11 replies to this topic

[NAV]

Sorry airedale, it's not the Hurst stuff !


Kitchin cycle, Juglar cycle, Kuznets cycle - Very well predicted the disasters in the recent years which never occured

Kondratieff cycle - This latest Kondraitieff winter turned out to be the hottest

What's the latest buzz in the cycles world ?. It's called the Minsky Credit Cycle.

http://www.rgemonito...roubini/208166/

Enjoy !

Edited by NAV, 11 August 2007 - 06:30 AM.

[ogm]

To be honest, the situation does look scary here. There are trillions of debt in all forms and sizes out there. It will be an absolute nightmare if the economic activity slows and defaults start cascading. The real interest rates will skyrocket and choke the economy even more sending it into deflationary depression. And even though we're oversold and sitting at some supports by certain measures.... the momentum setup on weekly charts is all out negative, and if they crack monthly will roll over too. What I don't understand is the insane amount of volume. I mean every dog is churning on historical volume. If there is no liquidity ... where is all this massive volume coming from and what does it mean. And its not all selling. Someone is buying. Huge huge volume.

Edited by ogm, 11 August 2007 - 07:00 AM.

[NAV]

To be honest, the situation does look scary here.

And you are still buying subprime junk

Edited by NAV, 11 August 2007 - 07:35 AM.

[kaiser soze]

I think the huge volume is not necessarily indicative of net buying or selling. Because of the attractive volatility and the availability of leveraged vehicles even for individual sectors, a lot of daytraders (hedge funds and retail traders) are in the market and are trading more frequently during the day than before. Case in point :SKF (the ultrashort financials ETF) is already one of the most actively traded ETFs out there. Also, due to the reasons everybody knows, there is more risk in the market, which translates into a reluctance to hold overnight positions. Those who would be longer term traders are now short term position traders and daytraders. I'm also guessing that liquidity is actually scarce and that shorts and daytraders are the only sources of liquidity here. Those seeking to exit huge long positions can then do so under the cover of volatility. The intraday swings are slowly getting bigger. I think it was Dennis Gartman(not completely sure on this one, somebody on TV though) who said that the wild intraday swings would not continue for much longer. The markets would calm down once a clear trend got established even if it was to the downside. And that is a possibility. Once the Boyz use the liquidity provided them by central banks to "manage" their riskiest positions and then position themselves for the next trend (perhaps a downtrend), the markets may indeed calm down. But there is another possibility. And that involves liquidity remaining scarce so that daytraders continue to be the main source of liquidity. If so, to keep "us" in the game, the expansion of intraday range may continue. As traders, we just cannot shirk away from such amazing intraday volatility. We ae drawn like moths to the flame. 100 point up or down days already became 200 point up or down days became 300 point up or down days. So this scenario would project 400 point and even 500 point up and down days in the near future. No need to add what happens at the end of this volatility up-spiral. Its obvious.

[selecto]

"Exchange-traded funds that invest in U.S. stocks pulled in close to $11.82 billion of net new money during the week ended Aug. 8 -- the largest amount since these investment vehicles were introduced in the mid-1990s, according to TrimTabs, of Santa Rosa, Calif."

Story.

[ogm]

I think the huge volume is not necessarily indicative of net buying or selling.

Because of the attractive volatility and the availability of leveraged vehicles even for individual sectors, a lot of daytraders (hedge funds and retail traders) are in the market and are trading more frequently during the day than before. Case in point :SKF (the ultrashort financials ETF) is already one of the most actively traded ETFs out there. Also, due to the reasons everybody knows, there is more risk in the market, which translates into a reluctance to hold overnight positions. Those who would be longer term traders are now short term position traders and daytraders.

I'm also guessing that liquidity is actually scarce and that shorts and daytraders are the only sources of liquidity here. Those seeking to exit huge long positions can then do so under the cover of volatility. The intraday swings are slowly getting bigger.

I think it was Dennis Gartman(not completely sure on this one, somebody on TV though) who said that the wild intraday swings would not continue for much longer. The markets would calm down once a clear trend got established even if it was to the downside. And that is a possibility. Once the Boyz use the liquidity provided them by central banks to "manage" their riskiest positions and then position themselves for the next trend (perhaps a downtrend), the markets may indeed calm down.

But there is another possibility. And that involves liquidity remaining scarce so that daytraders continue to be the main source of liquidity. If so, to keep "us" in the game, the expansion of intraday range may continue. As traders, we just cannot shirk away from such amazing intraday volatility. We ae drawn like moths to the flame. 100 point up or down days already became 200 point up or down days became 300 point up or down days. So this scenario would project 400 point and even 500 point up and down days in the near future. No need to add what happens at the end of this volatility up-spiral. Its obvious.

I just posted the SDS chart before read this... but what you said goes along with it too...

SKF... its a SHORT financials fund. and now compare it to LONG financials fund. Why are the SHORT funds getting so much attention and volume ? Whats the psychology here ? Maybe it is bullish from contrarian point of view. Everyone wants to trade SHORT funds.. volume in long stuff funds is 10 times lower. Interesting isn't it ?

How to read this ?

As for daytrading I actually prefer to do less daytrading in the high volatility environments. Too easy to get chopped up in pieces with high leverage instruments like futures. But I doubt that daytraders are the ones moving so many shares across the board in this market.

I said it several times before, but I think there is enough of liquidity there... and instead of going into CDO's and CMO's its now trying to find new places to go. And stocks look like an attractive place for the liquidity to be.

Edited by ogm, 11 August 2007 - 09:16 AM.

[kaiser soze]

The more successful ultrashort ETFs now have a lot of institutional participation. How do I know this : The wsj market data page provides the block trades in the most actively traded securities. I have been observing that the number of huge block trades on QID, SDS and SKF has been increasing. Recently, block trades on TWM are showing up. This gives them a more selective way to hedge their long positions instead of having to short the S&P futures everytime their outlook changes. They dont need leveraged long ETFs as much because their holdings of individual stocks are already designed to outperform that particular sector.

[ogm]

The more successful ultrashort ETFs now have a lot of institutional participation. How do I know this : The wsj market data page provides the block trades in the most actively traded securities. I have been observing that the number of huge block trades on QID, SDS and SKF has been increasing. Recently, block trades on TWM are showing up. This gives them a more selective way to hedge their long positions instead of having to short the S&P futures everytime their outlook changes. They dont need leveraged long ETFs as much because their holdings of individual stocks are already designed to outperform that particular sector.

Ok, I can go along with hedging, but... once again from the sentiment point of view...

Instead of shorting futures or buying puts ( though put/call is still high) lets say they are hedging with ultra short funds ( which are constructed out of index swaps, btw, another leveraged instrument)

Once again, what does it say about sentiment if these hedges are increasing in volume exponentialy over the last few days ?

[kaiser soze]

The more successful ultrashort ETFs now have a lot of institutional participation. How do I know this : The wsj market data page provides the block trades in the most actively traded securities. I have been observing that the number of huge block trades on QID, SDS and SKF has been increasing. Recently, block trades on TWM are showing up. This gives them a more selective way to hedge their long positions instead of having to short the S&P futures everytime their outlook changes. They dont need leveraged long ETFs as much because their holdings of individual stocks are already designed to outperform that particular sector.

Ok, I can go along with hedging, but... once again from the sentiment point of view...

Instead of shorting futures or buying puts ( though put/call is still high) lets say they are hedging with ultra short funds ( which are constructed out of index swaps, btw, another leveraged instrument)

Once again, what does it say about sentiment if these hedges are increasing in volume exponentialy over the last few days ?

Objection ! Leading the witness

Institutions try to increase alpha by superior stock selection. They want to minimize market risk and sector risk. Question is : do we want to fade the institutions' preception of market risk ?

[arbman]

I tihnk the reason the short funds are getting attention is not because people are going fully short, they are rather long a basket of stocks and trading in and out of the short funds easily for hedging. If you have a basket of strong stocks, it is much better than holding the long ETFs, but the short ETFs are a convenient way to say; "well I know my basket is strong, but if the entire economy slows down, they won't be doing much either..." So, I am thinking that people are not as suicidal as you guys are thinking about the trading of the short funds. In fact, some advisors might be recommending a hedging strategy now instead of an excessive exposure to bonds... Just some thoughts... - kisa