Jul

8

BullIn all seriousness, does anyone note a similarity in art and life here vis a vis the Nadal / Federer match and S&P today, 7-07-2008? It was a most unusual day in SPU: neutral in morning,  then a terrible fall starting at noon, then a dramatic rally, then a horrible fall after 15:38. Okay. Vis a vis Federer, considering him a bull. He loses the first two sets (the terrible fall). He wins the next two sets (a dramatic rally) to unchanged at two sets each. Then he loses the fifth set (a horrible fall) in darkness. Most readers will think I'm overreaching. I say the evil hand of the Mistress was at work copying the Wimbledon finals.

Steve Leslie replies:

Federer vs Nadal reminds me of McCain vs Obama. An interesting dynamic. McCain (bull) and Obama (bear). By all accounts, this is a Democrat year and McCain should be double digits behind in the polls and he is fighting long odds. Like winning six straight Wimbledons against a 22 year old very hot Wunderkind. Yet he is holding up despite everything's going against him and his party. After the Denver convention we will see a bump in Obama's numbers. This is akin to losing the first two sets. Then the Republicans will have their convention and McCain will benefit. Set three and four. Finally in November we will see an end to the longest campaign in history. Which is set five. It could also very well be decided by extra games. Key states such as OH, MI, PA, FL. In many ways this may decide if there is a bull market out on the horizon waiting to run. 


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24 Comments so far

  1. Lance Cummings on July 8, 2008 12:39 am

    Are you daft? Are we supposed to dwell on this fantasy seriously?

  2. Anatoly Veltman on July 8, 2008 1:24 am

    Keen observation once again, Vic.

    Question remains: how does one play the reversal game here, mid-summer? The week leading to 7/1 intra-day bullish action, which heartened you — turned out to suck more Small Specs into net Long (according to delayed Commitment of Traders Report). So, we remain witness to their despair, on the way to eventual capitulation — as of this writing.

    One event of interest will be T. Boone Pickens live on CNBC this morning. His three preceding interviews this year: all marked major volatility jumps in the Energy pits. Curiously, liquid Energies display negative profile going in; while Natural Gas is sporting Bullish divergence…

    According to same Report: Treasuries, currencies and precious metals should remain a trading affair for a while, as commercials duly sold them all scale-up. Only honorable mention goes to Copper's bullish profile; and not to forget that Alcoa is reporting.

  3. Lon Evans on July 8, 2008 4:57 am

    Vic,

    He lost!

    lon

  4. Lon Evans on July 8, 2008 5:00 am

    Anatoly,

    T Boone talks a lot about oil, but where's his money going? Water! Yeah, water! The next big commodity, and only this SOB (God bless him) had the courage to go there.

    lon

  5. Lon Evans on July 8, 2008 7:59 am

    BTW All,

    Overnight SnP futures down below 1250. Imagine that, Vic. Run the numbers. When was the last time we saw these levels?

    lon

  6. Anatoly Veltman on July 8, 2008 8:05 am

    T. Boone hasn't raised his $150 forecast; did say momentary $200 was possible in case of Iran debacle. More notably: that a pull-back to $100 could not be ruled out, as part of market fluctuation.

    Attention momentarily shifted to Bernanke's speech, expected to be supportive…

  7. leonardo Cecchini on July 8, 2008 9:00 am

    I believe that this anology has a deeper meaning vis-a-vis the market. In the end, one can use all the technical and/or fundamental analyse one desires that ultimately what matters most is on which side of the scale is the majority of the market leaning on. With regards to your analogy, Nadal was and is the bull for me whilst for you he is the bear. So who is right? Maybe, noticing the crowds’ reactions to every point he won versus Federers’, the crowd played its role in possibly making Nadal win. So just like recent comments by TV pundits et al of few months back, despite the market’s cheapness, it has got cheaper still. In the end, this market will turn around when the participants decide it is time to do so. Mistress or no mistress….

  8. gabe on July 8, 2008 10:40 am

    hold on. mcenroe and sampras are coming down from the stands this week to make federer a little more tender.

  9. Edwin Hoyle on July 8, 2008 2:48 pm

    Thank G*d we have Steve Leslie to tell us that 1) candidates will get a bounce from their conventions and 2) Ohio, Michigan, PA, and FL will be important.

  10. Anatoly Veltman on July 8, 2008 3:05 pm

    European capitulation did let us into a short-term long: just to take advantage of the morning lead-on on behalf of T.Boone Pickens and Bernanke’s…

    In Crude futures, we took an exact 3-day $10 profit (this amount was pre-planned, going into Wed’s DOEs). In S&P, we decided to let them ride for at least 24-hours - and we’ll most likely get out in conjuction with the DOEs.

    It must be stressed: there is nothing permanent about Crude’s decline or S&P rally; i.e. we see no change on trends. Should Crude correct total of $15 this fast, and S&P snap back toward 38% retracement - we’ll be happy to assume a directly opposite to today’s short-term trading bias…

  11. lon evans on July 9, 2008 5:03 am

    Anatoly,

    You ever want an apprentice, I’m your man.

    lon

  12. Anatoly Veltman on July 9, 2008 4:23 pm

    Of course everyone noticed, when DJ successfully tested March BS low on June 24, then bounced strongly June 25. SP futures traded as high as 1337.5 that day - but downtrend resumed immediately and fiercely from there. I hand-marked that level on the wall above my trading screens. When sensing a Long flyer in European trade of July 8, I noticed that my purchase price in 1237 handle was 100 full points below that pivotal marker; just as the May high of 1442 was roughly 100 handles above it!

    So preparing to reverse from Long back to Short today, on sharp 38.2% retracement (1337.5-1236.8)x .382 = 38.5 handles rally - I first got out before DOE’s (and counted my blessing when Crude “unexpectedly” drew 5 million barrels). Then, right past noon, I noticed that Crude just dropped a quick buck - but SP wasn’t able to rally above my sale price 1275; it felt heavy up there. I was still bullish Bonds, but my rules don’t allow adding on the rise (being 5 handles away from my first purchase in June!) So I decided to throw a good position down in SP, treating it as a day-trade and re-assess later; as I do have a number of other pressing ideas.

    See, I follow Open Interest figures extremely closely. In the previous life of open-outcry trading: one could track long vs. short camps via excellent pit surveillance. In the new life: our intelligence is reduced to Commitment of Traders report, released 3.30pm Fridays. Its greatest flaw is being 3-sessions dated - thus often decidedly outdated! The only way to mitigate is to extrapolate O.I. vs price moves on daily basis. It is only one-third session late from CBOT, and about two-thirds session late from NYMEX.

    Crude’s 10% O.I. decline over the past month, during 130’s->140’s advance in-validated price up-trend. Ultimately, we are not in business of buying high and selling low. We got an obscene edge to short the unheard of $145 WTI (a price 10% higher than the previous highest ever) - with the knowledge that 10% of shorts have just thrown in the towel.

    CL O.I. has actually bounced back up by 1.5% during bearish rout Mon/Tue! C.O.T. breakdown of last week’s rally, leading to $145.85 record: showed Commercials reducing length, Funds shorting and Small Specs going Long. Remember that Commercials tend to execute their trades more calmly - and do not immediately move price! We must now assume that it was Funds aggresively hitting bids this week, entering new Shorts. Conclusion: Crude right here is balancing precariously between Small Spec sell-stops (under horizontal $131 support line) and Fund buy-stops (over $140, where their new winner were start turning loser).

    In recent months, Funds have favored products over crude length. Fund gasoline holdings are especially worrysome: 70,000 longs vs 10,000 shorts! Not so with Crude, where Funds appear to be rolling out of net Long toward net Short. And Fund Natural Gas short has just expanded to new record! My strategy: look to buy NG (possibly as soon as tomorrow, in conjuction with the weekly EIA report) - but you need the O.I. figure to confirm at least partial exit of hapless Small Spec Longs first! My position has to replace their’s, just in time to capitalize on weekend hurricane track worries!

    I’ve been looking to buy Copper on sharp break, as O.I. tended to lead price a few times this year (look at mind-boggling buy signals 1/22/08 and 6/12/08, sell signal of 4/29/08!). The way bids were aggressively hit this week indicated new Fund shorting. Followed by O.I. drop news today, apparently signalling Small Spec Long capitulation. I’m playing fast and furious reversal here!

    Grain contracts have been screaming SHORT ME: price behaved like it knew no upside limits - while O.I. has been dropping across the board three weeks straight!

    Finally: Treasury futures. I put out major buy signal right at mid-June lows, as O.I. indicated two-week-long Spec liquidation. We were buying ultimate bargain, at the time when those contracts just lost their last supporters. As such, we knew that position had tremendous pay-off potential! But as Treasury contracts will soon rapidly approach the other side of the trading range, and O.I. has never materially picked-up - we’ll be looking to exit Longs this week and look for Short signals.

  13. Anatoly Veltman on July 10, 2008 12:24 pm

    I used the rumor that PIMCO was pulling deposits out of Lehman to cover SP on approach of contract low. I’m also fasing out of Long Treasuries.

    Natural Gas drop following EIA release allowed us into Long near $11.90; planning to concentrate on this position that has objective near $13.61 contract high. Open Interest reduced second-straight day of the drop - an indication of lessened “company” for us with this risky falling knife entry.

    Copper gave us two dips to buy: Wed during US and Thu during London. We’re still waiting for Open Interest set-up to confirm; thus we play fast and furious reversals in Copper, getting out nimbly. We do expect to enter Long for position play, as soon as O.I. and inter-market picture is clear.

    Crude O.I. stays recovery during price consolidation. This bodes better for stops above $140 to go first, before stops below $131 are triggered…

  14. Anatoly Veltman on July 10, 2008 1:36 pm

    Long Copper again, as it gave us a dip below 3.70 near US close. To re-iterate: Open Interest and Commitment of Traders composition is most bullish in HG, out of all metals. We’re also heartened by improving showing in FCX and AA today

  15. Anatoly Veltman on July 10, 2008 2:50 pm

    It’s interesting that running of buy-stops in Crude was orchestrated just close enough to official 2.30pm settlement - to register an overnight headline of “Oil jumps $5 in NY!”. As such, a vicious inter-market circle has been set in motion - where equity investors around the world will shun the prospect of waking up Monday to another “Bear Stearns” unraveling…

    So, following blistering short-cover with an hour to go in US stock market - do remember what they did to Crude with less than half-hour to go!

  16. Anatoly Veltman on July 11, 2008 5:42 am

    Like shooting fish in a barrel… Energies, metals, S&P: oy-way!

  17. Anatoly Veltman on July 11, 2008 9:35 am

    Off-the lows: Paulson to make statement “shortly”; another chance to get in. Some things never change

  18. Greg Vinately on July 11, 2008 11:37 am

    “Like shooting fish in a barrel…”

    No,really?!

  19. Anatoly Veltman on July 11, 2008 12:35 pm

    Open Interest laid out clearly today: only liquid Energies and Gold gained O.I. on Thursday's huge advances, thus placing shorts into very deep trouble on additional rally early today. Natural Gas and all other metals lost O.I., indicating that some of the shorts did cover Thursday… Same with Treasuries: no amount of stocks worries attracted any new Treasury positions! Clearly, participants realize that any lender bail-out will require new supply of paper — and curtail their bullish sentiment. Surely worked for me: I got out of my last longs this morning!

  20. Anatoly Veltman on July 11, 2008 2:03 pm

    S&P upside run from 1225.5 low toward day’s highs will scare-off a good number of shorts. Those who have not covered low - will cover high. We’re planning to re-establish short up there. There is no reason to believe that Short trade is over…

  21. acetrader on July 11, 2008 2:44 pm

    wait, what? SQUEEZE!!!

  22. Anatoly Veltman on July 11, 2008 3:07 pm

    This has been an enormously profitable week, averaging 100% return on margin every day! And the main theme, beside the solid intermediate trend framework - was agility. Summer markets make more runs “of no consequence”. They allow you much more advantageous entry - and you get a lot more mileage out of every trade. All you need to do - it is to be prepared 24 hours, and move in and out, keeping in mind your main biases. So as E-mini made its straight run from pit low of 1225.5 toward day’s high on Bush/Fed/Cramer - the likelihood was: this was not the last trade to do today! There is no reason to believe that Short trade in equities is over; whether it resumes today or next week…

  23. Anatoly Veltman on July 12, 2008 11:12 am

    Commitment of Traders (C.O.T.) report for all futures was released Fri, right before stock market close. I didn’t notice any divergence signals; except that Commercials still shorted SP on decline, at the expense of SmallSpecs increasing their NetLong.

    To re-iterate, C.O.T.’s flaw is “being 3-sessions late”. From Tue settle, SP dropped 1274->1240; Commercials (whose function is, customarily, to offer above and to bid below) most likely finally covered some, while SmallSpecs might have capitulated some… These interim assumptions are very difficult in (quarterly cash-settled!) stock index futures, where Open Interest (O.I.) structurally grows the entire quarter - no matter what…

    An example of successful extrapolation of “commitment” out of daily O.I. was last week. I explained July9: “CL O.I. has actually bounced back up by 1.5% during bearish rout Mon/Tue! C.O.T. breakdown of last week’s rally, leading to $145.85 record: showed Commercials reducing length, Funds shorting and SmallSpecs going Long. Remember that Commercials tend to execute their trades more calmly - and do not immediately move price! We must now assume that it was Funds aggressively hitting bids this week, entering new Shorts.” “In recent months, Funds have favored products over crude length. Fund gasoline holdings are especially worrisome: 70,000 longs vs 10,000 shorts! Not so with Crude, where Funds appear to be rolling out of net Long toward net Short. And Fund Natural Gas short has just expanded to new record! My strategy: look to buy NG (possibly as soon as tomorrow, in conjunction with the weekly EIA report) - but you need the O.I. figure to confirm at least partial exit of hapless SmallSpec Longs first! My position has to replace their’s”

    I went further July10: “Crude O.I. stays recovery during price consolidation. This bodes better for stops above $140 to go first, before stops below $131 are triggered…”

    CFTC figures (just released) contained exactly that! From 7/1 settle to 7/8 settle, CL dropped $140->$136. Fund position changed: from NetLong 22,000->NetLong 7,000. RB dropped $3.51->$3.36. Fund position changed: from NetLong 60,000->NetLong 49,000. NG dropped $13.50->12.37. SmallSpec position changed: from NetLong 53,000->NetLong 40,000. My assumptions have been proven correct by hindsight CFTC report! More important: on the day made - those assumptions let me into profitable Long in both CL and NG (two markets with very different current commitment profiles!)

  24. Anatoly Veltman on July 15, 2008 5:18 am

    Deaf ear to bottom-pickers: we are faced with Black Tuesday, or Wednesday, or Thursday, or Friday.

    I anticipate that markets leaders (SP & Crude) will remain very newsworthy through the week. Also: currencies, Treasuries and metals will get volatile sooner, rather than later. What I mean here: they haven't done much in over a quarter's time period - and horizontal markets tend to eventually break-out in vertical fashion. That may be unfortunate for most readers - as most trading career losses result from missed opportunities. By the time, when most leveraged and sure opportunities arise - majority are either already out of the action, or not yet set-up to act in size. Remember George Soros: "It's not whether you're right or wrong. It's all about how much you have on, when you're right!"

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