Trading Buy

Our Institutional Research firm — my day job — made a short term buy call last night.

Its only a trading call, but I will see if I can get permission (from our clients) to release it publicly.

Bottom line: A bounce, similar to January, only not as strong or long-lasting. And, its not a lasting bottom.

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  1. OldBrokenRecord commented on Jul 2

    @BR,
    Considering your (undeserved) perma-bear reputation, this might be viewed as a very good contrary indicator…

  2. leftback commented on Jul 2

    I think I agree with this call. You had a discussion of the Fed raising rates a few weeks back and decided they were jawboning – correcty as it happened.

    Now, what if Trichet was actually also just woofing? After all, banks in Europe have issues too, so a hike could be disruptive. The $ rallies, oil falls and we get a short-term stock rally.

  3. Philippe commented on Jul 2

    Should the choice be between two contrary indicators This one may be more appropriate

    Buy `Crash Protection’ Puts on European Stocks, Goldman Says

    By Alexis Xydias

    June 30 (Bloomberg) — Investors should buy “crash protection” against a plunge this year in European stocks because losses are likely and insurance costs are low, according to Goldman Sachs Group Inc.

  4. DDK commented on Jul 2

    Wouldn’t surprise me — the sell triggers I set months ago on SDS went off yesterday, so I’m sitting on a wad of sidelined cash. I’m not sure in this market I want to go long though — I was considering waiting a week, and then re-shorting the dead cat bounce. I figure if the bottom falls out this time I’ve missed out on another pile of delicious profits, but with the piles of volatility sloshing around, I can live with that.

  5. SINGER commented on Jul 2

    Agree…SP, held 1270….

  6. kontorhotel commented on Jul 2

    I agree with BR.. But I am a little scared of missing the next ( more or less ” in your face ” easy short´s buy buying some SDS later this month.)

    Maybe a little SSO with a stoploss… and then some SDS later this month.. but yes the 1270-1275 held well …

  7. Contrary commented on Jul 2

    You cannot rely on one person as a contrary indicator.

    Even Joey Baggadonuts learned his lesson post 2000 and became cautious in 2006

  8. zackattack commented on Jul 2

    With you on that call, Barry.

    I covered a lot yesterday too, unfortunately into the morning swoosh rather than the deeper noon one.

    Oscillators were sooo oversold, the stars were aligning for a bounce. I’d felt that way for a few days and covered part of the China short too early.

    From the way it reacted to the crappy GM news, you could see that Mr. M is ready to have his bull goggles on.

  9. Kirk commented on Jul 2

    Vince Farrell:

    “I’m not sure what earnings are going to be so let’s plagiarize some of Jason Trennert’s work from Strategas. Jason looked at all the recessions since WW II and calculated that on average earnings fell 17% from whatever the peak had been. I don’t see a recession on our table yet, but let’s declare one for the sake of argument. The recent peak in earnings was the four-quarter period ending June, 2007 when the S&P earned $91.50. If we take 17% off that, and remember, those that don’t study history are condemned to repeat it, then the trough in earnings will be $76. That number is far below any estimate I have seen, so that might be bearish enough.”

    – – – – – – – – –

    Now…THIS guy works on WALL STREET? WTF?

    Look at the ACTUAL S&P 500 EARNINGS DATA!

    The last 4 quarters of earnings equal $76.77 (including the high water mark of $24.06 in Q2 of 2007).

    Once this high water quarter is dropped from the tabulation (in about 6 weeks) the trailing 12 month earnings will be $70 +/- based upon the assumption Q2 will come in at roughly $17.50 per share.

    THUS…if you take his market multiples of 16 to 17 on $70 per share in earnings that would equal 1120 to 1190.

    UNBELIEVABLE! He is at best VERY VERY misleading.

    Now…assume earnings stay muted at $17 for another couple quarters then you will see trailing 12 month earnings at $67 to $68.

    Again…NOT SUPPORTING a market much above 1120 to 1200.

    DOWN 6% to 10% from here!

    So when they say it is all baked in…

    C’mon!

    This is the same %$& who didn’t see ANY earnings hit coming of any amount a year ago!!!!!!

    %&*!

    Keep in mind that S&P 500 estimates were for $21.08 per share in early April for Q1. ACTUAL Q1 earnings turned out to be $16.62!

    EARNINGS ESTIMATES ARE VERY VERY OVERSTATED!

    http://72.14.205.104/search?q=cache:PkIP

  10. d commented on Jul 2

    BR, remind me how we square your upside trading call against Fusion IQ’s sell call issued yesterday. thx.

  11. OldBrokenRecord commented on Jul 2

    Foreword: I’m joking.

    @d,
    Now you know that BR has been enrolled in the PPT… You blew his cover.

  12. Steve Barry commented on Jul 2

    You could get a light volume holiday week rally…I might say cover shorts if you must, but surely don’t buy. As sentiment goes, 10 day put calls were 1.25-1.3 at recent trading buys…now a mediocre 1.05. It would take a month to get to 1.3. II Bulls are 32% vs. 20% for March low. You could get a bullish oil number and bad jobs number and get killed buying here.

    As for fundamentals, last year S&P revenue was 9$40 per share. I have to think it will be around $920 this year at best. Put a generous 1 times multiple given housing, credit, recession and uncertainty and you get S&P at 920.

  13. Risk Averse Alert commented on Jul 2

    WRONG! You show me one thing from yesterday’s bounce lending any kind of underlying substance to the rally off mid-day lows. There was NOTHING. This market is screwed … and the deepest, most frightening decline of any seen thus far over the past year is at hand. Complacency reigns … even among those who claim to know better.

  14. mephisto commented on Jul 2

    So everybody covered and everybody is waiting for the bounce that everyone knows is coming because the sticksaved support at 1270 held–this while everybody winds down for vacation.

    Who the hell is going to do the buying? Vince “Hip Deep in Financials” Farrell?

  15. gregh commented on Jul 2

    you don’t advertise the fusionIQ stuff regularly, so I hate to ask for comparisons, but the fusion blog mentioned Sell signs for all three indexes, while here you mention a buy, seems counter-contra. Can you contrast the time frames of these two?

    The mid-january bounce was 2 weeks long…

  16. DDK commented on Jul 2

    Mephisto — my intuition (just intuition) is that the recent oil spike briefly goes down as fast as it came up (to, say, 125-130), and “surprising” non-seasonally-adjusted-non-revised home sales numbers come in for June saying people are buying more houses now than they did during the winter, causing the mainstream media to issue their monthly “The recession is over! Buy now!” mousetrap.

  17. david commented on Jul 2

    Already ahead of you, bought short-term calls on the index yesterday when the S&P went under 1280

  18. UrbanDigs commented on Jul 2

    I must agree, and I think a trading bounce is highly likely although I would have loved to see the VIX hit 28-29 or so, at some point in the past few sessions.

    Long SSO, DDM, UYG at these levels. Thing is, if we do bounce, to say 1340 or so, that is when the shorts will start scrambling to cover and really power the bear market rally.

  19. DL commented on Jul 2

    We may get a bounce here, but it probably won’t be more than 3-4% on the S&P.

  20. Steve Barry commented on Jul 2

    Barry says this will be similar to the January bounce, but not as long lasting…The January bounce started 1/22 and lasted 8 trading days, making its high on 2/1, then went into a range…so this one lasts what, 5 days? I don’t even see it happening with a total 10 day put/call MA at 1.03 now

  21. Robert commented on Jul 2

    I agree and bot C and VLO 2 days ago.
    Let us pray for the bounce, even if it is only a sold-out bounce.

  22. Steve Barry commented on Jul 2

    I think you better pray for no splat…why be long on the cusp of a depression?

  23. Al Czervic commented on Jul 2

    Hmmmm…IWM is now below yesterday’s low.

  24. Robert commented on Jul 2

    Steve….you are correct, as this will be deep and long. I bought these for a trade ONLY and could be out in 5 minutes or 5 days. But I also have gold stocks, too.

  25. drey commented on Jul 2

    I gotta say you guys have some big balls trying to squeeze a little money out of THIS market on the long side by hoping to perfectly time the next bounce.

    Why not just sit out the bounce if we get it, then get back in on the short side when the time is right? Seems like a much better (not to mention safer) play…

    Risk/reward, my friends, risk/reward.

  26. bdg123 commented on Jul 2

    Ain’t no buyers that I see…….yet.

  27. franz commented on Jul 2

    A little bit too early in my opinion. While it may be correct, everyone has a negative bias and will sell into any rally. The risk/reward is not there for a good upside as volume has been light. Wait until August as volume and bargin hunters should come out. Should be a rally from August to around November. After election outcome has been determine, I expect the market to go down again.

  28. DL commented on Jul 2

    It might be worth buying a few call options on the QQQQ before the close today, then selling them tomorrow.

  29. Steve Barry commented on Jul 2

    Very dangerous market here…oil will likely be sitting at very high level going into driving holiday. Jobs number tomorrow looks ready for a puker and trading ends at 1PM…guys will be dumping like mad before leaving for the Hamptons… QID can close above 45 today for the first time since 4/17.

  30. Jay commented on Jul 2

    Having a tough time seeing a bull move from here, yet, without capitulation. Esp since we’re lower than March. VIX is now over 25. I would want a VIX 40+ for a bottom, otherwise we continue the slow melt. I could see a meaningless bounce to Dow 11750 and then down again, but would not be getting long on a down 100+ day.

  31. Steve Barry commented on Jul 2

    Check that…QID can close above 45 46 today for the first time since 4/17 4/15.

  32. MitchN commented on Jul 2

    Ouch. That was one ugly afternoon. 1,270 resistance on S&P crushed. Tomorrow is not looking good. Would not want to be long here.

    Look out below.

  33. zackattack commented on Jul 2

    Man, the bottom just fell out of the old leadership.

    Dunno if it’s a scenario where they’re shooting the generals now, which is typically an endgame phenomenon.

    I covered the last of my big indices stuff today. DXD and FXP all gone.

    I don’t feel good about the profits I took here. Feeling like I’m covering too early. But, discipline over conviction.

    Still have on a goodly chunk of SMN, which was a beautiful thing today.

    Gold would be next. It’s a late-stage cyclical, not a religion.

  34. MarkM commented on Jul 2

    Well, I sold the open. Only thing I’ve done right for two weeks.

  35. DL commented on Jul 2

    I rolled the dice and bought some call options on QQQQ just before the close. I’ll sell them tomorrow morning… win or lose.

  36. rootless cosmopolitan commented on Jul 2

    Barry,

    how many points down from the opening today would you call the short term buy call by your firm last night a wrong call?

  37. Mich(^IXIC1881) commented on Jul 2

    That’s why the computers can’t replace the humans anytime soon. A computer doesn’t care about long weekend, Iran-Israel-US conflict, oil hitting new records…

  38. Steve Barry commented on Jul 2

    Thanks to NVDA warning after the bell, QID is now trading 46.30.

  39. leftback commented on Jul 2

    Yow, wasn’t expecting so much selling, good thing I had a lot of DUG going in this morning, I ended up ahead.

    I feel like we are watching the $ and Euro wrestling for control every day. The $ is overdue a little break upwards.

    Are the oil longs getting nervous here? Could be some more interesting commodity action over the next 7-10 days.

  40. MitchN commented on Jul 2

    Are the oil longs getting nervous here?

    Not if they’re reading Bill Bonner:

    What Bush learned behind closed doors [in his recent visit to kiss Prince Abdullah’s ring]

    If some well-informed experts are right, Saudi Arabia’s oil reserves are a fraction of what they’ve been telling us.

    Why does it matter? Because everyone has believed for decades that Saudi Arabia’s oil supply is virtually unlimited. That’s what the Saudis have said over and over again for more than 30 years.

    If an oil shortage threatens to cause a recession or a market crash, we can count on the Saudis to come through. So people think.

    But in a private briefing, one of America’s top oil experts told President George Bush exactly what I’m telling you. In fact, this same man was a consultant to the secretive task force that drew up Vice President Dick Cheney’s energy plan in 2001.

    In other words, the guy is a heavy hitter who knows the energy business.

    He warned Bush that the Saudis don’t have anything near the oil reserves they claim. They already pump less oil than most “experts” think, and here’s the real kicker…

    Saudi oil production is about to drop sharply. And it will keep going down for good.

    [end excerpt]

    And that’s why we got rid of Saddam. And that’s why peak oil is not a fairy tale.

    Wake up, people.

  41. Barry commented on Jul 2

    rootless cosmopolitan,

    Its a statistical trade. You play the odds when they are in your favor. Theres no guarantee that trades do not go against you.

    Thats the Inst. side of the business. That’s something you learn when you manage assets or trade for a living.

  42. Mitch commented on Jul 2

    My trading desk got a copy of your institutional piece — I appreciate your reasoning and the the bold call. They cannot all be winners.

    It looked good until the dollar tanked and oil went vertical around 2pm. Markets dropped 200 points from there.

    Don’t let non-traders stress you out — they simply don’t know.

  43. leftback commented on Jul 2

    rootless,

    Barry is a Macro guy. Macro people are often early on their calls, and because they make up a minority of traders, they often experience some pain setting up a trade BECAUSE they see an imbalance earlier than most. Momentum investors, on the other hand, almost by definition, are NEVER early, and there are a lot more of them. They tend to overstay their welcome, and get burned at the back end of long held trades. A lot of these guys are long oil right now.

    Mitch,

    Nobody is saying peak oil won’t happen AT SOME STAGE. But oil is not going to go up 5% every week in a straight line, no matter how many shady sources are quoted and how many totally unconfirmed rumors are floated into the markets.

    BTW, if Paul Krugman thinks that all the oil traded is delivered and that there is no manipulation of the oil and other commodity markets, I will show you an ivory tower academic who doesn’t understand futures markets as well as he thinks…..

    There are so many charts out there in history that look like the USO right now…. take a few other slowing economies, a small increase in the $ and some people with big reputations are going to look pretty silly in a few months.

  44. Todd commented on Jul 2

    Leftback, there’s a lot that Krugman writes that I don’t buy into. Sometimes I do. But, he made an excellent point the other day about whether or not speculators are largely responsible for the rise in oil. He pointed out the rise in price in iron ore in the past year, as witnessed by the recent 90% price increases accepted by the Chinese with Brazilian and Australian producers. Iron ore is not freely traded as a futures contract thereby immune to speculative fervor. Ivory tower or not, that’s a great point and it gave me pause to rethink my own idea about how responsible speculation is for the rise in crude.

    Debunk that please, Leftback.

  45. Risk Averse Alert commented on Jul 3

    JULY 3, 2008 9:30 a.m.

    Time to temper the previous comment I made to your buy signal…

    You could be right about a late-January-like bounce.

    However, you are definitely early. Just like yesterday, this morning’s bounce will fail. The bottom from which the market might bounce most definitely is not yet in.

  46. Jay commented on Jul 3

    EUR/USD just broke 1.57 on the downside. Bad for oil? Maybe a relief rally to Dow 11750-12000?

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