Too Big To Flail - The Beginnings

Too Big to Flail

By

Trader Dutchie

Starting today I will do myself a big service: I will take myself serious for once and with seriousness comes responsibility. The responsibility to come up with a good name for my newsletter.

Verb

to flail (third-person singular simple present flails, present participle flailing, simple past and past participle flailed)

1. To beat using a flail or similar implement.
2. To wave or swing vigorously
3. To thresh.

Somethings are too big ‘to flail’ at, some truths too ugly to uncover, some secrets better left untold. “Too Big to Flail” will remind me everyday that I cannot let that happen. I mean, if Don Quixote  could flail at windmills I can certainly flail at Bernanke, Trichet, all presidents and prime-ministers or that mysterious person called “The Hand”. I am bound by my own integrity to tell the truth about all that is going on around us, no matter the depth of the cover-up (Ok, Ok, I am no Bob Woodward yet, but a man is allowed to dream isn’t he).

So uncover, be astonished but most of all enjoy my daily insights in ‘Too Big to Flail’

"Has it maybe ever occurred to any of our glorious regulators that the reason why nobody has any faith left in the stock market, which has become just a teetering house of cards, supported constantly by the Federal Reserve Bank of New York, is due to precisely the kinds of totally nonsensical ramps in the market just as the one we are witnessing right now? Considering that the economic data could hardly be any worse, how is anyone supposed to trade this complete binary gibberish? We realize there are another ten minutes in trading, which means the S&P will likely make another valiant attempt at 1,150 just to get nothing but more algos to do the buying once limits are triggered. Whether it will succeed is irrelevant, as nobody trades any more, precisely for this reason. And the end result will be merely another flash crash, that will drive absolutely everyone out, up to and including the last few vacuum tubes remaining." courtesy of my friends at ZeroHedge.

I must admit, it was like the old days. Bad numbers followed by a miracle reversal and a rally into the close. "The Hand" seems to be back, republican or democrat, "The Hand" is there to protect us.

What does this mean for the short term model I laid out to you yesterday? It kind of validates my theory that we have to do one last leg up before we fall down. The S&P hit 1.150 even today. Precisely the number the whole world is watching so closely, for should that "magic" number break to the upside we will begin our year end rally. It was prolly too much to ask to close above today after the unsettling consumer confidence numbers, but tomorrow there is no real economic data coming out so it might be an ideal day for the FED to push up those futures in the early going and then hope that the underinvested trading community will follow in full force. Sure there is almost nobody left in the market to do any trading, but that said it means there's also no one at the sell side, so up up and awayyyyy !

On the monetary side there are some expiries of LTRO's (Long Term Repo Operation). A 75 bln euro 12 month, an 18 bln euro 6 month and a 132 bln euro 3 month are all due Oct 1st. The ECB is offering a 7-day repo (done yesterday, 166.4 bln which was 12.4 bln more than last week) and a 3 month repo of which the results come out today. Watch them closely, the ECB might say that the "abnormal liquidity measures" will be rolled back... they will be rolled over into "normal" repos with "abnormal" sizes ;-)

When we come in the all important Tankan report out of Japan will have been published. Expectation is that it will show new weakness all over the economy.

So the late day rally helped the major indices close in the green: DOW + 0.43% S&P +0.49% Nasdaq +0.41% EurUSD 1.358 Oil $76 Gold (that's a new one!) $ 1.309

All sectors closed up today with Consumer Services & Healthcare the best 2 performers + 0.9% and Telecom & Tech closing unchanged.

What to expect today: more of the same as we had yesterday. We will try to go higher, try to go lower and in the meantime we are building a base from which we can actually rise as can be seen in this S&P chart

The Dax on the other hand is still caught in a tightening trading range, with the floor now at 6.000 (which coincidentally is also the 200 day MA)

I recommend the same trade as I did yesterday: trade stocks with news, go long some high-beta stocks if the market feels strong but always put BXX underneath. The stronger the market feels the less protection is needed, but always buy the protection, it’s a small price to pay.

That was it for my first edition of “Too big too Flail” I hope you found it useful, enjoyed it and above all are eager to receive nr 2 which will be in your mailbox tomorrow, same time same place.

Happy Hunting & Let’s be careful out there !!!