Sunday, June 27, 2010

Senator Dodd Succeed To Water Down The Financial Overhaul Bill

I wanted to write about Financial Overhaul Bill, but I have been so busy, but today I find some spare time to express my opinion.
Christopher John Dodd D-Senator from Connecticut could block the Lincoln derivative bill and water down the Volcker rule (*1). The Financial Overhaul Bill is over 1500 pages, I guaranty you, most of senators nor congressmen/congresswomen did not bother to read it. Financial lobbyists were busy to do their job and they succeed. I believe it was the life time opportunity to take advantage of unpopularity of banks and pass a strong bill to regulate the financial industry to stop them from gambling with our future, but they missed it. I'm speechless. Chris Dodd did it again! The Wall Street bailout was not enough he did one more favor for his friends in the Wall Street.

D-Senator Blanche Lincoln’s proposal was supposed to stop commercial banks from derivative trading. The original proposal would force banks to spin off their derivatives businesses entirely. They water down her bill and forced her to make significant changes to the bill. The new proposal clarified that the legislation would allow banks to trade and deal derivatives through separately capitalized affiliates. The new proposal also would give large bank-holding companies up to two years to follow the new rules and shield most community banks from limits. Yes you heard it right they are going to give bankers two years to follow the new rules. So for the next two years we are going to face business as usual. They cannot give banks taxpayers guaranty and allow them to gamble on synthetic derivatives. Wasn't it the reason AIG went belly up in 2008. How couldn't they learn their lesson? If banks want to act like hedge funds let them risk to default. Why should taxpayers pay for their risky bets? Depository banks should not allowed to use the depositors' money to gamble in Wall Street. The repeal of the Glass-Steagall Act of 1933 effectively removed the separation that previously existed between investment banks and depository banks is the caused by the collapse of the subprime mortgage market that led to the recent financial crisis. What are they thinking? A couple weeks ago, I called my senator and let him know what do I think. Problem is not many people understand the significant of financial reform nor they care what is going on in Washington. I start to wander if there is any patriotic person left in House or Senate? What are they doing to this country? History will blame Dodd and his colleagues for their shameful actions. If you wandering, why does senator Dodd beat his chest for bankers? The charts below would be a clear answer.

Top 20 Industries contributing to Senator Dodd:

Top 20 Contributors to Senator Dodd :

It's interesting to see even Dick Bove(financial analyst at Rochdale Securities) thinks this bill is useless.
I usually disagree with him, but this time I could not agree more. Here is a link to part of his interview with Bloomberg. click here to watch the video: Bove interview on Financial Overhaul bill .

(*1) Volcker Rule: The proposal specifically prohibits banks or institutions that owns banks from engaging in proprietary trading that isn't at the behest of its clients, and from owning or investing in a hedge fund or private equity fund, as well as limiting the liabilities that the largest banks could hold.
Source: The White House Office of the Press Secretary

Thursday, June 24, 2010

S&P500 Technical Analysis (06/24/2010)

S&P500 Technical Analysis chart:
Quick reminder on S&P500, note if S&P500 stays below 1100 it will take out the 1040. Bond market is sending mixed signals as a financial analyst I don't like what I see, it doesn't make any sense. There is something fishy, I think we are going to get a very violent move with in next couple days, who surprises many traders. It's too early to say if we are going to get the surprise move to the upside or a fast and furious move lower, but I will remain in the bears' camp. Tomorrow we are going to get the first quarter GDP data, analysts forecast is 3%, but they are going to get disappointed. I think the GDP would be 2.6% to 2.8%. It's impossible to forecast what is going to play out on Friday, but as long as S&P500 stays below 1100 bears will have the upper hand, and any rally would be a selling opportunity.

Friday, June 18, 2010

LIBOR & Ted Spread Chart (06/18/2010)

LIBOR-OIS (USD SWAP) 3M Chart: Value:0.21

Ted Spread Chart:
Value: 44.39

I post the LIBOR every fridays.

Thursday, June 17, 2010

Key level for S&P500 in June 2010

S&P500 is above the key level (1100). The real game will start next week, if bulls could keep the S&P500 above the 1100 you could go long. Note violation of 1100 would be very negative for bulls, if S&P500 tanks below 1100 it will take out the 1040. Please note indicators became over bought, we shall find out soon if bulls have any steam left.

Saturday, June 12, 2010

LIBOR & Ted Spread Chart (06/12/2010)

I post the LIBOR chart every fridays. Just type Libor in search box (it is located on top left corner). You will see all Libor charts.
I post the LIBOR every fridays.

Thursday, June 10, 2010

S&P500 Technical Analysis (06/10/2010)

S&P500 Technical Analysis chart:
If you are wandering what the hell is going on with Stock market? you are not alone. Every day market gaps higher and in the last 2 hours of trading we head south. Technically we are in the new stage of the bear market, big institutions try to manipulate the market they buy future market over night and shoot the E-Mini S&P up then in the morning when you wake up you see market gaps up. Moving the Future market is much easier than any indices, all you need is a couple billion dollars. Therefore big institutions use it as a effective tool to gap open the market higher in hope of squeeze the shorts. I don't mind if they shake up the amateur bears, but if S&P500 gets above 1100 you really don't want to stay short.

S&P500 has formed a head and shoulder. At this point it is hard to say what is going to play out . S&P500 has been moving in the 1100 to 1040 range. We are in the "no man's land", if S&P500 gets above 1100 the head and shoulder pattern is out the window and S&P500 should rally to test 1152 resistance level.

S&P500 has hit 1044-1040 level 3 times and every time we got a bounce. If we move to 1040, I expect this time it won't hold. In the case of 1040 violation S&P500 should tank to 980-950 level.

Wednesday, June 9, 2010

Congratulation we have a new born bear market!

S&P500 Technical Analysis chart:
What we have witnessed is the new stage of the bear market. It's just a grizzly cub at this point, it needs a couple weeks before natural bulls are going to admit that we have a new born and bulls rally is over. If you go deep you see we never come out of the secular bear market. We did not have a bull market to begin with; as an analyst I consider 666.79 (March 6th 2009 low) to 1219.80 (May 26th High) rally a humongous bear market rally because S&P500 failed to move above 1230, it does not fall to bull market criteria.

Please note that from 1040 to 1100 is the no mans land, bulls could argue that 1040 has hold three times therefore S&P500 has potential to rally. I have seen many bulls like Bob Doll Chief Equity Strategist of BlackRock or Michael Darda chief economist at MKM and many others doing marathon shows on CNBC and Bloomberg, but as days go they become less confidence in their bullish arguments. If you follow stock market closely you should remember that Michael Darda was up beat all the way into the late summer 2008, surprise surprise! We call them natural bulls they never give up, they are always bullish.

There are some bulls who did not give up yet and weak hand bears who rush to cover their short positions as soon as they see some buying, that's why we witness extreme moves to the up side like June 8th-9th with no follow up. These moves are classic short squeeze right from text books. I'm looking to violation of 1040 support level. When S&P500 breaks 1040 it would give bears more confidence to hold to their short positions. If you are a bull you should pray to God that some how S&P500 gets above 1100. This is the "value trap" not a buying opportunity. Note S&P500 below 1100 is not a buy.

I'm neutral in short term as long as S&P500 moves between 1100 to 1040, but I will remain bearish in intermediate and long term.

Friday, June 4, 2010

Unemployment Rate Chart (06/04/2010)

Employment Situation:
Nonfarm Payrolls:430,000
Unemployment Rate:9.7%
Total Unemployment Rate:16.6%

Ahead of Employment Situation Data

In a couple hours we are going to get the job report. You must subtract 450-500K census workers from the raw data. My most optimistic forecast for Nonfarm Payrolls would be 640K to 700K. If we get anything below 600K market should tank sharply. Everybody is looking for an excellent employment data, therefore the surprise element is out the window. It's impossible to forecast what is going to play out on Friday. As I mentioned in my previous post. You must pay attention to 1100-1105, 1120 and 1150 resistances in coming days. It should give you a clear perspective on market direction.

The European Economy in a Nutshell !