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Pre-Crash Warning


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#1 wndysrf

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Posted 04 April 2003 - 04:35 PM

Mark’s Market Commentary – April 4, 2003

Los Angeles continues to attract throngs of young girls from Arizona State. They receive heaps of adoration from the young males on campus, and are now ready to leverage their personal appearance for financial gain in Tinsel Town.

Unfortunately, they find that the men in Los Angeles are different. Initially, they pile on the gifts and praise on these unsuspecting girls, and the girls end up gladly performing the necessary acts. Only later to find out that they have been pumped and dumped by hordes of serial dating players, roaming the clubs like Wildebeasts, never to be heard from again.

After several rounds of this activity, the girls usually high tail it back home to Arizona, their mental state in a body bag, and end up having to visit all kinds of shrinks and therapists to restore their self esteem.

The retired Raytheon purchasing agents who attend the Commodity Robot Daytrading Seminar in Tempe, Arizona are no different. After seeing fantastic profits on demo tapes, and scoring big time on paper simulations, they are ready to get rich by using these newfound systems in real time with real money. They crank up the WiseTrade HeatMap and start piling on big positions, hoping to score big time. Unfortunately, they end up running into a buzz saw of Matrix Manipulation. An Alice in Wonderland Rabbit Hole that whipsaws their accounts into oblivion. When they have lost all of their money, they close their accounts and retreat to the Retirement Center, hoping to win $5 at the Bingo game, their egos sent away in a body bag.

Pre-Crash Hysteria is building up steam. The widening disconnect between stock values and economic data. The increased Animal Planet Herd mentality. Traders, white with fear, scared of missing the next bull market. Millions of eyeballs and black boxes, gaming stocks, commodities, treasuries, and currencies, such that the entire globe is now moving in lockstep. Not moving based on fundamentals, but moving based on the latest war rumor. And which ever way the rumor stream goes, the momentum traders engage in 5-minute candle motion chasing.

Traders perceive that “the fix” is in. All leveraged speculators now know about the FEED FLOOR. Knowledge that Greenspan will not allow the markets to tank. Therefore, what little cash is left is leveraged with willing bank lenders to create monster sized long positions in preparation for the big move over the 200-day.

Note that TrimTabs reported small mutual fund outflows last week. The Hans Hans Hans Hans Brinker Lemmings resulted in a $3 billion inflow the week before, which is far short of the $23 billion in inflows during last year’s March Madness. No real selling has hit the market yet. Redemptions remain a trickle. Note how many companies are cutting back 401(k) matching, or canceling plans altogether. That means The Matrix is getting less reliable “buy and hope” money, and is becoming more dependent upon “hot money” created out of thin air from endless securtizations and round tripping of debt.

Sideline cash is becoming less stable, as a higher percentage of cash circulating inside the Atomic Particle Accelerator is speculative airball pro-forma money dependent upon the maintenance of promises, risk model outcomes, and sustenance from Al Green’s Repo Blasts. Trading blunders, cash calls, and evaporation of wealth from debt wipeouts are being masked by hot money being mainlined into the Accelerator.

A big move up from here in stocks is likely to result in immediate exhaustion. Any technical traders who are left on the sidelines “waiting for confirmation” will all jump in once the line is crossed. All shorts will cover. After that, there may be no more buyers.

Contrast that with the real bull market in tech stocks back in the early 1990’s, where the primary motivator was fear. Fear of losing profits. Fear of overvaluation and overextension. Leery of “New Era” myths. When new highs were reached, investors were selling into it, raising cash, not loading up with leverage.

Justin LaHart reports from CNN, highlighting the recent Animal Planet Trading:

One moment the war is going poorly, sending cash pouring into safe-haven assets, like government bonds and gold, jacking the price of oil higher, hammering stocks and the U.S. dollar. The next, the war is going well again, and all these "war trades" that have been put on get suddenly unwound. With traders running from one side of the boat to the other, one can hardly say that global markets are on an even keel.

Making matters even worse, the traders in different markets are all taking cues from one another, creating a magnifying effect on each move. Oil goes up so stocks go down so bonds go higher so oil goes up some more.

"It shows you that everything is trading-desk oriented," said Mizuho Securities USA strategist John Vail. "They tend to move in packs."

This behavior, where everything trades so cleanly with (or against) everything else, has rarely been so pronounced. The 10-year Treasury note and stocks, for instance, are negatively correlated (when stocks go up, the 10-year goes down, and vice versa) to the strongest degree of the past seven years.

"This sloshing back and forth between Treasurys and stocks happens whenever there's a panic," said Brian Reynolds, fixed income and economic strategist at Kirlin Securities.

Within the stock market, the pack-like behavior is even more pronounced. An analysis by Credit Suisse First Boston equity derivatives anal cyst Mika Toikka, shows that the degree to which stocks are moving in unison is at its highest level since the stock market crash of 1987. It's a sign, according to Toikka, that the stock market is single-mindedly focused on risk, with little regard to the fundamentals.

A quick look through recent history shows that such spikes in the correlation of individual stocks' moves with one another have often come at important stock market bottoms -- not just during the 1987 stock market crash, but during the deep market downdrafts that came with the Asian financial crisis in the fall of 1997 and the Russian debt crisis that came in the fall of 1998.

But don't start writing buy tickets just yet.

What the market drops in 1987, 1997 and 1998 have in common is not just that they were swell times to load up on stocks, but that they represented big breaks between the fundamentals and traders' perceptions. The reality was that the world, the economy and companies' earnings prospects were nowhere near as bad as Wall Street feared. When the crisis passed, the truth of the situation was hammered home, and huge snap-back rallies ensued.

But if there is a sharp break now between what traders are doing and the fundamentals of the market, thinks Merrill Lynch chief U.S. strategist Rich Bernstein, its character is different this time.

Stocks have been volatile lately, but they've mostly rallied on the perception that the war in Iraq will be over quickly, removing heaps of uncertainty from the world and ushering in a new bull market. In the past month, the S&P 500 has risen more than 5 percent.

Meantime, there have been reams of lousy economic data. Increasingly, it appears that the U.S. economy contracted in February and March, raising the possibility that the country has slid back into recession. Profits expectations are getting steadily trimmed. But these things have been ignored because everybody wants to be in the market when peace breaks out. In the past when everyone was trading in a pack, the big fear on Wall Street was losing your shirt.

"Now the overwhelming fear among portfolio managers is being left behind," said Bernstein.


………….

As for today’s market, just a bunch of motion chasing. Where ever the hot chicks were spotted, that’s where the players went. Any girls suffering from “that time of the month” blues were abandoned. At least temporarily. Some stocks went up, some went down. The broad indexes didn’t do a whole lot.

Anybody want to guess what the first line on Doug Noland’s commentary will be tonight?

“Yet another week of extraordinarily volatile and unsettled conditions in the financial markets, creating problematic issues for the derivative and hedging community.”

“Violent convulsions created by Wildcat Finance and Hypertrading continue to permeate the Global Speculative Markets.”

“Another dizzying week for the Dynamic Hedged Economy, fed by extraordinary bursts of liquidity and speculation.”

“Week 41 of the Mortgage Credit Bubble has pushed liquidity into parabolic extremes, accentuating the gross systemic imbalances in a wildly distorted and maladjusted financial system.”

“Another record week of Structured Finance, GSE growth, corporate bond issuance, and money supply growth has pushed the Credit Bubble to record heights, fueling rampant speculation in the Global Financial Markets.”

“Desperate 'no turning back' manipulation of the financial markets continues unabated, creating a vast moral hazard in an acutely fragile financial market caught up in speculative trading dynamics, increasing risk of a massive market dislocation.”

“What a week. Ballooning credit availability, imploding credit spreads, and a rally in global equities has once again staved off the collapse of the colossal and fragile debt structures supporting the maladjusted, deranged economy.”
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The Weimar Run: Bullphoria!!!!

#2 Bird D Durr

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Posted 04 April 2003 - 05:10 PM

LUCK: is a retrospective interpretation of what just happened. If you won, you were lucky; if you lost, you were unlucky. Luck lives in your rearview mirror and you can't play it forward no matter how hard you try.

Just a lesson I learned over years of speculation................It could do us all some good during these turbulent times.

Enjoy the Weakend fellow Stoolies!

-The BirdMan

#3 IrishJew

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Posted 04 April 2003 - 05:19 PM

:lol: :lol: :lol: :lol: :lol: :lol: :lol: :lol: :lol: :lol: :lol: :lol: :lol:

Mark, as an ASU alumni (just undergrad, mind you) you have no idea how right you are.

If you were into pleasures of the flesh with 2nd rate supermodels in the 18-22 year old range, then ASU is/was heaven on earth......

GO DEVILS!!!

IJ

#4 wndysrf

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Posted 04 April 2003 - 05:30 PM

Bradley Cycle Here:

Stock index not updated, but future cycle turns are graphed.

April to July looks like a doozy.

Bradley Siderograph
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#5 TheDeepBlueSea

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Posted 04 April 2003 - 05:43 PM

The article you quoted also caught my eye today. Posted it on the intra-day.
The associated chart seems to confirm your view of the trading world moving in lock-step.

Posted Image

Hard to see how this won't end badly.

#6 wndysrf

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Posted 04 April 2003 - 05:47 PM

SEBL warns.

$120 to $7 in three years.
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#7 Guest_The CoinGuy_*

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Posted 04 April 2003 - 05:47 PM

Hello Fellow Stoolizens,

Just turned on TO'B, looks like Fart's taking on Damon Vickers...makes for interesting listening. Don't agree with him, but admire his tenacity and zeal.

Doc made a stick save for me yesterday with the pre-analz, I, (like others were feeling) with the ramparama before bell we were looking for a good size ramp. Was lining up to get long(for myself, it was in a big way, for a trade). After the opening, I took a look at the candle on the first move, and it wasn't confirming the move(pre-market). So, I waited for the top(using another indicator), and shorted with leverage. Now I'm not a day-trader, but a small quick trade now and then keeps the blood flowing. Thanks to Doc, I was able to cover at the close today, for some nice coin.

Tanks DOC,

The CoinGuy

Amazingly basic chart...1 mo QQQ

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#8 Guest_The CoinGuy_*

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Posted 04 April 2003 - 05:49 PM

Stilling poking the piglets....

TCG

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#9 PileDriver

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Posted 04 April 2003 - 05:53 PM

Bradley Cycle Here:

Stock index not updated, but future cycle turns are graphed.

April to July looks like a doozy.

Bradley Siderograph

flip it upside down :lol:

If that comes to fruition remember late Jun or early July as your cover date no matter how encouraging further downside FEELS likely cuz the 100% rebound will be phenomenally fast :P

NAV up 1% today being 50/50 long & short. Bwhahahahaha!

#10 IrishJew

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Posted 04 April 2003 - 06:02 PM

SEBL remains a good short, IMO. Absolutely getting their ass handed to them by salesforce.com.

#11 Guest_jrmfl_*

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Posted 04 April 2003 - 06:04 PM

:lol: :lol: :lol: :lol: :lol: :lol: :lol: :lol: :lol: :lol: :lol: :lol: :lol:

Mark, as an ASU alumni (just undergrad, mind you) you have no idea how right you are.

If you were into pleasures of the flesh with 2nd rate supermodels in the 18-22 year old range, then ASU is/was heaven on earth......

GO DEVILS!!!

IJ

sundevil as well 1986. whoo hoo! sure miss the dash inn... B)

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Posted 04 April 2003 - 06:11 PM

looks like Commercial S&P net long first time in 3 years

look out above

#13 lb

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Posted 04 April 2003 - 06:14 PM

Pre-Crash Warning, what a pleasant title.

Yes, “The widening disconnect between stock values and economic data” is burnt in to my brain. The war has a major effect on what we are seeing but the markets were showing this disconnect way before the bombing began. We are still trading on HOPE and trust and the war only amplifies those emotions.

Thanks for the column Mark.

#14 Charmin

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Posted 04 April 2003 - 06:16 PM

well, you could look at HUI this way - and if Mr. Bradley Turn is correct and the broads slide down into the end of April now would be a good time for HUI to do some work back up to the 200 day moving average.

Bradley turns

Posted Image
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#15 The End

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Posted 04 April 2003 - 06:17 PM

looks like Commercial S&P net long first time in 3 years

look out above

The where net long as of LAST tuesday.

I'm Out, for now. Need a weekend without the market.

Have a great weak- end stoolies. B)
NONE of what I type, should be taken as financial advice.

And when you loose control, you'll reap the harvest that you've sown
And as the fear grows, the bad blood slows and turns to stone
And it's too late to loose the weight you used to need to throw around
So have a good drown, as you go down, alone
Dragged down by the stone.


--Waters





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