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Another Weak End


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#61 rayok

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Posted 28 March 2003 - 08:47 PM

A song for the tech longs out there. :P Ring Of Fire
Written by June Carter and Merle Kilgore
Recorded by Johnny Cash on 3/25/63
Love Is A Burning Thing
And It Makes A Fiery Ring
Bound By Wild Desire
I Fell Into A Ring Of Fire

CHORUS:
I Fell Into A Burning Ring Of Fire
I Went Down, Down, Down
And The Flames Went Higher

And It Burns, Burns, Burns
The Ring Of Fire
The Ring Of Fire

I Fell Into A Burning Ring Of Fire
I Went Down, Down, Down
And The Flames Went Higher

And It Burns, Burns, Burns
The Ring Of Fire
The Ring Of Fire

The Taste Of Love Is Sweet
When Hearts Like Ours Meet
I Fell For You Like A Child
Oh, But The Fire Went Wild

CHORUS
I Fell Into A Burning Ring Of Fire
I Went Down, Down, Down
And The Flames Went Higher

And It Burns, Burns, Burns
The Ring Of Fire
The Ring Of Fire

I Fell Into A Burning Ring Of Fire
I Went Down, Down, Down
And The Flames Went Higher

And It Burns, Burns, Burns
The Ring Of Fire
The Ring Of Fire

And It Burns, Burns, Burns

The Ring Of Fire

The Ring Of Fire

#62 DrStool

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Posted 28 March 2003 - 08:53 PM

In last Weak End's Anals, I wrote about the COT and what it means. This weeks COTreport confirms what I speculated would happen. The commercial hedgers went net long. This is EXTREMELY BEARISH for the intermediate term. The last time the commercials were net long at this level was the weeks of March 13-21 of 2000, at the EXACT TOP of the bull market.

From last Weak End Anals 3/20/03:

After three years of a bear market, short positions and hedges build up to a level that creates an artificial, but nevertheless real and severe, shortage of stocks. To put it simply, there are too many shorts, and too little stock for sale to meet the demand to cover.  This condition is made worse by the myriad of derivatives available today that were not available in the past. The level of "dynamic hedging" today is unprecedented. This includes massive selling of calls against stock positions, and a spectrum of wild cross hedging strategies, which create an explosive tinder box when things start to go the other way.

Wednesday a week ago, the Bank of Japan intervened in the currency markets in an action designed to suppress the yen. They bought dollars. The media reported that a number of hedge funds got caught in the "war trade." They were short dollars and stocks, long gold and bonds, and were highly leveraged.  Reuters reported on March 20: 

Before the first shot was even fired in Iraq, a handful of hedge funds lost hundreds of millions of dollars when markets turned against them on hopes the fighting would end quickly. So-called commodity trading advisors, or CTAs, who rely on computer models to track long-term trends, were hurt badly when stocks and the dollar suddenly swung around and raced higher. Some of these funds recorded declines of as much as 25 percent in five days, sources familiar with their trading said.  ‘For many CTAs, this was the perfect storm,’ said Philippe Bonnefoy, head of alternative investment strategies at Commerzbank Securities. ‘Most of the CTAs suffered double-digit reversals because all of the trends changed in one fell swoop, in one day, in fact." (End of Reuters snip)

That set off the chain reaction disaster (for bears) that we are currently in the middle of. Last week, was, of course, scam week, when options and fucutures expire. Until last week, the CFTC had reported that commercial hedgers had near record levels of short positions for several weeks. What most stoolies fail to recognize is that the "Commercials" are not merely the biggest players in the markets, in order to be classified as "Commercials", they must be hedgers, just like a pig farmer who hedges his pigs in the pork bellies markets. 

While pig farmers may be the "smart money" in the pork belly market, commercial hedgers of stock index futures are simply big dumbass institutions, playing not with their own little piggies, but yours. The commercial short positions reached record levels because the big dumbass institutions, instead of selling their stocks throughout the bear market as they did in the past, steadily increased their hedging by selling index futures and individual stock and index options.  Instead of creating real liquidity by selling their stocks, they created artificial shortage by pledging them against these hedges.  

While Doc saw these conditions building, and alluded to the possibility of a big rally a few times, he awakened to the full implications of them, a day late and a dollar short. We live and learn. There were plenty of indications that a low was in with cmaps being hit and the 10-13 week cycle indicators rising. Doc expected a trading range to develop, instead of the monster that we are in the midst of. It's a trading range alright. The only problem is that it's 150 points wide. Live and learn. 

This current Commitment of Traders report through March 18 shows that the net short positions of commercial traders has declined precipitously, and was at the lowest level in nearly 3 years and is barely net short. Considering the action of the last 3 days, it is even lower now, than it was on Wednesday, when the COT was filed. Obviously they were covering their hedges. At the same time, they were buying in stock to deliver against their covered calls. It was, in effect, the perfect storm, the equivalent of shock and awe in the markets.

Posted Image

(Chart Courtesy of VTO Report)

Now that a whole bunch of the bigger hedge players have gotten blown out, and the dumbass  institutions have bought in their short fucutures, and/or bought stock to deliver against their calls and fucutures, the markets can get back to business. Monday is going to be an interesting day. Will it gap down and never look back? The indicators don't suggest it, but with the hedges unwound, where will the demand come from?  Will Joe Sixpack take the handoff? Probably not. More likely, a short term top will begin to form here.


Well that's about what happened, and that top is starting to look like more than just a short term top.


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#63 Oilman

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Posted 28 March 2003 - 09:00 PM

In the short run it is just noise, just don't leverage yourself for a fall in the short run. Remember that the long trend is still down regardless of the war, ppt, terrorists, etc. Listen and learn from the stoolies here and first and fore most protect your capital at all cost.

Today was a very good day for most of us as we made some coin. I expect next week to be down as we are mostly closing moving down--weak close.

Oilman B)

#64 longOnUranus

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Posted 28 March 2003 - 09:08 PM

tig 'ole - I know this is very, very anal-retentive of me, but HUI/GOLD ratio chart should probably be linear instead of log (ratios are non-linear anyway).

I don't know why it couldn't be log, but just doesn't seem right... :blink:

I am truly amazed this market hasn't fallen through the floor. This world is ten seconds 'till midnight. The "run for the exits" will be true in every sense of the phrase.

#65 GregFokker

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Posted 28 March 2003 - 09:12 PM

tig 'ole - I know this is very, very anal-retentive of me, but HUI/GOLD ratio chart should probably be linear instead of log (ratios are non-linear anyway).

I don't know why it couldn't be log, but just doesn't seem right... :blink:

I am truly amazed this market hasn't fallen through the floor. This world is ten seconds 'till midnight. The "run for the exits" will be true in every sense of the phrase.

True. It feels as if everyone's really dragging out that very last haul of that very last bit of tobacco before hitting the filter of that last smoke even as the firing squad takes aim...

...A declining spenglerian carnival of Colossaalism united with Inflation where the numbers one through 10 are forever banished as worthless arithmetical detritus from a bygone age... - Beardrech

Naturally we believe the govt numbers... and Boobus Americanus sleepwalks off the edge of the energy-crisis cliff clutching his shares of "Crisco", Yoohoo and GooGah munching on his Yum Yums and Ho Hos. Future historians will have a hell of a time figuring out what the hell Americanus neanderthalus was thinking and exactly what brought on his sudden demise... - Henny Penny

Well, good night everyone. I gotta go lube up for tomorrow's regular end-of-week Gold Slapdown and Stock Index Bear Punishment Rally Weekend Greenprint. ...Probably another Shock-and-Awe Gap-Up-Open and Wire-to-Wire Meltup Runaway Bull Charge Mo-Mo Spike to Fresh New All-Time Lifetime Highs, culminating in a 4:15 yelping scalded dog runoff with panic short-covering and legal not-held bad double fills due to fast market conditions, plus quote system freeze-ups and trading platform lock-outs along the way. *yawn* typical gov't Friday. - Shorty


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Posted 28 March 2003 - 09:13 PM

DeepBlueSea I think you were asking about this?

"Investors will want to know if the World Gold Council will participate in the development of gold funds similar to the one that debuted this week in Australia.

The open-end fund trades like a stock on the Australian Stock Exchange. Because it is backed by real gold stored in a London vault and trades in real time, the down-under product, called Gold Bullion Securities (AU:GOLD: news, chart, profile), may be the first exchange-traded fund of a commodity.

Each share of the new fund, which began trading Friday, is entitled to one tenth of one fine troy ounce of gold."

Full article http://cbs.marketwat.....}&siteid=mktw

#67 Tig 'Ol Bitties

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Posted 28 March 2003 - 09:15 PM

tig 'ole - I know this is very, very anal-retentive of me, but HUI/GOLD ratio chart should probably be linear instead of log (ratios are non-linear anyway).

I don't know why it couldn't be log, but just doesn't seem right... :blink:

LOU,

I agree with you, just threw that one up without looking (default).

I appreciate your anal retentiveness! :P

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Posted 28 March 2003 - 09:32 PM

Just caught Kudlow. Saw him after the close with Maria as well. I think he is heading for a personal crash. Expect to see him back in rehab within the next six months.

#69 Dustbowl

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Posted 28 March 2003 - 09:44 PM

Mousey: Darn it, I missed Krudlow. Really wanted to see him squirm tonight. Did he give many of those low groans under his breath while agreeing with his guest or was he he in arrogant indignation mode? He is a piece of major dung.

#70 BAREister

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Posted 28 March 2003 - 09:55 PM

Look, the marker is down. We've got Bhudda and Wyndy rappin' about some horrific liquidity injection.
We've got SG and UDDERS including Oyster projectin' some major ramp in the coming daze or weeks.

If EVER there was a time FUR this bear to jerk the rug out FURom under ALL this TA buzz, itz NOW.

We've got HRFF ass BEARISH ass EVER and sayin he don't think we're goin' to get ANYTHING of ANY consequence to the UPside unless and until we start prevailing in this simply catASStrophic MISS>adventure in Iraq.

The BARE is wryly amuzed. This morASS of a war is going to DESTROY Mr. Bush and the Republican Party FUR ass FUR ass the eye can c. They are already beginning to wriggle like a fish on a HOOK.

Edited by DrStool, 28 March 2003 - 11:40 PM.

"The sphinx set riddles for people which they could not solve and the sphinx devoured them." Russian poet Ilia Ehrenberg reflecting years later upon the debacle of the Bolshevik Revolution and civil war

"In any case, experience shows people are unlikely to change their ways without a cataclysm of existential proportions" Meinhard Meigel, German economist and demography expert on his prophecy of a Wagnerian abyss of social and economic chaos

"We believe that here is no easy way out of this mess, and that the chance of a benign outcome, while hopefully possible, is quite low." Comstock Partners 3-17-2005

"Not without a shudder may the human hand reach into the mysterious urn of destiny." Junk email promoting the sale of Valium, Viagra, Soma and Cialis. Of course, we AMERICANS need not WORRY about such CLAPTRAP!!!

"The trouble about myths, or lies, is that those who foster them are stuck with them." Edward Crankshaw

"I don't buy the idea that a crash will come without warning. There are always warnings. All crashes have certain common technical preconditions." Doc (snorjt)

"YOU look IMPORTANT. Are you important, or just....WEIRD?"
"Bob I am" at a political gathering, to HRFF, 9-29-04

"Are YOU C.I.A.???"
"No, I'm not "CIA"."
"Well, you sure LOOK LIKE you're C.I.A.!!!"

Lead singer of the rock band KISS to HRFF at a luggage carousel at SeaTac airport circa 1996

"Unlike you, I use words people can understand." Doc

"America at the moment, with its faith-based currency, faith-based economy and faith-based government, might be a heaven for those who love faith, but it's a hell for those of us that respect evidence." The Daily (W?)Reckoning, circa 9-17-04

"What should be clear at this point is that even huge fiscal stimulus and unprecedented financial excess are incapable of fostering a sound and self-sustaining economic expansion. The paramount issue, today and going forward, is the deeply maladjusted U.S. economy and its increasing unresponsiveness to even enormous yet misdirected financial stimulus. Both the Financial Sphere and Economic Sphere are severely maladjusted." Doug Noland's Credit Bubble Bulletin, Aug 24 '04

"U.S. dollar purchasing power relies almost entirely on the difference between interest rates in Japan and the higher rates in the United States." Warren Pollock, Prudent Bear essay circa 9-04

"What about your replacements? the Children. What do we tell them when the whole thing caves in?" HyperTiger

#71 GregFokker

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Posted 28 March 2003 - 10:19 PM

Fokker heard on Vermont Public Radio that Shrub's administration has set a record for the greatest number of classified documents in their first year in office- over 20 million secrets in their first year alone.

...A declining spenglerian carnival of Colossaalism united with Inflation where the numbers one through 10 are forever banished as worthless arithmetical detritus from a bygone age... - Beardrech

Naturally we believe the govt numbers... and Boobus Americanus sleepwalks off the edge of the energy-crisis cliff clutching his shares of "Crisco", Yoohoo and GooGah munching on his Yum Yums and Ho Hos. Future historians will have a hell of a time figuring out what the hell Americanus neanderthalus was thinking and exactly what brought on his sudden demise... - Henny Penny

Well, good night everyone. I gotta go lube up for tomorrow's regular end-of-week Gold Slapdown and Stock Index Bear Punishment Rally Weekend Greenprint. ...Probably another Shock-and-Awe Gap-Up-Open and Wire-to-Wire Meltup Runaway Bull Charge Mo-Mo Spike to Fresh New All-Time Lifetime Highs, culminating in a 4:15 yelping scalded dog runoff with panic short-covering and legal not-held bad double fills due to fast market conditions, plus quote system freeze-ups and trading platform lock-outs along the way. *yawn* typical gov't Friday. - Shorty


#72 mjkst27

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Posted 28 March 2003 - 10:22 PM

Fokker heard on Vermont Public Radio that Shrub's administration has set a record for the greatest number of classified documents in their first year in office- over 20 million secrets in their first year alone.

Obviously a subversive radio program. Please disregard.

#73 maximummark

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Posted 28 March 2003 - 10:22 PM

Figuring approximately 43 days till 10 Sigma, and rising recognition to a market terminal -4 days out...PM is front-running and they will exit early for conversion to guns and butter, so don't even reach for that last dollar...PPT will keep the market afloat in an accelerating ebb tide...far North American/Canadian plays have an advantage over South African and South American in that they largely survive...Kitco has a share program for physical...all ramps are shorting opportunities...Bush confused me by proceeding, but half heartedly, and the war will languish until it becomes irrelevant...

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Posted 28 March 2003 - 10:23 PM

Just caught Kudlow. Saw him after the close with Maria as well. I think he is heading for a personal crash. Expect to see him back in rehab within the next six months.

AH YEP, that guy is going to pop a cork. I hope it is on screen. Then it's off to Happy Acres for a rest. I can't watch them. Too weird and twisted.

#75 Dustbowl

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Posted 28 March 2003 - 10:25 PM

FOKKER: That is probably true. I believe he has blocked by executive Order the planned release of thousands of previously classified documents. Gotta keep the sheeple, well...sheeple. I use the term FOKKER now when I used to use the other widely used term. My friends during a round of golf are puzzled to hear me say: nice shot FOKKER!!! LOL





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