The Best ETN (and therefore the most dangerous)

Take a look at the spread between LSC and DJP starting in late June 08.

Clearly this post is a little late to the party, but... WOW.

LSC is an ETN that replicates a technically traded long/short commodities index. It offers a compelling advantage over other commodities ETN's like DJP, and thus I will keep an eye on it. To track the underlying, Bloomberg SPTICTR:IND.

Sadly, it is less liquid than DJP, and contains credit risk via HSBC USA.

Clearly the credit risk is very real as HBC is barely a week from its lows.

A debt product whose underlying is a technically managed commodity index is awesome for many reasons, but until HBC can get its act together, I'm too chicken to jump into this pool.

War on the Way?

"It's War" declares Matt Drudge following an English report about an Indian EDITORIAL. Yes, an editorial just might start WWW3 if people continue to read the headlines. I mentioned the possibility of the markets pricing in a major war a few weeks ago here, but I didn't think it would happen a week later.

Volatility Charts

Fortune favors the bulls as the rally continues.

More stocks are getting bullish and the volatility is dropping.

Stocks above the 50dma are increasing, but we don't have a confirmed trend.

There are an increasing number of stocks making all time highs, but it's still meager.

The spread between short and long term volatility is normalizing, but it may indicate complacency.

Risks are still high, but a proverbial toe in the water won't drown bullish speculators if they play the right sectors. Staples, Telecoms and Heath Care aren't moving, but Basic Materials and Energy are flying high. The bond market continues to exhibit a flight to quality, so remain cautious.

Twittered Tickers

Thoughts from the collective at StockTwits.com

I suspect Google stinks, but I'm not short yet. It will rally, but there are better opportunities.

General Motors is also terrible, long or short. Better stocks abound.

C continues to rally, and thought it has hit my 7.60 target, there is no reason to run. 12 anyone?

I take a lot of shit for hating on Apple. Thus, I have nothing to say.

SKF continues to destroy the undisciplined, but I bet this will go to 300 again.

With the market in rally mode, even the worst stocks will rise. Twitters seem focused on big news driven names, and I suspect that is not the most fertile group for easy trades. I still think SKF will be a winner, but due to its enormous volatility, it requires a keen awareness of price trend and proper position sizing according to your personal risk tolerance.

UUP & $USD Divergence?

Any one have thoughts on the following divergence?

The relatively new Dollar Bullish ETF UUP is indicating a new downtrend.

On the other hand, the $USD, a index with a bit more trading history, seems to be at the lower range of an uptrend.

Since they share a 1:1 correlation, this aberration might be explained by the graphing technique I'm employing. The charts are scaled by average true range over some really long period I've arbitrarily set (9999999). Since UUP has little trading history and less long term volatility, it might exhibiting a closer relationship to its relative trend line. Due to its longer indexical history, $USD has a greater range, and thus the scale is probably reflecting it's volatility. I suspect that many traders will be getting short UUP due to the chart, but perhaps it would be better to investigate the nature of the underlying $USD.

To put this into perspective, let me detail my past Thanksgiving. After a glorious feast centered around a enormous Turducken, I went out for a smoke with a few friends. A curious looking fellow who was clearly unemployed and missing a few screws came up to us and began a classic rant. "9/11 was an inside job, Planet X is coming, 2012, New World," yadda yadda. Since I believe all that shit, it was embarrassing to hear it from a clearly deranged lowlife for whom I have little sympathy. The nail in the coffin was his insistence upon an economic collapse, and the fall of the dollar, which is more conspiratorial logic that I agree with. Then it hit me.

When the unemployed and homeless are shorting the dollar, beware. All logic screams that the dollar should fall. We've all seen the charts, we know the debt burden is incalculable, we know that the Fed can print money. But the dollar is rising. Scores of analysts with enough degrees to melt the steel core of the WTC say that the dollar must fall. It isn't. Trade what you see, not what you believe.

Twitter Tickers

Some ideas from the global consciousness of StockTwits.com

ENER is rallying into resistance.

So is ESLR.

The solar plays look like better shorts, but you won't find me fighting the uptrend.

Gold miners are showing some encouraging strength above support, how about a scary pullback?

CPB can rally, but I suspect Staples will under perform relative to other sectors during a bounce.

For the most part, I don't think this is a stock picking environment. There are so many risks out there, I don't see how taking on company specific risk can be advantageous. Though there are some interesting stocks that have tons of cash per share and low debt, I'm more interested in sector themes to be traded via ETF. Gold miners via GDX remain the sector to beat, and if this market can maintain its current short term uptrend, it won't matter what you own, EVERYTHING will rise.

Turkey Talk

A few ratios and some interesting developments.

US Equity / US Bonds have reached a prior level of support. Watch for resistance.

Another day of advancing volume significantly outweighing declining volume.

The US Dollar looks ready to break its recent and sharp uptrend, implying slowing momentum.

Silver is putting in a nice base, and is beginning to look like a buy.

More evidence of a potential reversal in sentiment is coming to light, but risks remain high.

Wednesday Wrapup

The short term uptrend grows stronger by the day.

The Bullidex (Bullish Percent Index / Volatility Index) has finally registered some new X's.

More stocks continue to rise above the 50dma on decreasing volatility.

Finally, an increasing number of stocks are trading at new highs.

Market internals continue to strengthen as an increasing number of stocks are rising with less volatility. With many companies trading at low valuations, unprecedented levels of liquidity, and a psychologically stunned general public, the conditions remain optimal for a rally.

Nothing New To Report

The market made some moderate progress, nothing too exciting. Short term the trend is up, long term we're still looking grim.

Top Five Twitter Tickers

RIMM will take months to repair, and I have no love for their products.

Google barely budged today, and as much as I love the company, the stock is shit.

People who won the C game bailed early, but it might push to 7.60 before collapsing in half.

Another terrible tech stock. Macs are lame, Jobs will die, Vista will PWN U!

SKF gets more attractive each day at these levels, but the tide has yet to turn.

Long term caution is advised as this is a deadly rally for optimists and bottom pickers.

3 Ratios To Watch

American Equities vs. Bonds are rallying in a downtrend, but approaching resistance.

The stabilization of Miners vs. Gold reduces deflationary worries.

Relative to gold, the 30Y is bouncing off long term resistance, but remains in an uptrend.

Signs of stabilization are emerging as these ratios exhibit mean reversion.

If volatility can stabilize, we may be setting up for a meaningful uptrend in equities. Nevertheless, it is still too early to commit anything more than a handful of dollars to equities overnight.

Monday Market Mumblings

The market is showing signs of internal strength.

There are more bullish stocks above the 50dma with generally lower volatility.

Advancing volume is much heavier than declining volume.

Judging by these indicators and recent price action, the tape is saying up, up and away. We are still in a long term bear market, but there is no reason to short these rallies yet.

On a side note, those fuckers at Citigroup are my new heros. I want to fuck things up so badly that the government has to hand me billions of dollars, and yet, maintain a multimillion dollar salary. They just don't teach that kind of shit at community college; long live the destroyers of wealth, for they give it value.

Mining for Gold

With Friday's big move in the shiny yellow stuff, a good deal of noise is being made about the future of the gold sector. Recent price action suggests that this is a rally in a bear market, and we're approaching overhead resistance. Moreover, the recent rise was substantiated by weak volume, suggesting little conviction amongst buyers. In its favor, the sector made a higher low in the recent wave of selling, which suggests relative strength to the overall market.

Fundamentally, there are many reasons to like Gold and its producers, things like the new Citigroup bailout come to mind. Nevertheless, if the credit crisis persists (read: Paulson's strong dollar policy), then gold's luster will remain tarnished. With questionable technicals and murky fundamentals, this is a risky long, and a potential short until further notice.

Top Five Twitter Tickers

General Motors is about as relevant as horse drawn carriages.

AdSense sucks, and so does Google's future revenue.

I'll keep the Gold, you take the Man Sachs.

Citi is not only asleep, it is comatose, and probably dead.
Leveraged destruction of the finance sector remains the best trade of the year.
Equities suck, and though we may be oversold, the long term picture grows increasingly grim.

Weekend Review

Not much has changed, even with Friday's +6% close.

Even fewer stocks breaking to new highs.

Optimistically, a couple stocks are climbing above the 50dma.

Gold showed good strength, and GDX was up 26%.
But gold is approaching resistance, so stay cautious.

The market is still terribly weak. Gold miners may offer some upside potential, but I suspect it is a better shorting opportunity until the broader market can find some traction. Treasuries are getting ridiculous, but it is too early to get short the long end of the curve. Keep an eye on TBT.

Look Out Below

Here is a long term look at how bad this market is for investors.

Nothing is going up and the volatility is high.
Banks are making a run to 0.
The only potential silver lining is the catastrophic ratio between down/up volume, but I wouldn't wanna try and call this capitulation ahead of time.

All in all, the market is clearly unable to catch a real bid, and as we begin to see 12/14 year lows get breached, people will get increasingly fed up. I suspect tomorrow's open will be rough for the longs, but I'm keeping my eyes open for a "WHY THE FUCK ARE WE GOING UP?" rally.

P.S. Am I the only one happy to see the efficient market theory consume Berkshire Hathaway? Somebody buy Warren a Cherry Coke once you make a killing short AXP.

Buy Energy & Sell Finance

A theme from the first half of 2008 is reemerging, and it warrants notice.
How far can the spread between DIG and UYG get?