Posts Tagged ‘Stock Options Market’

The US Mid-Term elections are over.  The Cartel (Fed) QE2 (Quantitative Easing i.e. creating counterfeit (out of nothing) money) is now established.  Tomorrow the “Employment” numbers are coming.

The elections cost $4 billion dollars.  When you spend that kind of money to buy an election you owe somebody something and it is not the regular US taxpayer.

Here is what the Gold and Silver, as represented by their respective ETFs did after the Fed’s announcement:

Notice the huge jump?  It tells us that market participants are hedging against a falling US dollar and against an upcoming inflation which usually follows these kind of actions, namely artificially inflating (increasing) the money in circulation via counterfeiting actions.  As I mentioned last week, Germany did that and eventually the German Mark became worthless.  People used it to start their fireplaces, that is how low value it had.

Take a look at the chart comparing the US dollar and Gold during the past 6 months:

Let’s see how the market is reacting so far, keeping in mind that many times the market (controlled by institutions) will react one way just before it reverses itself.  Here is the market, as represented by the SPY, which also jumped up:

Why it is up like that? Unlike the GLD and SLV, there is no real fundamental reason for it, UNLESS of course the Fed action is nothing more than to prop up the banks and Wall Street firms, who in turn prop up the market at the expense of the individual American tax payers who foot most of the bill, since this QE2  is nothing more than the US Treasury (runs by a former Fed executive; remember that prior to the current one, a former Goldman Sachs executive was running it) borrowing this money from the Cartel.

Now watch the “magic” (scam is more like it) unfolds:  The Cartel creates the funds  for the loan out of nothing (called counterfeiting). The Treasury (tax payers) then have to PAY INTEREST on this counterfeit loan on top of having to repay the loan itself.  The Fed is  SECURING (getting a collateral) this loan with REAL Treasury Bonds which legally COMMITS tax payers to pay for it. Treasury Bonds are nothing more than a PROMISE made by politicians ON OUR BEHALF.  I do not trust politicians to make promises on my behalf (see quote below), how about you?

Unless we are extremely short term traders (which we are not) getting into options and/or stock trades at this moment is too risky in my opinion.  Let’s see how the markets settle in the next few days after the knee jerk reactions and in my humble opinion a manipulation by the Cartel members and their friends.  After all, they carry no risk:  They make billions, and if they fail they get bailed out (as we see once again in QE2) by the American people who shoulder all the risk, REGARDLESS which party is in control.

Once again, when you spend $4 billion dollars to buy an election you owe something to somebody.

The second week of the November 2010 options’ month is over.

Here is the week and month summary

Market Summary

As you can see above, the market went nowhere during the past week and very little during the past two weeks. The average daily range is down to 12, meaning it is tightening, which I eluded to last week.

I think that Wall Street is waiting for the Cartel (Fed) to officially announce their QE2 (Quantitative Easing), which I think is a forgone conclusion.  QE is nothing but a Double Speak for creating billions more dollars out of nothing.  When Germany did exactly the same thing in the late 20s and early 30s (the words Quantitative Easing were not invented yet in that scenario) eventually the German Mark became worthless.

The other thing we are all waiting for is the Mid Term US elections on Tuesday, Nov 2, 1010.  I think that it is also a forgone conclusion as far as the Congress goes and may even tilt the balance in the Senate.  By the way, over $2 billion ($2,000,000,000) were spent to buy these elections.  When you spend that kind of money you owe something to somebody (the donors, lobbyists etc.) which of course leaves out the average American out in the cold.

So the real question is what the market will do after these two events pass?

Here are some links to articles.  While reading these keep in mind the quote and slogan below.

http://finance.yahoo.com/news/5-Reasons-Americans-Are-So-atlantic-870082825.html?x=0&sec=topStories&pos=3&asset=&ccode=

http://finance.yahoo.com/news/Poll-Americans-Dont-Know-bloomberg-2909319248.html?x=0&sec=topStories&pos=8&asset=&ccode=

http://finance.yahoo.com/tech-ticker/poised-for-victory-gop-faces-%22the-burden-of-doing-something%22-wapo%E2%80%99s-cillizza-says-535553.html?tickers=^dji,^gspc,spy,dia,tlt,tbt,^tnx&sec=topStories&pos=6&asset=&ccode=

http://finance.yahoo.com/news/The-Biggest-Myth-of-the-usnews-420375109.html?x=0&sec=topStories&pos=main&asset=&ccode=

I guess that the saying “Let’s not let the facts get in the way of a good story” (or whatever word you want to substitute story with) fits well here.

“The difference between truth and fiction is that fiction needs to be made credible” – Mark Twain.  Timeless quote; fits well with the slogan “Ignorance Is Expensive®”

As always,

“Keeping It Simple is Smart (K.I.S.S.)”

Erik Epp

Below is a summary table of what the market been doing during the past week and since the October 2010 options’ month started.  The market appears to be on a bullish or at least bullish technical run for now.  That will mean a good bull option trading and stock trading.  But is it really on a bullish run or just a bear bounce “fake bull” run to fool the option trading and stock trading crowds.  Only time will tell.

Take a look at the chart below.  The SPY broke a resistance line (white horizontal) around the 114-115 mark.  The next line of resistance is around the 118-119 (yellow horizontal).  If it breaks that one then the red horizontal line of around 122.  The real question is if this is a real bull breakout or a fake bearish correction breakout.  Also notice that the 10 day Moving Average line (yellow) crossed above the 20 day Moving Average (purple) early September.  The next step will be to compare these moving averages to little longer ones, such as 40 or 50 and even 80, 90 or 100.  I will do that on another chart, another day for simplicity.

Well, as is quite common the past few weeks, the market goes up and down but in the end (based on a weekly basis) it changes very little, this week is no different.  It is true that it is the summer and usually summers are not known for large market movements, one way or another.  But it is also true that the market does not seem to have a reason to go up substantially and a good reason to go down to reflect reality.

The US economy is growing (if one can believe the official reporting) at an anemic rate.  Unemployment is high and unlike the past, many of these jobs will not be coming back since the US shipped most of its manufacturing (the place for a large number of jobs) overseas.  With no jobs, consumption is being reduced to essentials.  The private, for profit Cartel (Fed) is speaking tough about what they can do, but all they can do is buy more US Treasury notes and bonds (for which they get paid interest of course from the American tax payer) and then CREATE OUT OF THIN AIR dollars by lending them to government, banks and Wall Street of course.  So the moment the OUT OF THIN AIR created dollars are put into the system via the loans, they become REAL!  So what is really the risk for the Cartel?  NOTHING!  They created the loans out of NOTHING!  ALL the risk is now in the hands of the borrower(s)!  WHAT A SCAM!  In other words, the CARTEL “actions” are nothing more than indebting deeper and deeper the American people, via their “Elected Representatives’” (either party) and Government (either party) by increasing the debt(s) and deficit(s).

Ok, here is the $64,000 question, especially to all the noise makers, hot air big mouth geniuses out there; how are you planning to pay for all this, assuming of course that you will keep this Cartel’s scam in place?

Anyway, with this kind of picture, the way I see it, the much higher risk and probability is for the market to go DOWN!, and hence why I suggested Friday to buy the put on the DIA, the Dow Jones Industrial Average ETF.  By the way, the market being cut by 30 – 50% in the next 1 – 6 months will not surprise me.  Naturally, if I am wrong (which is always a good possibility), the cost of the insurance (the DIA put) will be simply that: A cost for protection, which is why we kept it relatively cheap.  However, if I am right, the put will go up substantially in value; we have over a year for this put to protect us, even if only partially.

As I mentioned during the last couple of weeks, other publications are finally waking up to this scam between Washington, the Cartel and its minions and Wall Street (once again, I realize that it is all Obama’s fault, but where were they before Obama when all this mess developed and eventually exploded?).

Here is a link to an article in the Wall Street Journal.

And this is a title to an “infomercial” (to sell the best stock since sliced bread) that really caught my attention:
“The Rise of Financial Terrorism”

Yes, they mean Washington (either party), Wall Street, the Cartel and their minions.

I am really glad that more and more of it is being exposed.  Maybe, just maybe, we will see some movement from the American people electing and demanding Washington representatives that actually represent the voters’ interests, not the “Financial Terrorists” and get rid of them if they do not.  By the way, are you noticing how the word “Terrorism” or its offshoots are becoming such a wide spread and generic used “TRIGGER” word(s)?  I believe that it is the Chinese who have a saying that “It is easier to label (the trigger word) someone (or finger them) than actually debate the issue(s) or facts” (or something like that). I’ll let you think of the many other examples of trigger words (labeling) out there.

I thought that you may be interested to read this since it is about the new “overhaul law.”

Also you may want to read this and ask yourself why would the FED not want to aid in the recovery?  Better yet, since interest rates are virtually 0%, what can the FED do other than flood the market with “liquidity”?  Let me remind you that the FED is a FOR PROFIT banking membership cartel.  The key words here are FOR PROFIT and BANKING CARTEL. Ask yourself this simple question:

Where did most of the Treasury Secretaries (including the current one) come from?  Either the Cartel itself or one of its members!  So who are they actually serving:  The American people or their FOR PROFIT cartel or member firm(s)?  Why is it that a FOR PROFIT BANKING CARTEL is allowed to set the monetary and fiscal policies “of the country” (or is it the Cartel’s) and actually run it?
So if a financial institution is in trouble (I won’t get into the reasons why), which one would get a priority to be “bailed out” by tax payers?  A member of the cartel (or one with very strong ties to a member) or one who is not?  Lehman Brothers was allowed to fail; it WAS NOT a member.  Now I realize that everything is Obama’s fault, but how about AIG which owed billions to Henry Paulson’s firm (yes, all this happened BEFORE Obama) Goldman Sachs?  What was the first transaction by AIG when they received the “bail out” funds from Paulson?  Pay off the loans to Goldman Sachs.

Who is the current Treasury Secretary?  Answer: The guy who was in charge of the New York Fed which in turn was supposed to control and monitor Wall Street and its cronies (again BEFORE Obama). 

Did he do his job in that capacity? So why did he get the reward?

Here is another interesting article.

By the way, I fault Obama for having the mandate to make a change and do nothing of the sort.  Instead he hired a pathetic liar (oops, misspeaking) as a Foreign Secretary, a Fed (Cartel) executive as Treasury Secretary (see above) and a whole bunch of others who represent and practice the same old stuff that caused the mess to begin with, instead of taking that mandate and REALLY shake up the old and create a true change.

Last, but not least, I highly recommend watching Michael Moore’s movie “Capitalism, a Love Story”.  I am not suggesting here that you should agree with Michael Moore, or whatever political views he has, but I do suggest that learning and seeing things from a different perspective, view point and angle is very healthy, eye opener and rewarding.  I read my “competitors” stuff all the time. How effective would a spy agency be if it refuses to learn and watch what the others are saying and doing?

The market popped up this week on “better” than expected revenues from several companies.  Of course if the “expectations” are low to begin with (the analysts and the companies do not want to “disappoint”), surpassing them is not a big task.  Add to it that much of the “increase in revenues” came from cost cutting (such as letting people go) and accounting (such as one time items) and the picture MAY not be as rosy as it might appear.

Here is what the SPY chart looks like this week, rising 38 points or 3.6% (as per comments last week, we are using last week’s closing price as the basis for the percentage).  Below is the WEEKLY chart since the beginning of 2010.

On a weekly basis (Friday to Friday closings) the next hurdle for the SPY to overcome on the upside is 112 which occurred on June 18, 2010 (options expiration day). On a daily basis, May 17th close @ 114 is the number to beat.

As I wrote last week, let’s not jump for joy about the “market recovery” yet (paraphrasing).  Well the market (SPX) dropped back to where it was on June 4, 2010 (identical closing number), DOWN 52.63 points or 4.7% from the end of last options’ month (June 18, 2010).  Once again the “magic math” when it comes to percentages is in play.

IN POINTS the market basically dropped by the same amount of points as the rise of last week (53 drop 55 rise) yet it appears that on a percentage basis the rise was much higher than the drop; 5.4% vs. 4.7%.  The reason is quite simple: We use TWO different bases for the percentage calculations; the closing number of 1022.58 on July 2, 2010 (for the rise) vs. the closing number of 1117.51 on June 18, 2010 (for the drop).

The point I am trying to make here is that percentages can be deceiving.  Let’s try this:

A house cost $100,000
A year later it rises 25% and a year after that it drops 20%.  After the two years, is the house value more than, less than, or the same as the cost?

The answer is THE SAME!  The house rose 25% or $25,000 (25% of 100,000 = 25,000) to $125,000.  It then dropped 20% or $25,000 (20% of 125,000 = 25,000) back to $100,000 value.  So even though the dollar rise or drop is identical, the percentages are different due to the different basis they were based on.

Here is what the SPY chart looks like this week:

Notice the RISE in volumes during the past week vs. the DROP in volumes the (which I mentioned last week) during the rise.  So let me repeat what I wrote last week:  “Forgive me if I remain cautious and somewhat skeptical of this ‘market recovery’.”  I think that the market bias is to the downside at the moment.

The market had its best upside week of the year.  However, before we get ahead of ourselves with celebrations, let’s look at the last 3 weeks (since the beginning of the options’ month): 

From Jun 18 – 25 the SPX fell 41 points.
From Jun 25 – July 2 the SPX fell 54 points.
From July 2 – July 9 the SPX rose 55 points.

As you can see, this past week the SPX simply got back to where it started on June 25th (ok, one point above it: The June 25th closing was 1076.76).

Furthermore, between Dec 31, 2009 and July 9, 2010 (calendar year to date) the SPX is down 37 points.

Between April 9, 2010 (end of a week) and July 9, 2010 the SPX is down 116 points. 

Below is the calendar year to date (YTD) chart of the SPY (the ETF of the SPX):

Notice the last week rise (this is a daily chart)?  It is merely a 58% bounce of the last two week’s drop, a normal and very common pattern within the Technical Analysis and more specifically if you follow the Fibonacci patterns. Also, notice the last week’s rise on DECLINING volumes; usually not a good sign.

So please forgive me if I remain cautious and somewhat skeptical of this “market recovery”.