On Friday the market appeared to be calm in the morning but as the day wore on it became apparent that all was not well under the surface. The Biotech’s got absolutely destroyed. Additionally while the S&P was green to the tune of almost 1% my P&L started to turn positive before noon. That was very odd because I am long absolutely nothing at this point. I finished the day up 10% with the market flat. What happened on Friday is a very bad harbinger of what is to come over the next 10 trading days.
What is going on is not bears shorting the market. Sure they are some but what is occurring is the giant sucking sound of liquidity leaving the market. What I saw on Friday was liquidation pure and simple. Additionally, we also saw junk bond spreads blow out on Friday. Remember equities are a derivative of credit. When credit gets impaired equites are not that far behind. Over the weekend FT reported that Saudi Arabia is calling up asset managers to liquidate portfolios to help fund the budget shortfalls caused by lower energy prices. I have also written about this in the past as well. When big institutions start liquidating into this market we are going to truly see how illiquid this market really is and how much the Dodd Frank bill has impacted the Streets ability to buffer falling prices.
I think the set-up this Sunday evening is worse than August 23rd set-up going into the 24th for the bulls. Primarily because Friday was the kind of day that the media does not notice so most everyone over the weekend is not aware of the carnage to come. I don’t know what Monday will bring but I think we will be much lower by the end of this week. As long as credit is going in the wrong direction we are in a bear market.
If you enjoy the content at iBankCoin, please follow us on Twitter
Blue, if liquidity becomes a problem, will you keep cash on hand or even buy gold a la 2008 melt down?
Blue,
Do you think the ECB/FED will let $DB fail? Without intervention I think it’s a zero shot and way sooner than many realize. At the very least I think you’ll see it’s stock price devalued greatly before government steps in to save it.
I may even try my hand at some October 25 puts for a mere $0.30. I think the decline will be swift; very Lehman-like.
Bluestar,
What is the junk bond spread?
Like $JNK/$SPX or $NQ ratio?
thanks
across the board liquidation in the early morning. Nothing is spared, metals, oil although bonds are up at the moment.
BLUESTAR IS GOD!!!
Short into the volcano.
Institutional selling is a big problemo.
Build cash and just like real estate
wait to buy co’s in better neighborhoods
that you were previously not able to afford
I like this trading tribe
I picture BlueStar sitting in a Copenhagen cafe smoking Phat joints .. or if he is back home, sitting atop Haleakalah with a Cuban stogie or some local spleef, counting his gazillions of well-thought-out well-executed gains .. nice job Senor BlueStar
Once the stock market starts to collapse our wonderful gubmint will step up to the plate with QE4 or another tarp-like bailout. I don’t think Tarp is palatable politically this time around so the FED will do the dirty work. We will see a 15 handle on the SPX before that happens.
This will negate the 4 year cycle and cause an extreme blowoff top in the stock market. After that the greatest stock market catastrophe in history in the next couple of years.
QCI, thats how im thinking. Still weary of a QE4 in the cards. I need to see the real blow off top, 2013 wasnt enough!
QCI, yes, DB and many other banks in EZ will go to the wall in the next 2 years.
The SRM is ready and waiting for 1.1.16.
http://www.monetaryperspectives.com/just-over-the-horizon/
GM,
Been eyeing $DB all year. I think it’s much sooner than anyone realizes. The European banking implosion commences soon, real soon. This may be the catalyst for QE4 and further ECB easing.
good day Bluestar.
what do you think about gold ? and miners ?
Not until SRM is in place start of 2016 earliest QCI.
ECB will print more at some point, but they’ll not buy bonds or shares when it matters, something far more solid.
IMO, as long as platinum is getting the stuffing knocked out of it, you won’t see a gold rally. Platinum looks to me like more cliff diving is on the way.
pb, you will change your mind in due course. Gold is different.
GM: Been trading gold and miners since ’98. I’ll change my mind when I see a clear divergence. Not there yet.
And I will add: an awful lot of people are expecting gold to trade contrary to the market. I don’t see why. In a forced liquidation scenario, gold will be at the top of the list of liquid assets.
Gold was diverging negatively versus the CRB index from early 80s til 2001, when the Euro launched and just after the WAG.
Ever since gold has risen versus the CRB index.
If you don’t see that, I politely suggest you need an eyesight test immediately.
I tell you, it’s so wonderful to know why that is happening, the grand plan.
Watch the ECB go in the next few years.
PS, I don’t trade gold, I hold it in a non-bank vault.
Who said anything about the CRB? I said platinum but didn’t state a time frame. So let’s say 3 years. For the last 3 years, both have been in a decline.
I expect BlueStar is aware of the downside risks for gold. Perhaps he can chime in on the subject.
The downside risks are as you mentioned, in a market washout, there may be some gold hedge selling.
But I’m not sure how many leveraged players will be into gold this time, so it’s a coin flip whether or not we see that.
Limited downside risks, and only for a brief period, then off to the races I think.
Hello All,
Sorry I did not answer as I have been traveling in Europe and wifi was spotty.