Market Topping Out?

Back in February, I said the market should come back to 10000 and then head downward. Well, 10000 is an approximate number. Maybe 9600 is close enough.

Benenke

Benanke said "recovery", and that convince a bunch of people to jump into the market.

That ought to be the last batch of "investors" there ...

10 Trade Days Til Expiration

The market has run too fast too far. I think there will be some sort of correction before option expiration day.

Look for the following to correct themselves:

Oil - XOM etc

Commodities sector

IBM, AAPL, etc.

Japan - EWJ

Gold & Silver

Bank Test

Amazing.

The Fed projected the 19 largest banks will suffer a collective potential loss of $599 billion, and this is being casted as positive, not so bad.

The banks are doing okay now because of $700 billion of tax payer charities. But this party won't last for ever.

What's the total market cap of those 19 companies? A lot less than $600 billion, I would think. If they were to lose $600B, then ALL of the current shareholders are toast.

RE: Citi on fire

 

The graph on the following link is very interesting:

 

 http://finance.yahoo.com/tech-ticker/article/226937/How-Bear-Markets-End

 

I think it basically says that we are not done yet.

 

 

http://trendmester.blogspot.com

 

 

Citi on fire

 

The government and major bond holders are willing to buy Citi shares for $3.25 a share, yet the market is selling to down to $1.40.

What gives?

 

I think Citi shares are incredibly cheap right now.

 

 

http://trendmester.blogspot.com

 

 

Oil Matters

Since last December, there’s been a tremendous increase of retail investors trying to speculate on the oil market.

 

Oil is a physical commodity that is traded on the commodities market with monthly delivery dates. Speculators who do not wish to take physical delivery have to rely on future contracts, and have to roll those contracts forward to future months before they expire on the third Friday of each month.

 

This roll-over activity created two interesting phenomenon:

 

(1)     The farther out month contracts are more in-demand than near month contracts. This (among other reasons) have created a phenomenon called ‘Contango’, which basically says current and near month contracts are cheaper than further out month contracts.

(2)     On the near months contracts – current and next month mostly – the contracts are in-demand for about a week after the expiration day of the previous month’s contract. After that the selling takes over until the next expiration day. Part of the reason for this is that funds like USO want to be out of the current month contract by the end of the second week.

 

If you buy USO or other instruments that rely on near term contracts, the Contango will kill you – you’ll lose 10 – 15% each month as the fund rolls over to the next month contract. Compare USO to another fund USL which uses a more Contango-tolerant strategy.

 

For short term trading, buying USO around the third Friday and selling near the end of the month seems like a good strategy.

 

Longer term, we’ll need to see a reduction in Contango before bullishness can take off.