech valuations as any sort of value reference.)  However, if one believe that trends can be defined by time as much as price, this "new crack" spread has been rising for seven and a half years...nearly as long as the previous decline from the bubble highs.  It's difficult to say which will break first- oil or this spread.   It's probably worth checking in on them periodically, however, to see if one or the other exhibits divergences that could signal the end of the trend.

Speaking of trends, the flattening of the eurodollar curve has really been something to behold.   Coming from a blank sheet of paper, you'd have to say that some of these spreads really look like they offer value:  the 2nd versus the 10th ED contract is priced at just 83 bps, while the Fed expects to put rates up by 100 just this year alone.

Unfortunately, the market is not coming from a blank sheet of paper, as a lot of punters got sucked into steepeners after the hawkish October Fed.  Macro Man himself wrote in favour of the trade, and while he also suggested taking a bit off when it came good immediately, the subsequent collapse has been disappointing, to say the least.

Clearly ED's are being driven by negative risk sentiment surround equities, oil, and China, and figuring that the Fed will blink.   Dennis Lockhart admitted yesterday that the January meeting wasn't really live but noted that March is.   Ultimately, you'd have to think that we'll get some sort of guidance from a Fed that is truly a central bank for the modern age, providing a running commentary of its assessment with as much frequency as a teenager sending out Twitter updates.  These days, that feels like about the only thing that can arrest the juggernaut that is the ED flattener, regardless of the dubious value proposition at current levels.
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Nico G
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January 12, 2016 at 7:04 AM ×

repeating March Stoxx auction buy good with a 3 hour time stop. Theme is still opex and constructive retracement of last 10% plunge

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Nico G
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January 12, 2016 at 7:12 AM ×

as per theme oil MM it feels like the mirror of July 2008. $147 crude top on renewed Iran fear blablah while Goldman called it to 200. I sold the high 130s and peed my pants and added a famous tranche at $147 something (kept the ticket somewhere). Today I am buying clips of oil even i know nothing of the energy world thus all those calls for $20 oil gotta make you a contrarian. Why didn't those same idiots call oil price down when it was absudly dwelling above $100 amid slowing world growth is beyong me. Now those talking heads would like to claim some credit on the tail of a trend that they colossally missed. Some things never change.

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Anonymous
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January 12, 2016 at 8:58 AM ×

@Pol, i do agree it is time to consider stepping in and trying to buy risk but instead of equities i favour expressing it via short FI. To me they have been very sluggish on the way up so wont surprise me if they underperform during any risk rally.

Regarding $cnh, the squeeze definitely seems to have been painful for some punters but i think it opens up some good opportunities to express some curve positions aloong the forwards curve. Unfortunately i feel this squeeze is not over anytime soon so would be weary of being caught having to roll anything before CNY.

I think with oil you may get a chance to buy it at better levels. There certainly nothing that i watch on my screens to suggest that the beast is rallying anytime soon. To clarify i am itching to be long crude, but at the moment there is really nothing persuading me to catch this falling knife.

- izman -

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Rossco
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January 12, 2016 at 9:02 AM ×

just my 2 cents worth, but there seems to be too many people still in the buy the dip camp for a tradeable rally to emerge.... just my 2 cents

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Rossco
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January 12, 2016 at 9:05 AM ×

in equities that is

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Polemic
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January 12, 2016 at 9:08 AM ×

Anon - 8.58 fair and good points but because of that sluggishness I'm wondering if there are so many forces at work on them that next direction will be as unclear as present direction.

Rossco - really? I just hear sell sell sell from where I'm sitting - apart from LB who joined me in the Kevlar bondage club last night.

More confused thoughts from me here - http://polemics-pains.blogspot.co.uk/2016/01/the-games-at-colosseum.html

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Anonymous
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January 12, 2016 at 9:10 AM ×

Some very strange things going on in USDCNH this morning... Quote back from my broker
Borrowing CNH is costing an annualised 100%!
However you can carry at 85%..!
Utter madness
I'm sure once the funding markets normalise USDCNH will shoot back up.. Impossible to trade it at the moment tho

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CV
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January 12, 2016 at 9:21 AM ×

Great stuff MM ... I am seriously contemplating a punt on Repsol here which is slightly related to your story. I think oil could bounce in the end of Q1 (I know, shoot me ;)), and Rep looks ripe for a squeeze.

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Nico G
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January 12, 2016 at 9:46 AM ×

why is everyone so obsessed with China - their whole economy and capital markets were opaque and untrustworthy on the way up.... same goes on the way down. You'd have to be a joke of an investor to be long any risky asset there. Historically there is meeh correlation between Shanghai and Wall street anyway.

nice 1% pocketed in Europe - for the Dudes Of The Shortest Timeframe this volatility is heaven

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Anonymous
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January 12, 2016 at 10:08 AM ×

Jawbone time at CB meetings. BDF Symposium. On now.

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Skyguy
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January 12, 2016 at 10:13 AM ×

I just doubled down on a small position of dvye yesterday. Trailing 12M yield of around 7%. I'm wondering if any of you learned gents have any thoughts on this position. Yea, I know, it's China heavy, Financials heavy, but what do you want for 49 basis points in expense ratio? Seems a pretty diverse basket of countries/currencies/sectors, and a little hard for me to imagine it's closer to the top than the bottom.

Thoughts?

Regards,

Skyguy

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Anonymous
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January 12, 2016 at 11:08 AM ×

FDAX currently rising at ~200 ticks per hour. Elsewhere equities up, oil up. Nice to have the BOJ back in the market after their bank holiday.

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Leftback
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January 12, 2016 at 12:00 PM ×

Surprisingly comfortable night for LB in his Kevlar PJs. Polemic, the ventilation has really improved in these things.

Skyguy, while we are a fan of EMs over the much longer-term, for the purposes of punting in the short term we would offer the following observations. As long as crude oil is still falling (see MM's post above), EMs will likely under-perform (except during any big oil squeeze that may develop). This is why we went with Spoos and Stoxx this time around. We do agree with you that the EMs are nearer the bottom than the top though.....

We dumped almost all of our F/I longs yesterday, agree with izman @8:58 that looks like a short for now - as MM has pointed out, US10y traded sluggishly even as everyone was dumping equities, which was all highly unpromising.

CV, we are already long Repsol, talk about the definition of beta. Peripheral Europe meets energy. We do like that one over the much longer term (that's our stock phrase for that time when people start to buy Russia again).

While we seem well on the way to a relief rally/squeeze this morning, it's worth noting that the action in the FX markets, and especially USDCNY, will probably continue to be the main driver of markets for a while so we can't go to sleep on that, and we will have to keep half an eye open all the time.

I'd be interested in MM's view on this, but my take on PBoC is that they would like to achieve CNY devaluation and will likely continue toward some level like USDCNY 7,00. However they have obviously noted the dislocations in capital markets that have accompanied the previous step moves in CNY and so they will probably try to "bump it down the hill" in manageable pieces in order to avoid full-blown panic by Mrs. Watanabe and massive capital flight.

The moves in late Summer and this last week or so may prove to be typical of such episodes. If this is true, this episode is almost over but we can probably expect perhaps two more episodes of similar size this year before they reach their target. In between such episodes there may be a month or two when USDCNY is relatively stable and a variety of risky assets may be viewed more favorably. Anyone got thoughts on this? Not saying China is everything but this is now an important factor.

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Macro Man
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January 12, 2016 at 12:03 PM ×

@ Anon 9.10, when you takes hundred of billions of RMB out of the system and don't sterilize, funny enough you cause a shortage in the money market that drives up short term rates! That PBOC has allowed this to happen is highly suggestive that they have said "enough is enough" with respect to RMB weakness for the time being.

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washedup
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January 12, 2016 at 1:41 PM ×

Punters may or may not realize this, but the lack of liquidity in CNY and CNH wis more likely to work to the advantage of the PBoC (and that doesn't even take into account the other tactics they may employ on bears!) - this is going to be a far harder short than, shall we say, the sterling in the early 90's.
MM - the NDX/XLE idea clearly has parallels with the sector rotation stories in 2000/01 (tech to consumer/utilities) and 2007/08 (financials to energy as crude rallied) - the lesson both places was that there ultimately is no place to hide and everything eventually gets swept up in the tsunami of bearish goo.
I wonder, just wonder (for no other reason than that its a bit too easy to believe the opposite) if we are reading it wrong this time - in 00/01 the starting point for tech valuations was much much higher - in 07/08 the prime factor driving the beneficiary of rotation (the spike in oil) was clearly in and of itself not helping the financial sector.
I would feel a lot better with the bearish thesis if my neighbors weren't stopping me in the streets asking me why the market hasn't crashed already - not looking for exuberance to short, I will take good old fashioned complacency a la august.

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Anonymous
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January 12, 2016 at 2:02 PM ×

I understand that having the taxi man talk about selling is a sign of sentiment extreme amongst the public, but given the lack of retail participation in the rally (and the lack of general public euphoria that goes with it), can this still be regarded as a strong signal ?

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washedup
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January 12, 2016 at 2:09 PM ×

@anon 2:02 - It can't - which is why one has to settle for complacency among the investing classes - but just today I have seen 2 calls for sub $20 oil, loud prognostications for a bigger than 25% correction, and claims that where China goes so does the world - that is just on a couple of websites (I didn't visit zero hedge for fear I may light my hair on fire).
None of this is necessarily wrong in the medium term, mind you, but to me sentiment seems a bit extreme for where we are in the cycle is all.

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Anonymous
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January 12, 2016 at 2:31 PM ×

Thanks washed - makes sense. I am a longer term guy so I will sit on my hands at present.

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Henner
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January 12, 2016 at 2:36 PM ×

regarding CNY: I think what a lot of people don't see or take into account is that China now targets a peg to the basket and not just the dollar. They have stressed this a couple of times but the market still concentrates exclusively on USDCNY. Everybody says wow, they are depreciating against the dollar when in fact they are keeping the peg to the basket almost perfectly (we've looked on this more close) and just the dollar appreciated against the basket. To me it seems to be a lack of understanding / communication issue. Anyway, I see no big depreciation in place but we'll track the 13 currencies. Once the general public gets more aware of this i see an easing of China devaluation fears.

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Henner
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January 12, 2016 at 2:43 PM ×

fair enough this is devaluation per se as pegging to "weaker" currencies is weakening your currencies.... still it's not a "currency war". and regarding USDCNY I'm with this guy: "here will be a frontloading of dollar strength and then the dollar will begin to weaken by the second half [of 2016] so we may find the renminbi may be stronger by end-2016 that it is today,"

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hipper
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January 12, 2016 at 3:17 PM ×

Here was some estimate of breakeven costs in major OPEC nations. Nigeria was just pushing the panicky button so they might be in the upper extreme spectrum along with Venezuela. But the bottom line (besides the battle for market share) is that everyone is still making money contributing to the social budgets, hence there haven't been supply cuts, rather all time record volumes.

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Anonymous
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January 12, 2016 at 4:35 PM ×

CNBC Market Alert » Dow sheds all of today's gains so far, turns negative; S&P and Nasdaq still higher. Oil crashes to new cycle lows.

Oh dear.

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Skyguy
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January 12, 2016 at 4:40 PM ×

Hey LB, thanks for the, er, feedback.

I get that EM and oil production overlap quite a bit, and also that commodities (sans PM's) are getting drilled across the board.

Still, oil's at (gulp) $30. My mind just can't wrap it's head around oil at $20.

And 50% discounts and 7% yield on an index are hard to resist.

Fortunately (sadly?), I come from a Trust Fund background, and yield and capital gain ain't the same thing when a trust document is looking over one's shoulder. Long term rents and usury are in my DNA, hard to purge sometimes.

If I had a pair I'd be trading SPX for a bounce as well, but I read too much Hussman.

Regards,

Skyguy

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Cowboy
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January 12, 2016 at 5:23 PM ×

I think oil supply/price is geopolitical driven. Saudi Iran Syria Russia dynamics. So can't call it on an economic/technical basis. I too remember 200 forecasts. The 20 dlr forecasts are just the same kind of straight line extrapolations by the same kinda sell side guys.
I think USDCNY will continue to be a major factor. But voldemort will try to screw anyone punting it. They were selling USDCNH last wk while fixing USDCNY higher last wk. Gut feel is CNY will weaken and lead to problems across EM and possibly DM over 6-12 mths.

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Anonymous
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January 12, 2016 at 5:35 PM ×

There's been a lot of people buying this dip... a nice 100 handle drop in spoos from these levels, down to around 1800, would be amusing...

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Bruce in Tennessee
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January 12, 2016 at 6:01 PM ×

Added to SDS today. Not about being Pierre-Paul. Idea is to roughly try to time an inflection point. Looks like a tired market to this novice. (And has for >6 months...)

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Leftback
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January 12, 2016 at 6:15 PM ×

Goodness me, which Anon is this @5:35? It's so much more fun when Anons use handles so we can laugh at them later if they are wrong, or genuflect if they are right, Has Funny Money gone to the Bear side and is now abusing Dip Buyers? You should be aware that most of us are not Dip Buyers here, in general, although we are Kevlar wearing Dumpster Divers.

LB is smelling a neck-snapping reversal in crude oil ahead. Sooner or later the "short oil every day mindlessly" crowd are going to be taken advantage of, so to speak. We fancy a lot of buy programs are lurking, waiting for a $29.xx handle.... today's move in rates is giving us another opportunity to close some US fixed income positions, and we are grateful for that.

BP close to its Deepwater Horizon low here. Tempting to grab a small piece of the action there. Even a modest reversal in cable later in 2016 would yield pleasant results if we assume the dividend isn't going to be eviscerated. Just sayin'..

HYG has traded well all year and is no longer plummeting in lock step with crude oil. That area is looking relatively attractive now and is probably going to prove a better bet than the Long Bond for a little while.

BinT, beware the rip-snorting face-ripper. The usual remarks about Mr Shorty and Cold Steel might be in effect soon.

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Leftback
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January 12, 2016 at 6:25 PM ×

XLE now 5 days of knifing through the lower Bolly band. Also sitting close to the 2011 low around $54, so there is chart support here that not many people are talking about today b/c most people are howlingly bearish on all things energy. Technicals meet sentiment, as it is abundantly clear that Nobody in the universe, especially Uber drivers, thinks that XLE will ever rally again, so there is a fairly high probability that a rebound is imminent.

Just sayin'...

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January 12, 2016 at 6:47 PM ×

Left - FYI I typically scale all my technical charts by dividing share price by the /DX (dollar index). It's my, imperfect, way of creating a "real" price. Since I get paid in dollars it helps me decide when to trade dollar assets for something more enticing. By that measure XLE is actually more equivalent with the lows of 2010 of around $48/share.

Do you do or anybody else do something similar? Any comments?

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Anonymous
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January 12, 2016 at 7:33 PM ×

@LB,

I agreed with you on CNY theme. Given the insane funding cost of short RMB in HK right now, the max pain trade would be long CNY and force the RMB bears to run for cover. My bet will be this week, considering the calendar effects here. And you are right that this episode would repeat probably every few months until the Chinese economic indicators improve.

I am not so sure about oil. I still believe that a bankruptcy of a major oil producer is needed to be the catalyst of a mid-term rebound. So far I am surprised the strength of credit markets.



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washedup
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January 12, 2016 at 7:56 PM ×

Marshall - don't see the point in dividing by the dollar index when the marginal producer is from the US! Haven't done so since 2010.
Lefty lefty lefty - scares me when I agree with you this fully - just hope we aren't roommates in an actual, um, dumpster, soon.

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Leftback
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January 12, 2016 at 8:14 PM ×

It is full body Kevlar suits today at Hammock Asset Management, [d/b/a Falling Knife Capital today]. We sold the last of our TLT and AGG today and bought the XLE, VWO, TLT puts and some XLE calls. We also bought a bit of Repsol and Statoil today.

Shorts have been a bit cocky, they are almost bending over and mooning other market participants. Long term readers of this blog will recall what usually happens to Mr Shorty when he does this. An unscheduled visit from an Anonymous Proctologist?

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Nico G
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January 12, 2016 at 8:56 PM ×

LB

i wouldn't wait too much on crude. Folks are reluctant to buy even if they are uber bullish because they do not want to see the proverbial -6% or an even -10% wash out in their face. Except it is only a few dollars, the tape at NYMEX simply has not changed - 2 or 3 figures up or down every day - be it at 100 or 30. The percentage change has become dramatic and is scaring most.

i m in at 32 on March futures - i don't care if it touches 29 because i am punting the low 40s which can happen, as we have seen, in 1 or 2 sessions of your neck-snapping squeeze variety

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Leftback
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January 12, 2016 at 9:12 PM ×

Yeah, Nico, we agree and we are on board as of today. The brief penetration of $30 today was what we had been waiting for. Candles in SPX and VIX look very much like the September, not August selling episode. A good chance that vol sellers come in and take over this market for a week or two now as we enter earnings season with somewhat diminished expectations.

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Leftback
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January 12, 2016 at 9:21 PM ×

There were a few contrarian indicators today. Gartman went short. B in T added to his short position. Then there was this one, which tends to have the highest association (100%) with short-term equity market lows:

Albert Edwards Perma Bear Sighting

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Anonymous
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January 12, 2016 at 10:31 PM ×

Gundlach: "I think we're going to take out the September low of the S&P500"

The Bond King has spoken.

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CV
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January 12, 2016 at 10:36 PM ×

He he, LB is on form. Great stuff. Broadly agree that Mr Shorty is a bit too cocky here. He thought Spoos would fall in a straight line to 1600, and it never works like that!

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Anonymous
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January 12, 2016 at 10:54 PM ×

Equity market on crack? I feel like I've been on it since market opened the first Sunday.

Equities stalled and watched watched the price action in CL unfold as it tried to deal with a 1500lot on bid at 30.10, which moved up to 30.15. Took an hour to trade it. Once it did, we tagged $29 and bounced. That was low in Spoos and off she went after oil close.

That gasoline build in Api though...

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Anonymous
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January 12, 2016 at 11:06 PM ×

@Nico and LB,

Just for clarification, it seems you both are doing this for a trade up to ~1980 Spoos? As Nico mentioned, roughly a billion people want to get out of their longs when they get a chance.

- Whammer

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Anonymous
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January 13, 2016 at 12:29 AM ×

Can 10 US sailors in Iranian custody change the trend of crude manana?

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Polemic
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January 13, 2016 at 12:39 AM ×

Anon12.29
.. heres the plan - So, we buy stocks in US arms co's manufacturers, law firms and 'Latin american gentlemen outfitters Inc ( camouflage our speciality)" On the idea that , and god knows i might be really miles off with this, but hey, you never know... One way out of his crisis would be for, say, the US to sell arms to Israel who then channel them as a third party to moderates in Iran who in exchange promise to help to get the hostages freed. The money coming back from the Iranians for the arms could be syphoned off to maybe, just an idea here, support US interests in Latin America fighting agents unfriendly governments.
Now I don't know what that would do for oil .. and I know that no one could possibly think of doing something so whacky, but you never know it might just be worth a punt.

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MrBeach
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January 13, 2016 at 12:52 AM ×

Just got asked by a very nice soccer mom whether she should be shorting stocks in her child's trust fund. She raised the RBS report found summarized here: http://money.cnn.com/2016/01/12/investing/markets-sell-everything-cataclysmic-year-rbs/.

I politely told her that with with volatility in China, the drop in oil prices and the Fed projecting rate rises this year, it is hard to say exactly where markets will go. Then I bowed out of the discussion.

Interesting indicator for me.

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Anonymous
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January 13, 2016 at 1:03 AM ×

"RBS doesn't have the best track record. It had to be nationalised during the GFC for its failures and has to pay many billions of dollars in fines and compensation for everything from dudding insurance and mortgage customers to rigging interest rates and foreign exchange markets. One analyst suggested RBS would be up for $16.6 billion in fines, compensation and restructuring costs just in 2015. So perhaps RBS advising everyone to "sell everything" and getting the top headlines in the general news pages is a contrarian buy signal, the opposite of the taxi driver advising to buy stocks."

http://www.smh.com.au/business/comment-and-analysis/the-rbs-grabs-headlines-but-the-end-of-the-world-is-not-nigh-20160112-gm4jwn.html

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Macro Man
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January 13, 2016 at 1:07 AM ×

Yes well, without casting aspersion on the 'sell everything' report, whatever its merits may be, I can tell you that the word from one of my good mates ( a former senior MD at RBS) is that working there is just like working at the DMV, except without the high pay and excitement that you get from issuing driver's licenses.

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Anonymous
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January 13, 2016 at 1:10 AM ×

This is like an inverse auction ... who can bid the lowest:

One the United Kingdom’s largest banks is warning oil prices could sink as low as $10 a barrel. Banking and financial services company Standard Charter said Tuesday, “we think prices could fall as low as $10 a barrel before most of the money managers in the market conceded that matters had gone too far". Standard Charter stands out as the most bearish on oil prices among the major financial institutions including Morgan Stanley, Goldman Sachs and RBS.

http://dailycaller.com/2016/01/12/major-bank-warns-oil-price-could-fall-to-10-a-barrel/




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Leftback
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January 13, 2016 at 1:15 AM ×

Whammer, the exit point for relief rallies isn't always predictable and they can run for a lot longer than most people expect. If China goes quiet, then it's possible volatility could get sold down for an extended period and then, you know, never short a quiet market... more likely the exit will be suggested by some technical level or other, but if we get a real snapback there are always a variety of alternate retracements to consider. Right now we are going with Polemic's philosophy that Price Is News. The News was still fairly bad today, but Price was going up at the close yesterday and today, and that's all that matters for now.

Anyway, we'll get plenty of chances to discuss strategy here over the next few days....

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Anonymous
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January 13, 2016 at 1:20 AM ×

We are waiting for forecasts of $0/bbl, or OPEC paying the West to take the stuff off their hands. Mr Beach, we specialize in advising very nice Soccer Moms here at Hammock Capital so please direct them to our offices.

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Polemic
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January 13, 2016 at 1:22 AM ×

If Scotland really believes the bollocks it talks about oil prices they should be buying the stuff and refilling their North Sea wells whilst it's cheap.

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Polemic
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January 13, 2016 at 1:29 AM ×

So US buys arms gives them to israel, to who pass them on to Iran who in return ship oil to Scotland to refill their reserves, who in return send Haggis to Latin America.. no no no .. that can't be right.. So ho about .. Iran send the hostages to Goldman Sachs who amortise their ransom demand cash flow after, applying Israeli Factoring services, Issue a 3 yr mezzanine subordinated bond backed against it with the coupon payable in Scottish Haggis with a knock in should the hostages b released, paid in Surface to air missiles from the US deliverable In Pesos, who in turn hedge with a USD/SAR 10delta call. Does that work? No .. well how about ..

actually I m going to bed ..

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MrBeach
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January 13, 2016 at 1:51 AM ×

@Hammock Capital 1:20AM, Soccer moms in these parts aren't doing too bad. Between the white Range Rovers, organic meals, Lululemon gear and 3x weekly workouts at Equinox, they are trim, shiny and very well kept. My understanding is that about the only two things that seem to get a lustful second look are: access to private aircraft (and not of the propeller variety) and/or a 25 year old 5x weekly gym stud male body. Sadly, my Netjets membership seems to have gotten lost in the mail and my body - well - let's say I'm doing great for my age.

My guess is the financially-concerned soccer mom I mentioned earlier will, in short order, move on to more important issues and return the investing decisions to her family office.

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Anonymous
admin
January 13, 2016 at 2:14 AM ×

@Polemic, I kind of like that whole arms for hostages idea to support Latin American "off the books" fighting. Can we spice that up with a strong-jawed lieutenant colonel and a blonde secretary who shreds documents?

Probably not believable, I know........

-Whammer

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Polemic
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January 13, 2016 at 2:16 AM ×

Sure Whammer, I like your thinking. that could really pull it together.

I ve been thinking along different lines though, contingencies, so to speak.. just in case that isn't a flyer..

See here -- http://polemics-pains.blogspot.co.uk/2016/01/hostage-negotiations.html

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Anonymous
admin
January 13, 2016 at 2:20 AM ×

Thanks LB. I'm finally figuring out what "Price is News" means ;-)

- Whammer

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Anonymous
admin
January 13, 2016 at 2:33 AM ×

@MrBeach, love your story, very interesting.

Though every signal points to an oversold market, I agree with Whammer that the incoming rebound may only have one leg so to speak.

As of the Navy's boats captured by Iran, does anyone seriously believe that it was an accident that those boats were in Iran's water? My first impression was another pig bay.

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Anonymous
admin
January 13, 2016 at 2:59 AM ×

Yeah you know i think the fear over this whole CNY is overblown. The timing of it is a bit unfortunate to have it happen over the start of the year in thin liquidity but storm in a teacup to me. My CNY CFETS index never broke 100 and still holding above that level. For an economy that is clearly struggling through a weak patch in the face of a DXY rally, it was almost inevitable that only a matter of time before PBOC started fixing $CNY higher. Funny though, now my IB and messages are flooded with views of fixing going to 7.00 and beyond and everyone has become an asia (specially CNY expert) but yet not a whimper when we were at 6.20. In any case, all things held constant, i cannot see a fix at 7.00. I can certainly see a scenario this could happen but it is by far not my base case.

oh and yes as MM rightly pointed out, when you spend billions selling $cnh and not sterilising it, funny enough liquidity gets tight, especially considering which part of the year we are in (ie CNY around the corner). I think its a deliberate move by PBOC and its quite pboc style to see it happen after a high fix as means of punishing specs. Personally i dont feel that much was on the directional punt for CNH as most were expressed via options, however i think alot got burnt on the ndf / cny "arb" spread (the CNH 1 wk points just screams of pain).

- izman -

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Anonymous
admin
January 13, 2016 at 3:00 AM ×

*** sorry that should read NDF/ CNH "arb" spd

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Nico G
admin
January 13, 2016 at 4:02 AM ×

Whammer

i bitterly regret repositioning shorts too soon too agressively in October 2014. After 1825 low i was so happy to see 1950 on spoos and did not listen to the tape. What seemed to be a promising 'beginning' of a broad correction turned into the nth V-shape ripping bounce to new highs, that very QE era thing.

this time around though i am watching the tape pretty much tick by tick - an arduous affair while visiting California, sleepwise. I'll be shorting big at the first sign of hesitation because 1820-1840 will have to be revisited this quarter. Why? it would be very odd not to, better establish a triple bottom at 1825 to put a floor on that market or else we have business visiting deeper Fibbos down the 1100-2100 range (1585 is too good a target to be true)

Back to current expiry week areas of interest are 1960 on spoos and 3180 on stoxx. Am still trailing 20 lots long on stoxx from 3013. So 3180 on Thursday would be a gift and a great time to reverse short. And yes that cute plan would have to be executed before the billion investors waiting to sell the next 'rally'. Normally the market is a bitch and fools everyone i.e. noone sells the 1960 believing 1980 is next

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Leftback
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January 13, 2016 at 5:51 AM ×

So many of these retracements have gone on and on, long past the 23.6% level, the 38.2% level, the 50% level, 61.8% level, the 72.4% level, at each Fib number leaving frustrated sellers and wounded shorts in their wake, only to continue longer than even the most fervent of bulls can believe, until the last bears are exsanguinated and the news flow turns to giddy euphoria.

There is a gap at SPX 2040, and as unlikely as this might sound, filling that gap would bring the market back to even for 2016 and be extremely frustrating to bears. At this point bulls would start believing in new highs and then Spoos will get flushed again .... markets just do this stuff. It wouldn't be shocking.

We are often thought of as bearish. This week we will be attacked as being excessively bullish. So it goes. Really we are just trying to effect trades that have a decent risk/reward ratio and right now into OpEx, we think that's on the long side.

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Leftback
admin
January 13, 2016 at 5:56 AM ×

The wild card for this potential relief rally is oil. If crude stabilizes or goes off on a snorter then a whole sector of the equity and credit market that isn't normally that exciting but has been beaten senseless will go on an absolute screamer and so will EMs.

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