| | | | |
| | | Fiscal Cliff Notes | | | Democrats want to increase tax rates; Republicans say no way. Republicans seek major changes to entitlement programs; Democrats are divided. Republicans want to nullify a package of automatic spending cuts; Democrats won’t go for it without major concessions.
Yes, our political system can be boiled down to the goings on of a fourth grade classroom. Jimmy wants Susie to give her notebook back; Susie says Jimmie is mean. Susie says Jimmy shouldn’t throw rubber bands at her in class....and so on.
The market (and all of us) just wants the massive dysfunction to end before we go off the cliff. In a low volume Veteran’s day session, the market was basically unchanged but still sits near last week’s lows.
Moving from fourth grade to say freshman year, I thought today’s slow trading session would be an opportune time to review what’s at stake, provide “Cliff Notes” on the looming economic crisis courtesy of the International Monetary Fund. Current law implies automatic tax increases and spending cuts amounting to $700 billion in 2013—a tightening of around 4 ½ percent of GDP. If realized, this would push the country into a recession with large international spillovers. The severity of the economic effects would partly depend on the duration of the cliff. Even if the ―fiscal cliff were quickly unwound, the damage to the economy could be substantial, especially if consumers and businesses were faced with continued uncertainty about tax and spending policies.
Moreover, the absence of a deal on raising the debt ceiling also conjures up the specter of a dramatic tightening or even technical default. Failing to do this in a timely fashion adds to risk of financial market volatility. While investors are treating such events as tail risks—as U.S. policymakers have in the past always been able to pull back from the brink—the shocks, if realized, will be very large.
At the same time, U.S. debt dynamics are not sustainable over the long run. Failing to agree soon on a credible plan to put the federal debt on a sustainable path could exacerbate uncertainty and thereby detract from activity; over the medium to long-term, it could lead to a gradual erosion of the reserve currency status of the U.S. dollar and put upward pressure on Treasury bond yields.
| | Trade well and follow the trend, not the so-called “experts.” | | Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banking mafia. | | | | | | | | | |  | | | | is a leading investment education firm that empowers traders to achieve and surpass their financial goals. More than 50,000 students have used Larry Levin's proven techniques for powerful results. | | | | | |  | | | | Congratulations to Jeff Lynch
| | | | NOTICE: Testimonials are believed to be true based on the representations of the persons providing the testimonials, but facts stated in testimonials have not been independently audited or verified. Nor has there been any attempt to determine whether any testimonials are representative of the experiences of all persons using the methods described herein or to compare the experiences of the persons giving the testimonials after the testimonials were given. The average reader should not necessarily expect the same or similar results. Past performance is not necessarily indicative of future results. No person was compensated for providing a testimonial. | | | |  | | |  | | | | Volatility Commentary | | | Vix Plunges 10.37% Normally, a plunge in the VIX like we saw today is usually accompanied by a solid rally in the stock market. Yet, S&P500 Index barely closed up +0.15 to 1380.00. What gives? There are a few reasons why VIX plunged today despite a market that was unchanged--in other words, showing continued weakness.
First, today was Veteran's Day and many traders were away, evidenced by today's paltry market volumes. Second, no significant economic reports are scheduled until at least Wednesday afternoon with announcement of FED minutes having a potential to move markets. Furthermore, any US economic reports that incorporate the period of Hurricane Sandy's devastation are not going to be taken at face value. Third, Thanksgiving Holiday is next week, and market makers would already be discounting the likely scenario of little market activity next week.
Finally, I also believe that volatility players are discounting the likelihood of some form of "cooperative" language or action to address the fiscal cliff issue. Perhaps, government may agree in broad principle to address the fiscal cliff, but somehow postpone concrete decision making until 2013.
| | |  | | | | Currency Spotlight | | | | Japan’s economy continues to disappoint. Japan’s GDP fell an annualized 3.5% year-on year. The worst decline since the devastating earthquake and tsunami that hit the northeast portion of Japan in March 2011. Another negative quarterly print of GDP will be needed in order for Japan to officially be in a recession. The situation is rather bleak and not many economists expect their situation to improve, as the export driven economy continues to suffer with a yen that cannot manage to weaken.
The normal routine is now for currency traders to hear a wide range of Japanese finance ministers claim they will need to intervene in the FX market to prevent the yen from strengthening. Yesterday, Mr. Seiji Maehara, the Economics Minister hinted that “powerful policy easing” may occur in the next few weeks. Mr. Maehara would like to see more foreign bonds purchased, but the Bank of Japan Governor Masaaki Shirakawa did not support this idea at all. The effects of their unlimited easing over the years have not yielded the right results. Japan's central bank may choose to wait until other global issues are handled, such as the fiscal cliff in the U.S. and Greece receiving its latest payment.
Price action on USD/JPY has respected the recent uptrend support starting from September 28th. In order for further upside to continue, we will need to see price trade above the 200- day Simple Moving Average, which currently resides near the 79.66 area. In the event we see a breakdown below the 79.00 level, price could further extend its bearish leg down towards 77.40. If the U.S. economy posts some positive prints this week and we do not see a continuation of last week’s flight to safety, the yen may moderately weaken, but unfortunately not to the levels that are needed to support a pickup in their economy.
| | |
|  | | | | Watch List | | | With the holiday being extended or celebrated today, the market conditions were quite flat. Banks were closed and it seemed that the big money was still on vacation as action and volume was light. So my expectations are that the rest of the week will be in a state of recovery from the hard sells, and if there is still uncertainty going into the end of the year, the downtrend will pick up more and more momentum.
Now I just want to take this moment to say a grateful and humble thank you to all of the Vets out there and for those who serve now to protect our freedom and causes. The sacrifice and effort you have put in will never be forgotten by me, and I would like to acknowledge a friend of mine that did a great service for our country. USMC Sergeant Joe W. Suh of Unit 1st MAW, MACS 4 who did two tours of duty including Operation Enduring Freedom. It's guys like him that make me greatly respect my life and my place in this world. Now with the utmost respect this is not about political banter, or do I have any motive behind this except to say thank you to Joe and to all the fellow Veterans out there. Oo-rah Joe.... Open Position: CHKP Stocks to Watch: AMZN AAPL NFLX GMCR C BAC PCLN DIS HD | | |  | | | | Futures Data | | | ES 1379.50 / 1374.50 POC… 1377.00
YM 12793 / 12749
NQ 2591.25 / 2575.75
Notes from the Pit
Click Here to Read
| | | | | |  | | |  | | |  | | | | Dan O'Brien - Smaller Profit Targets | | |  | | | | | | | | IMPORTANT NOTICE: Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. Nothing in our website shall be deemed a solicitation or an offer to Buy/Sell futures and/or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on our site. Also, the past performance of any trading methodology is not necessarily indicative of future results. | | | | DAYTRADING involves high risks and YOU can LOSE a lot of money. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not actually been executed, the results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those talked about in our site. | | | | | |
No comments:
Post a Comment
Keep a civil tongue.