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Tuesday, June 20, 2017


“Yes, I see the correlation!”

Let’s face it, the world has “stock fever”, and the only cure is MOAR! We had 2 FED Pie Holes pontificate yesterday, and both said different things; one said interest rate increase were no problem, and the other said maybe no more rate hikes until December … maybe. Coincidence? Me thinks not, cuz the game plan is to confuse, deflect, and make statistical arguments that upon closer examination have nothing to do with each other. “Oh wait … I forgot … I’m not supposed to question the faculty lounge members “brilliance”, and I’m supposed to just STFU and buy moar stocks cuz EIFAB! [Everything Is F-ing Awesome Baby!]”.

And in the brilliance of the moment, it seems I’m not the only one questioning the world’s sanity when it comes to Argentina’s 100 year government bond. Since brevity is the soul of wit, my response yesterday sums it up rather well … “WTF”!  Seems our old bud Billy Blain over at ZH today gives a pretty good historical snapshot of Argentina’s credit history and is worth a read at the link below in case you missed it this morning:

But, if you think the universe has completely gone insane [it has], read the link below on the 100 year sale yesterday afternoon via ZH:

And, in light of this stunning development, is it any coincidence they come to market now looking for “free money” with an 8.25% coupon yield at Par [changed to 7.125% with the 3.5X oversubscription … see above], with the world [especially the State of Illinois] starved for yield? Again, me thinks not … desperate measures for desperate times. Basically, buy the crap and hope somewhere down the road after an interest payment or two you can pass the bat excrement sandwich to somebody else before the next default; it’s like “financial musical chairs”, without the music, but when SHTF as you most certainly know it will, the sound you will hear won’t be music.

Which leads me to stocks in the Dow30; now, I’m by no means bearish on stocks, and history will tell you as a trader that isn’t the way you “escape to success”, but on the other hand I’m not a very big believer in fairy tales either, and right now this open every day higher from overnight “vapors” and then do nothing ‘till 10-15 minutes from the close where CB’s [central banks] 1) crush the VIX, and 2) ramp the blue chips up, is wearing a little thin. And in the process, makes me wonder who in the hell is buying stocks at this moment? The same ones buying Argentinian 100 year bonds? “Cuz for me, to sum it all up and make it perfectly understandable, the same logic applies here as it does noticing 24 cans of medicinal Vitamin C therapy for 24 hours in a day. Wait a sec … I’m beginning to see a correlation here! And in today’s trading environment, where prices go higher thus creating more demand for stocks going higher [wait … what?], you’re gonna need more cases of the cold stuff to get through the day if you continue to buy into the official FED mantra of “EIFAB!” while you also hold those Argentinian bonds. All together now … stand up & close your eyes and click your heels together 3 times … [Toto, STFU] there’s no place like home, there’s no place like home … and see Dorothy, don’t you feel better now”?

Which brings me back to stock indices in general; today I’m announcing what is in the new trading manual and which all of you can download for free in a couple of weeks when I’m done writing it; namely, I’m replacing the NDX100 with the DAX30 in my coverage and trading. There are a number of reasons for this; 1) the “net” cost to trade, 2) intraday volatility, and 3) time of day.

The business cost to trade the DAX30 is far better [meaning cheaper] than the NDX100; at a 0.6 index point spread with RT commissions our “net” cost to trade is approximately 0.62 Dax30 index points with an index value that is more than 100% higher in notional value than the NDX100 … the kicker is that DAX30 index point price changes are in Euros, not Dollars, so we get an approximate 12% increase in index point profitability as a bonus. However, intraday volatility is the biggest reason; the DAX30 routinely puts in 100+ point ranges every day, while the NDX100 rarely does so or even comes close. The last main reason to make the switch is time of day; the DAX30 is open from 3 A.M. ESDT to 4 P.M. ESDT with the first hour being “pre-market” as the Frankfurt bourse doesn’t officially open until 4 A.M. ESDT. In the fall and winter, add an hour. The point is that the NDX100 mirrors the Dow30, whereas the DAX30 has its own dynamic that starts basically 5 ½ hours before the Dow30 opens. In essence, the DAX30 is the “Dow30 of Germany”, so by adding it and dropping NDX100 as a tradeable candidate, I’m giving the PAMM a more international flavor in terms of big, blue chip stocks. If I trade the DAX30, I’ll use the same criteria as the Dow30; sometime tonight I’ll change the website header to note the change.

I’ve been thinking about making the change for a while now, and it makes perfect sense, since the DAX30 has a whole hell of a lot more in common with the Dow30 & SP500 than the NDX100; while they generally will move in tandem, unless there are specific Euro reasons not to, it isn’t a “tick-for-tick” kind of correlation; but, and here is the main premise, the spread and liquidity are far better at 6 A.M. in the Dax30 than they are in the Dow30 or SP500. For example, if the indices are rallying in the U.S. pre-market, does it not make more sense to “buy the break” in the DAX30 than suffer slippage and a widened spread in the Dow30? So, if I see opportunity in the DAX30, I’m going to be taking the trade and treating it just like the Dow30 in the wee morning hours before the Dow30 opens.

And speaking of the SP500, the LP at Turnkey has quietly raised the spread to 0.4 index points from 0.3 index points … I guess nobody is supposed to notice the 33% rise in their cost of doing business for no damn reason other than pure greed; we’re simply supposed to trade and STFU. And also this morning, speaking of scumbag LP’s, I still haven’t heard a word from the LP via Turnkey on the Friday “off the market” fill of 7 Dow30 points. I’m sure, cuz you know they care sooooooooooo much about customer service and everything … this is the brokerage house that has a “customer first policy”  cuz it says so right on the very front page of their website, so that’s reassuring … only, it doesn’t mean warm spit if it’s just words, and they aren’t there except when they decide to be … so maybe they’ll get around to it sometime here in June or July when they’ve figured it out [which was we got had] and run it by bank compliance, as how best to tell us to go eat a bat excrement sandwich, cuz they aren’t changing anything, but have a nice day, OK? … at that exact moment, and not one frickin’ second sooner, we’ll hear from them. “I hope the doofus bank LP is buying those 100 year Argentinian bonds … please God”?

Turning to today’s market … OMG! … a lower open? [well, maybe, it’s still 3 hours to the NY open, so a lot can obviously happen] … somebody call 911 and let them know … surely some Connecticut Snowflake is long stocks and needs help, and has been successfully conditioned to believe prices can only go higher and that bear markets are defined in minutes … “but the guys on CNBC said …”! And how will the institutional Chipmunks react to this lower open? [Hint: the worst case setup that can happen from a “prices higher later” scenario is if they aggressively buy the lower open and take the Dow30 up fast and furious during the first 5 minutes of trading … we’ll see.]

Here at the open, “a little song a little dance, a little seltzer down your pants”, just to keep things interesting. Another 2 minute bear market followed by a short rally that goes nowhere. An hour and a half into trading and has the VIX hit 3 yet, cuz we got a 46 point range and it sure feels like neither the high or the low is in jeopardy of getting taken out … extremely frustrating. Add to this confusion, and already more than a few times today, first the Dow30 is stronger than the SP500, and then it reverses … then goes back and then reverses … it’s getting near impossible to get any kind of read from this market as the trade flow is simply impossible.

Here at Noon NY, and I thought yesterday was bad … I can’t even describe how bad this is, cuz it’s simply off the charts … seriously, is the VIX at 3? Meanwhile, the SP500 finally sells off 5 index points and the Dow30 goes down … 20 points at its MAX low? … and of course sets off sell stops at the old low by 3 points and then rallies fiercely up 10-12 points on vapors in 20 seconds. And this is the break? And now we got us a whopping 42 point range! … Ohhhh, I’m getting all tingly inside [not] … if this isn’t blatant manipulation, I don’t know what is.

Well, not to worry, cuz the manipulators are not finished yet, cuz now it’s time for the 25 point rally on vapors in 4 minutes [central bank bids adjusted upwards], to mess with the shorts and show them again for the umpteenth millionth time that selling really is a bad idea, and the market goes straight up back into the low 21530’s … you know, the area where the Dow30 was hours ago when the SP500 was 4 index points higher than it is now … confused yet? This is now the norm in the central bank paradigm era, where confusion reigns so hopefully you don’t figure out how bad they are killing things.

Here late in the trading day, this is about as tortuous a decline in prices as you could possibly have … 3 steps down and 2 up, with the occasional ramp to keep anybody from staying in a short position. With the day’s range still as small as you can possibly get, anything can still happen; new lows, new highs, who knows, and the SP500 is offering zero help at the moment. So far, every mini-panic lower by a few points is met with a sharp 5-10 point rally, but these rallies are getting sold. The low is 21499 now, with some century mark stops getting taken out thank you very much LP, who more than likely did it on purpose to line their own account, but that’s another story for another day.

Half hour to the close, this stuff won’t rally [except for the 2 & 3 minute wonder ramps up] and it won’t break [except on minuscule sell stops] … it simply chops, with dealers making a mess of things. On the day, 2 trades total, one good and one bad; the bad one was first and basically cost us our day cuz attempting to put in a “limit” order to buy the Dow30 the order box filled me with “market execution” and we ended up buying at 45; Ok, I thought, we’ll give this a shot and see what happens … what happened is what usually happens when you buy like you’re not supposed to. The other trade came exactly according to the version 4 algo, and sold it on the spike higher; after the dust settles we’re down a few bucks but nothing that can’t be made up tomorrow. So, my fault … should have been more careful with the order box, and didn’t realize when I change the volume figure the type of execution on my box defaults back to “market execution” and doesn’t stay at limit. Live and learn … if you’re trading your own account, make sure as well.

In the new version 4 algorithm, the “cutoff” time for buying breaks is 3:15 P.M. in New York [45 minutes to the close], versus the older versions which was at 2 P.M.; this more accurately takes into account the new central bank paradigm we find ourselves in, and gives us a better chance to capture some of those late day ramps up. Not today, though, and you see what happens after 3:15 when the market starts hitting a new low for the day … it has the potential, especially with a small range, of getting ugly quickly.

Just a lousy trading day, with all the trading action in the first and last half hour … everything else was worse than you can imagine unless you were trading it also, and then you know what I’m talking about. However, this low into the close today, should set up nicely for a move lower in Asia and Europe and give us some good trades tomorrow with volume; let’s hope so. Onward & Upward.

PAMM spreadsheet directly below.

Beach time! … only after the dog has ice cream of course … we are  outta here … until tomorrow.

Have a great day everybody!



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