et al VIX AND MORE !

If you follow markets technically at all, then you owe to yourself to visit VIX and More. The best stuff. I am also on twitter at heuristical, David Korn of Seattle.

Today at twitter, I posted, the following. We are due!

'@VIXandMore Nosebleed! How often is the VIX (implied volatility of S&P 100) 322% above it's 100 day MA and the market isn't down one or two weeks latter???'

If any of you are NOT at twitter, get an account. It's not a bunch of teenagers but, albeit, some are there too, but many senior writers, markers, idiosyncratic savants, economists, the works. It is the sonic cone of the new world. I was super skeptic at first, and refused. And now... I am a true convert. Best, dk

The Best Trade I Know

SLW instead of SLV or $SILVER. The only thing good here, which I love, is that little good can be seen. Enough is enough. I am now in with both feet.

Short Position Restored!

Had I been right all along about the serious need of the market to correct? Of course.

Had I a flawed execution when the time came, inexplicably getting out on the switch too soon (when the switch WAS the perfectly right way but by then was not!), only to get mercylessly pinned down leveraged long, to my my horror? Yes. Long story.

Today I was able to restore my short position, leveraged:




















Good riddens!

Down From here Quite Sharply!

The US Dollar is a long term secular downtrend, indicative not of financial imbalance soley, but a deep, habitually wrong way of being in the USA (confirmed by a raising gold and silver market, which is the anti-dollar, in a world of runaway infaltion, raising asset prices such as in soft commodities like wheat, vitals like WTI Oil, limited refining capacity),

where the Government must cut rates to keep the party going longer, a crumbling automotive industry, wide divergence between well heeled rich and fatigued and ignorant poor, speculation in housing, the subprime mortgage crisis, too much consummer credit in a nation sufforcating in debt to lender nations, confirmed by a balooning if not inrecoverable current account, lower tax rates while increasing spending on two wars... gosh.

Then somebody decides we need more Toyota Tundras, because they can sell them and folks will buy them. A nation run by lawyers and accountants, and investment bankers.

So the core is rotten, and the market has gone up 'just because it did'. And now we have hell to pay:

Bollinger bands on the Nasdaq 100 or NDX show us extremely overbought:















The 4 day RSI gives us a confirmed buy point:













The 4 day RSI in the longer term view shows that with rare exception, these levels show an exhaustion of buying power, or sustainable rally:










China is, while the story of the Twenty-First Century, indicative of mania, what, some increase of 180% of so in the last year??










And is confirmed by the view of the EEM:










I will enjoy watching this decline, a horror show in the making.

Bull Crap, Bull Trap

It is true that I have been short throughout this way too vertical market apogee, and when it HAS been down has been more than short lived. At the same time, we have soft housing and auto prices, significantly increased interest rates and energy prices, a bull now five+ years sustained, a Russel 2000 and Nasdaq 100 variously up 142% and 141% in the last four years, and perhaps anomalously scant world calm away from exogenus geopolitical shock that, perhaps, is unlikely to be sustained in the time ahead.












Here we show the technical chart for the Nasdaq 100, and indicates a classic raising top, contrasted with successively lower lows in the momentum indicator. This is a classic sell signal. I am staying short.















S&P Nasdaq 100 Futures, with the Bollinger Bands (or standard deviation), showing how extended is this bull. I am remaining short.















The VIX or CBOE volatility index shows the perturbaton from two weeks ago, and was not so much the undoing of the bull, as presaging or foreshaddowing just how nasty and how fast things can get. Volatility will not stay as low as it is now, and with it, the odds farvor decline and repricing risk OVER advance and decreased risk.

It's trend is decidedly up, and moving inveresely to the stock market, any pull back (again, market advance) towards the 50 day moving average (blue line) will be an excellent opportunity. If I were to see any more, and we really are getting long in the tooth, then it would be to see the 4 day RSI not only further up the band towards 90%, but spend a few more days there to confirm excess.

That--at least--is what my rational mind says, but I just want to go short without a lot of piter pater, and baring catostrophic decline mid-session Thursday after the 4th of July break, will double up here, with aplomb. Then I aim to close my eyes and relax into this, and sit on my hands, not touching the mouse or controls.

Short Tale

it is true that i have remained alarmingly short during the resume unexpected Federal Reserve driven bull-trap rally of the last few weeks, after five weeks of extraordinary gains from February and early march. remember, i am not day trading.

and since my cost of capital was MINUS--as i took out ALL my starting capital AND THEN SOME to protect gains and cultivate true peace of mind if not fearlessness and confidence in increasing risk, when i added the 'then some' back yesterday, it meant that my now carefully accumulated massive leveraged short of the QQQQ has zero capital cost, and i am only trading 'house money'. if i miss, i start at zero.

if i strike, no pun intended, then i eat big gravy.

this resent spate of unrelenting market advances came when the OEX put/call ratio maxed out, but now we are back in the territory of heavy call buying, warning sign one:




















the VIX which moves reciprocal to the S&P 500 or overall broader market is overbought, again, two:




















and, it would seem, that we continue to live in a risk free world, despite a massive warning shot fired from Shanghai last night, three:










the Nasdaq 100 is making an intermediate if not long term top here, four:
















and represents a double top back to the late February high, five:



sometimes we are UNCOMFORTABLE being invested, or being short, or long, but sometimes it is more uncomfortable NOT to be all in, leveraged short. you can Google that, as todays earnings due out in minutes will abundantly show.

GOOG leads, not only the technology sector, but is a proxy for the market as a whole, being used as a parking spot for ultra-liquid capital used to trade large postions, in and out, long and short, and is a bellweather for the volatility and direction of the market in its entirety, trading ONLY at fourteen times revenues (aka: price-sales-ratio)--the level at which megacap stocks reach mania levels and beyond such as Cisco, Intel, Worldcom one sustained relative to their respective industries, six:



or, seven, as Voltaire's Dr. Pangloss aptly concludes:

"There is a concatenation of all events in the best of possible worlds; for, in short, had you not been kicked out of a fine castle for the love of Miss Cunegund; had you not been put into the Inquisition; had you not travelled over America on foot; had you not run the baron through the body; and had you not lost all your sheep, which you brought from the good country of El Dorado, you would not have been here to eat preserved citrons and pistachio nuts." "Excellently observed," answered Candide; "but let us take care of our garden."

Image of Folly

Question: is this a market (i.e 'stock') that you would buy??? It is a most perfect representation of a 'bull trap' or bear rally, the perfect short set-up. And mark my words, while the NDX or really, for me, the QQQQ's, are todays worst markets following the the Bernanke sell-off, were it not for MSFT, QCOM, and GOOG, it could be a lot worse, since those three are underpinning a much worse Nasdaq decline or meltdown, these being among the few (but largest) Nasdaq stocks to be up to unchanged, as I write.

Problems were a soft soft durable goods orders report, housing sales slowdown, inflation concerns by the Federal Reserve, instability in Iran, and surging oil prices:

"Durable-Goods Orders orders unexpectedly fell for a second month in February, jeopardizing the Federal Reserve's forecast for a recovery in business spending (Bloomberg)", which bodes ill omen for stocks;or "Business Spending Slump in U.S. Raises Risk of Deeper Economic Slowdown: Economists at Morgan Stanley, Nomura Securities International Inc. and HSBC Securities USA Inc. were among those cutting U.S. first-quarter growth forecasts after a report on durable goods orders raised concern a decline in business spending was deepening";

"He (Bernanke) was clarifying that inflation risks are still existent,'' said Jason Schenker, an economist at Wachovia Corp. in Charlotte, North Carolina. ``This is further reinforcement that the Fed is on hold for the rest of the year.".

or "Foreclosures": A rise in foreclosures increases the possibility that builders and sellers will have to compete with an even bigger glut of properties on the market. The supply of unsold new homes at the current sales pace rose to the highest in 16 years as sales fell to the lowest level since 2000, the Commerce Department reported this week";

















Rap musician Snoop Dog was recently denied a visa for his planned concerts in the UK last week, and can anyone possibly imagine why the British Govenment could possibly not want this fine young man in their country? A calming and stabilizing influence?

"(Bloomberg) Prime Minister Tony Blair stepped up a diplomatic push on Iran to release 15 U.K. sailors and Marines held six days ago, asking help from allies and saying Britain's boats were 1.7 miles inside Iraqi waters when the raid occurred.

``It is now time to ratchet up the pressure,'' Blair said in Parliament in London today. The capture of the U.K. personnel was ``wrong and completely illegal.''

The comments escalate the British effort, bringing details of the argument with Iran into the public. Blair had avoided a clash until now, attempting to defuse the situation through private discussions. A female sailor who was among those detained was shown later on Iranian television, in a move that was condemned by Blair's spokesman.

Even before the Britons were taken into custody, the United Nations Security Council was working to punish Iran for failing to cooperate with inspectors probing its nuclear energy program. The council voted on March 24 to freeze assets of a state-owned Iranian bank and impose penalties on military commanders.

``There is concern that Tehran will either try to put the personnel on trial or will seek a tough diplomatic bargain,'' said Simon Henderson, analyst of Near East policy at the Washington Institute. Another possibility is seeking ``some concession on the growing nuclear crisis.''



And, finally: "(Bloomberg) Crude oil surged above $64 a barrel to close at a six-month high in New York on concern that tensions with Iran will escalate, disrupting shipments from the Middle East...

"A report today showed that U.S. crude oil, gasoline, diesel and heating oil supplies declined last week... 'The chances of a military incident occurring in the Persian Gulf are high. The volatility that occurred last night is probably a preview of what we will see in the weeks to come (Nauman Barakat)'...

"'The recent price moves show that geopolitical factors are back front and center,'' said Nauman Barakat, 'Sentiment is bullish. Geopolitical tension and tightness in the gasoline market are the twin pillars of this market'.

"'The situation isn't getting any better with Iran, there's been a major ratcheting up of tension,' (Paul Horsnell), 'We see Iran as being a major driver of oil prices through 2008... oil forecast of $70 a barrel for Barclays' global outlook last weekend'... 'It's ironic and rather frustrating -- what we said would happen already happened',Horsnell said. 'We've had a gradual, remorseless push up in price and then $5 in less than 10 minutes'.

"Almost a quarter of the world's oil flows through the Strait of Hormuz, a narrow waterway between Iran and Oman at the mouth of the Persian Gulf. Relations between Iran, which sits on the world's second-largest proven reserves, and western governments were already frayed because of the country's nuclear program".

So, having read all this, I ask you, a VIX or CBOE volatility index heavily discounted off it't lows ('highs' since it moves perfectly index to the stock market, and is the best measure of market fear), was this warrented??

dk

Look, look Mom, No Market Risk!

All is well again, and the masses are free to buy the stock market, so obviously now discouting meaningful risk (*cough*) so that swifter than swift institutional investors in squeaky clean, rooms with the silence of a sniper, air cooled silicon rooms with gigantic console monitors and instinet, instant, insanely fast traders can milk the uninitiated, using superDot, super-cooled, super-funds, super-fluid... let me stop before i get carried away... superDot supertraders...



if i had big money, id take it outside the united states. the u.s. dollars current account, massive GDP deficit, of now a trillion dollars annually, cost EACH AMERICAN $8.00 per day in interest only payments to G7 lender nations. now the rich, yes they have that kind of money. but the remainging 60% who live dollar to dollar do not have eight dollars per day. this is the end of empire.



the problem is not sub-prime, or republicans, or even democrats. just as enlightenment or 'full self realization is embodied in physicality', so our excess is not on paper. it is not a notional problem. it is not something subject to financial innovation or restructure. it is our lives, our habits, our avoidance of efficacy, driven by capital markets, extrapolating persistently upward sloping capital appreciation curves, incentized by investment banks, underwritten by gigantic property casualty insurers and medical insurers, and well healed, privileged elite, protected by police and military and legal accounting apparatus.



we are all the enemy and the enemy is not someone else. we believe that more is more, but more is now, by the law of diminished returns, less and less, as information, society, technology, and infrastructure collides with itself in gridlock.

so, no, i am not a bull on the equity markets. id be selling what many others, on balance, seem to be buying.

The Market Top

This is Front Row Seat, the title of a book that I plan to write in the years ahead. I was a senior broker at Migraine Stintley who's stint ended in the roaring Y-2K and dot.com era, who lived in a Zen temple in Korea right when we all seemed to think that Japan was going to take over the world, studied with a guru who lived with Maharishi in India most of the time I was at Morgan, and now work at one the "big box building materials" retailers, in customer service.

Did I leave Wall Street due to financial malfeasance or mismanagement? No. Was I so far from their mold that despite producing nationally leading results in my category that I really--* in one form or another*--was ultimately untenable to them, that they one way or another, legitimate or illegitimate, moral or immorally, had to find a way to get rid of me, which they unceremoniously did? Yes.

Did I know how to make money for others, many, many others? I did.

Did I do some things that I regret, not to mention my at the time unbounded arrogance, that brought it all about, so that, like Odysseus--who in passing Calypso's Island had to put wax in his ears so he would not hear the sirens sweet song, and, was so filled with incalculable remorse--of whom it was said that so great was his searing heartache and longing for wife and home, wherever home was, 'that the tears were never dry from his eyes--so I have had to endure my own private humiliation and undergo severe punishment, in one form or another? Yes.

But do they remember me? Yes. Can you imagine, my branch managers thoughts, when I told him after a customer wrote the firm a letter saying that I "threatened his wife" but instead told her flat out said to her that "your husband is weak" when, after his endless whining albeit after I only took $56,000 and turned it into $186,000 in ten months, my hierarchy of spiritual values as being far and away more important than "making money"' came to roost? Just picture that. What a most disturbing broker I was!

So yes, there is much that I would do differently now, but, yes, I knew how to make money, prodigious money for others, and did.

Did this ending hurt badly? Yes. Was I wronged, whereby they monetized my mistakes by "taking the forty million and getting rid of the inconvenience of me", and breaking up my book of assets like a Baby Bell as they did AT&T? Yes, I was. Was the largest recipient one of my best friends, who invited me to two weddings of his, with me among the smallest select handful of men at his bachelors party, yet no longer speaks to me? Yes. Am I bitter? No. This whole devolution has been a spiritual blessing to me.

* * *

Am I here to tell you how to make money? No. Am I here to share about my investment perceptions AS THEY REFLECT upon our broader world? Yes.

***

I am David. I have been paid to sit in the front row of the very best, very biggest, most difficult, most competitive game on planet earth. And after that, I got another wonderful seat, where I meet 1,500 persons a week, and interact with my customers with awareness, and an understanding of the larger global patterns at work. Domestic real estate in the United States is the last big gold rush, the hurry to the end of twilight zone of the void. And I still assiduously and closely follow global financial markets, including equity, commodity, debt, and foreign exchange. And perhaps the most dynamic of them, the stock market is, I always like to say "the shimmering Buddha Dharma".

photos taken from outter space of massive icebergs falling apart at Antartica

Today on CNBC, on Fast Money, I heard a wonderful comment by Tim Strazzini regarding the potential IPO of hedge-fund juggernaut Blackstone Capital saying that in going public that they were "selling private equity and intellectual capital".

How well I recall, when I was leaving superegional brokerage firm Pipes Gaffray, how just when long term interest rates were peaking at 8.00%, Microsoft which surely is not run by dummies asleep or oblivious to rare opportunities and financial trends, had it's first debt offering, selling preferred shares to the public, so that they would gain by the likely ensuing decline in interest rates. Were those sweet Microsoft Treasury Officers and investment bankers short of cash??? Excuse me? Hello... So here, we have perhaps the most brilliant and nibble hedge fund suddenly willing to let others have equity in their firm, so that they might have *what is so nicely called* "liquidity"? Himmmm? How kind!

What are they really telling us about the future of our own markets, when along with that there is talk of conducting the IPO on the London Exchange, so palty or encumbered are our own so well regulated markets??

And who recalls how no less a person than Michael Price of Mutual Shares sold his company to Franklin Templeton, but said he would continue to take an active role? Before the bust of 2000? Another generous and kind public servant?.

Let us all perk our ears.

* * *

I was leveraged short the turmoil of the last three weeks, and am now long, but long silver, as I have been since the bottom there, making a good switch, and of course up 22% in retirement account for three weeks, and 202% for my trading cash account. Both the VIX and RSI on the NDX, RUT, and SPX are in neutral, so I do not wish to be short, short term, but plan to get short again on any out of bounds continued strength.

So as Voltaire aptly said, in the voice of Doctor Panloss in Candid: "Let us now eat pistachio nuts".

Warmly, David