46 replies to this topic

[TechMan]

The Hunger Games

When I joined this forum 5 years ago, there weren't as many, if any, that were trading options. I was asked basic questions like transaction costs and options trading hours when I first started posting things like calendar spreads and call writing. Now, "everyone" is trading options, one way or another.

Big boys like JP Morgan and Goldman Sachs have attributed their trading revenues decline to "historically low levels of volatility and lower client activity across products". The same goes to "little boys" or retail traders. 3X leveraged ETFs ain't cutting it either in this trading environment. And, some have gone as far as trading options of leveraged ETFs. Total options volume continues to break new highs.

This is the Hunger Games.

Source: Barron's CBOE Market Report

Edited by TechMan, 19 July 2014 - 02:52 PM.

[TechMan]

And speaking of JP Morgan... It had given forecast of 20% lower revenue from equities trading back in May. The result announced this week was 14% lower. And its share price shot through the roof. Sandbagging, even as blatant as this, still works well.

[pdx5]

Less volatility = Less need to trade

[TechMan]

Less volatility = Less need to trade

Well, options volume speaks otherwise.

[CRUISENAL]

Harapa,

I would agree with you on the pullback. My work suggests maybe even more deeply. In both 2000 & 2007 there were sizable pullbacks near the tops. In the August period the SPX dropped from 1555 to like 1370 over 5 weeks and then rallied to a new high at the top. Today, an equal drop would be to maybe 1750-1800 area by mid Aug. if it started down soon. Then say a rally of 8 to 9 weeks to a top around 2000 in early to mid October. Since this has happened in the past it is surely able to do it again.

This would all be possible IF we start the slide next week or so to get to a low around mid August. Let's see what happens. I just don't trust this market to Short it when in Bull mode. I know my signal for the next Bear, but we are far from it at this point, although the RUT is getting closer. Alan

Harapa, I think we will see a correction soon, but it will be probably more than 2.5% though... BTW, to illustrate, I am not sure the trading channels are all that effective, perhaps you may want to use log charts... Clearly this is a monster advance now...

I am prepared for a correction to 1900. Since 1400, SPX has always fallen back to century mark except in 1800 zone. Technically Bears have the best setup to take the market down. See Hourly setup here. Will they?
Here is another attempt on a channel, this time using Andrew's Fork and log chart.

[Devastator91]

Agreed that next week is very important for sellers, as they will not get another real chance at shaking buyer confidence until late August, and by the the market would have gone so far out of the bounds of reason, anything other than a major correction would be a gain (anything's a gain at this point). What I mean is that bulls must start hesitating so reality can set in a bit for a later run, that won't end in a huge crash. Second, wars and outside geopolitical theater does have an effect on stocks if they affect metals and oil. Both of these influence the valuation of currencies which has a valuation effect. If oil is priced high before inflation as well as equities, imagine what a country in debt has to pay once they devalue it (like issuing more stock by printing more money). We really don't have wars anymore to conepare, just skirmishes and penis size tests. When the real next war of the modern century happens, with real global current effects, you will see the Black Swans people keep imagining now. Iraq and Afghanistan were just civil wars and redistribution to military contractors. However, it did cost us the 2008 financial crisis, as I'm very sure if gas prices were still Clinton era, more people could afford to pay their mortgages and commute, as well as everything else that increased in price due to the oil kabal's normalization of greed.

[pdx5]

Bulls can relax. ZIRP should moderate any drops in the markets. In 2008, LT Treasury bonds were paying 7.1% interest. Right now they are paying less than half of that. Would you buy a very LT bond at these rates? Based on recent performance.Stocks are the only game with any returns over expected inflation. A blow off is needed to cause a sizable correction. SPX 2050!

Edited by pdx5, 19 July 2014 - 06:56 PM.

[rjo]

Bulls can relax. ZIRP should moderate any drops in the markets.
In 2008, LT Treasury bonds were paying 7.1% interest.
Right now they are paying less than half of that.
Would you buy a very LT bond at these rates?
Based on recent performance.Stocks are the only game with any returns over expected inflation. A blow off is needed to cause a sizable correction.
SPX 2050!

Hi - think you have a handle error on long bond they weren't 7% in 2008

[pdx5]

Hi - think you have a handle error on long bond they weren't 7% in 2008

Average Interest Rates
Oct 31 2008 Oct 31 2007

Interest-bearing Debt:
Marketable:
Treasury Bills 1.436 4.512
Treasury Notes 4.009 4.401
Treasury Bonds 7.095 7.457
Treasury Inflation-Protected Securities
(TIPS) 2.409 2.546

http://www.treasuryd...008/2008_10.htm

[rjo]

Hi - think you have a handle error on long bond they weren't 7% in 2008

Average Interest Rates
Oct 31 2008 Oct 31 2007

Interest-bearing Debt:
Marketable:
Treasury Bills 1.436 4.512
Treasury Notes 4.009 4.401
Treasury Bonds 7.095 7.457
Treasury Inflation-Protected Securities
(TIPS) 2.409 2.546

http://www.treasuryd...008/2008_10.htm

Thanks Pdx for the clarification. I stand by my comment as well. If you purchased long bonds in 2008 you surely didn't get a 7.1 pct coupon from Uncle Sam