IDS World Markets Thurs 20th September 07

[Cassiopeia]

Holy Shizzle. Can the bond market close fast enough.

[Jimi]

Bear Wishful Thinking event number 2 ..HGX takes out Fed announcement low

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Yup.

 

Clearly, housing stocks are foreshadowing the Great Inflation that Linus is always talking about in the Weimar patch.

[crazy_ate]

Score another one for the morAn

 

My putz are up 50% in 24 hours......not too shabby

 

[linrom]

I'm staying with partial long BRIC exposure (Brazil, Russia, India, China).  First of all because of the price action, and secondly, because there is a decent chance that Korea will be taken out of the FTSE EM Index and upgraded to the Developed Market Index.  The "rejiggering" of all that slosh of EM funds would boost BRIC exposure for sure...

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I certainly can't fault anyone for continuing to ride the Submerging Market buckin' bronco. Since the August lows, the submergings are clearly the lead ponies, as they have been for the past five years.

 

One look at the chart of "Program Trading as a Pct of Weekly NYSE Volume" gives you a clue as to what is happening. The Basket Trade Boyz---the ETFs and the hedgies who love them---have represented an increasing share of market volume for the past eight years. At the top in 2000, program trading comprised about 15% of market volume. Since the August 2007 lows, this number has now skyrocketed to over 90%.

 

Nowhere is this phenomenon more clear than in the submerging market etfs where the group moves in lockstep.

 

Take a look at the percentage gains since the August 2007 lows:

 

Brazil (EWZ): +50%

China (FXI): +50%

 

Emerging (EEM): +31%

Australia (EWA): +29%

Korea (EWY): +29%

Singapore (EWS): +29%

India (INP): +29%

 

Malaysia (EWM): +23%

Mexico (EWW): +21%

Taiwan (EWT): +21%

 

Interesting how Brazil and China are both exactly 50%. And how Australia, Korea, Singapore and India are all exactly 29%. Not 27% or 30%, but exactly 29%.

 

Is this just some curious coincidence? Don't think so.

 

This shows that, funnymentals aside, the submerging market plays have become the #1 trading sardines for the basket-trade, momentum crowd. And it will keep working until it doesn't.

 

Since it has become the top choice (along with China) of the mo-mo brigade, a quick look at the Brazil etf (EWZ) is instructive.

 

Note that EWZ sold off -35% in 2004 and -35% in 2006. The program trading boyz were so eager to jump on EWZ during the August selloff that they couldn't wait for the requisite -35% this time and bonered EWZ up after it dumped "only" -34%. LOL.

 

But what has happened since the Aug low is even more instructive. Note that it took EWZ 21 weeks in 2004 to recover its high once the low was in. It took 16 weeks in 2005. And it took 30 weeks in 2006. How long has it taken this time? Just 6 weeks. Now that's fast work.

 

Strikes me that the patterns have become so obvious, and the belief that all dip-buying will be rewarded, that the submerging-market dipsters are even more frenetically chasing these plays than they have been over the past few years. And that's saying something, considering the moves they have already had.

 

When I look at these emerging market etfs, and the action since the August lows, they are beginning to give off that "REIT, circa 2006" smell. Back in the 4Q of 2006, I felt that the REITs would be among the worst-performing sectors for 2007 since the charts were beginning to give off that "desperate dip-buying" vibe. I see the same thing today with submerging.

 

Of course, the REITs kept rallying all the way into Feb 2007, so the submerging ETFs may do the same. We'll have to see. But it would be absolutely no surprise to me if 2008 were to see the longest, deepest selloff in the submerging group than we've seen in the past five years. Not necessarily the beginning of a bear market, but perhaps a well-earned siesta.

 

The basket trade boyz, who now make up the lion's share of daily volume, won't be chasing the submerging plays if/when the trend breaks down. That's what we've seen with the REITs this year which sold off steadily from February to August---the longest, deepest selloff since 2000.

 

No guarantees this will happen with submerging. But something to keep an eye on as the submerging plays ramp ever higher this fall.

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Very prescient post---when the Roman Empire fell, the rest of the world went into dark ages. Boy, they always expect "this time is different" result. It must not be a part of the hypothalamus system, they can't learn.

[crazy_ate]

First time the morAn has used TWM.....working out nicely.....in yesterday at 63.77

 

 

[Speakeasy]

Is this good?

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I had orders out for 3 different put contracts and it ran clean away from me on 'em all.

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You need a better broker. This guy always gets fills on his orders for contracts.

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Naw, my guy is a bit slipshod on price but he makes me laugh.

[Whadda I Do Whadda I Do]

If that's a head n' shoulders on the LT $ chart then inverted 50 seems doable.

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I have it targeting 39. 121 peak, neck at 80.

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Pessimist!

[Sudaca]

Of course, there is always the possibility that you'll get this reponse:

[crazy_ate]

TMA doesn't want to "give it up"......but it will.....patience grasshopper

 

 

[I_Am_Madness]

Citicorpse getting back to the post Fed cut announcement.

[crazy_ate]

wants to go to $1,000....

 

wants to go to $100....

 

Which one will win?

[potatohead]

WSJ: Fed Study: Dollar s Impact On Prices In US Is Muted

 

 

By Greg Ip

 

Of THE WALL STREET JOURNAL

 

A new Federal Reserve study suggests foreign companies that export to the

U.S. tend to lower their prices when their local currency rises against the

dollar.

[crazy_ate]

The markets down today?

 

No way......BWAHAHAAHAHA

[Whadda I Do Whadda I Do]

I'm not very good at this day trading thing (doesn't help that I slept through the opening) but I did a market buy of ABX last night while watching spot gold and sold for a $1 gain per share, missing the highs now, oh well.

 

Added some DXD for the fun of it.

[Peek Paper]

Paulson at Mission Control defending the Gap at all costs ...