Thursday, September 25, 2008

Why I don't see crash calls anymore

That is bothering me. If I don't see a crash call on the obvious places tonight, I am gonna get itchy in the morning.

One of the major FUBARs (FUBAR=Fxxx up beyond all recognition) on the list is gone tonight. Wamu was seized by FDIC which was quite obvious from the action on the stock today.

This was inevitable and fully priced in. After the initial reaction, this should push the futures higher towards the morning. Since JPM swallowed this bank too, and JPM is one of the largest components of BKX, XLF and other financial index and ETFs, this should give 10+ ES in addition to my expectation which was 1230. Remember the Indybank, it had caused 20 points gap up.

What is concerning me is equity P/C ratio which closed at 0.61. The market may be little heavier than I thought. Or maybe site traffic of xTrends exceeded Yahoo.com, I may be on the same crowded bus.

Aside from conspiracies, I believe the market will close near the best level tomorrow. There may be some early jitters. I still think we will gap up tomorrow. (on ES)

37 comments by xTrenders :

Susannah said...

Plenty of crash calls on the dollar. Perhaps sentiment has just shifted to a different instrument.

Spiral said...

I'm keen to believe this conspiracy theory of bailout. I believe this bailout is to help primary dealers to service the government debt (treasury) and won't ease credit market nor cause visible inflation. I will be watching EFF, IRX and TNX, and we may see some surprise in Jan. Just my opinion and this is why I'm flat for now. This is not a crash call but it may ease your anxiety :-) I always appreciate your insight.

Thanks!

IC said...

Wamu fails, RIMM disappoints, bailout is on hold, earthquakes/tsunamis/hurricanes (just kidding) with the weekend coming. Who would buy tomorrow? Atilla, if the market closes up over 150 points DOW or 1240 S&P I will also buy you a bottle of champagne. This feels like sitting in direct path of a tornado and thinking it will pass right by you. Best of luck to everyone here.

Greenie said...

Hey Atilla,

Futures look like in deep doo-doo. Please make sure your fund does not also need a bailout tomorrow :)

Greenie said...

is said

"Who would buy tomorrow? "

Have you checked sentimentrader lately? Maybe the whole world is reading xtrends these days.

Atilla M. Demiray said...

greenie, you can bail me out dont you?

Atilla M. Demiray said...

I posted the following on dcengr's blog

-----------

Atilla M. Demiray said...

Greenie, there is nothing guarantee in the market but I am going to give you a guarantee tonight.

ES will open in positive. If this comes true too, you will buy me a bottle too. Deal?

For the record, it is currently down 13

6:07 PM

Greenie said...

Atilla, Yes, I will be able to bail out. I am waiting for some funds to transfer from account.

http://tinyurl.com/4kpjmf

:)

Greenie

P. S. I am flat and have no bullish/bearish bet on the line.

Greenie said...

Sure, if ES opens positive, you will get a bottle of good wine. Right now it is at 1200.

Atilla M. Demiray said...

I am gonna be up all nite...yummmm ready to work !!!!!

Anonymous said...

LOL a survey Atilla?!

Atilla M. Demiray said...

yes please someone make a crash call on TT, I am getting nervous

Anonymous said...

what is TT?

Atilla M. Demiray said...

TT = http://www.traders-talk.com

Anonymous said...

okay, i'll bite... what is your prediction based on? technicals, gut, or otherwise?

no details needed, just wondering whether you're trying to tap into something other than technicals, since it seems highly unlikely that we gap up, or even open even at this point...

not a criticism, just a question.

thanks.

Atilla M. Demiray said...

Realization of the following:


1- Wamu had been priced in already
2- One or two day delay for the bail out deal doesn't change anything
3- GDP in the morning will be supportive due to the lower commodity prices since consumption is almost 2/3 of the GDP

Anonymous said...

ahhh, yes, i forgot about gdp--i guess that's your ace in the hole. you are correct, upside surprise there would definitely do it...

thanks.

Sam said...

Atilla, you realize that gdp is 2nd quarter and backward looking. Forecast for q3 and q4 is negative all the way. Forecast for Q1 is negative too.

There is no way in hell we open up even if we get a bail out deal (which is not going to happen by the way).

I do however think only way the bill gets signed is if we get a big down day.

Sam said...

Anonymous said...

ahhh, yes, i forgot about gdp--i guess that's your ace in the hole. you are correct, upside surprise there would definitely do it...

Must be new to trading. WM going under is a black swan event. Nothing, I repeat, nothing can change the fact we open 1-2% lower tomorrow and headed 3-4% lower at close.

Thought the traders here were better than usual bunch. Lately looks like folks here have lost their hot streak.

Susannah said...

Sam, I've been thinking the same way, that the market might need to prove to Congress that we need a deal for it to go through.

Greenie said...

"WM going under is a black swan event"

???? Are you kidding? My little son is only fourteen months old now, and even he knows that WaMu is broke.

Atilla M. Demiray said...

GDP projections are made based on past data. When the past data, namely 2nd Q GDP surprises tomorrow, they will revise 3rd.

Atilla M. Demiray said...

open 1%-2% lower and close 3-4% down huh.

Will you stop by at the end of the day tomorrow?

Atilla M. Demiray said...

greenie,

Sam sounds like your buddy milkbank on TT :)

tradertom said...

If we get nice GDP numbers, and positive news on the bailout being passed tomorrow I think we'll be good to go.

Greenie said...

Atilla, I am tempted to go long here. Everything looks perfect...only wish dc did not say 3 of 3 :)

BTW, do I get a bottle of something, if that flux machine does not deliver this time?

Greenie said...

"Sam sounds like your buddy milkbank on TT"

That milkbank holding NRO long from Aug 2007??

Atilla M. Demiray said...

Exactly... He must be enjoying dividends right....

But I saw a funnier thing. The other guy who is long NRO from the same level is holding a big DIA position from Dow 14000 levels. I couldnt believe my eyes. For a moment I thought it is from 114 but no it was something near 140.

Atilla M. Demiray said...

Yes you will get a bottle of wine if flux fails tomorrow

Anonymous said...

Atilla, according to the survey most of your readers are bearish... I don't get it.

Atilla M. Demiray said...

What are you suggesting? Should I be bearish because most of my readers are bearish or should they be bullish because I am currently bullish for short and mid term

Greenie said...

I think I have to get that wine shipped to you soon. TT got its crash call.

http://www.traders-talk.com/mb2/index.php?showtopic=94541

anabolic said...

Hi Atilla,

thanks for your time and analysis.

I would like to ask you when would be the turning point where your analysis is negated and u would cut your losses?

my wild guess is break of 1186 area?

Isaac said...

Looks like Greenie is getting a bottle of wine unless a miricle/bailout package comes out in the next hour. Could happen

Anonymous said...

GDP did not help futures. my long position is in the dump.
atilla, any guideline on when to bail out of it? i am now underwater from 1194. should i keep holding?

moo said...

U.S. GDP REVISED DOWN TO 2.8% GROWTH IN SECOND QUARTER

Anonymous said...

2.8% growth....lol