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| | | Mini-Crash | | | The market was not happy Wednesday. It opened lower and never caught a bid. In fact, despite the gap-open lower, the market immediately went offered.
There were no buyers.
As humans, we all want to assign a reason as to why the market fell but like most of the time, there probably isn’t one answer. In my opinion there were four; Obama’s victory, Germany, Greece, and earnings. I will keep it brief.
President Obama’s reelection victory made 50% quite happy and another 50% sad; however, despite which side of the political isle you are on, president Obama’s reelection was bad for Wall Street – or so we were told. As it turns out, it may be true. The reason: promised higher taxes. Wall Street took president Obama for his word and sold the market in anticipation of said higher (promised) taxes. This is bad for business, so the market dropped with his victory.
If president Obama is similar to his 1st term, however, Wall Street will soon breathe a sigh of relief as the president reneges on his promises and does not raise taxes at all. (Yeah, don’t hold your breath.)
Germany: The cat was let out of the bag this morning when Super-Mario of the ECB essentially said “Uhh, the debt crisis in Europe is beyond my control and now Germany itself is being hurt by it. This is bad because Germany is paying for these bailouts. What the heck do I do now?” This is bad for business too. What do the kids do when dad is broke?
Greece: Greece is on FIRE (literally) again. This is bad for the can-kicking exercise in Europe, and bad for the aforementioned Germany. When Greece tells the Eurozone to go to hell, Germany will lose a small fortune.
Earnings: This quarter’s earnings stink and they aren’t getting better, which is bad for the market.
Like I said – brief. ALL of this was well known IN ADVANCE. Were you surprised? If so, stop drinking the government’s Kool-Aid. | | 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 Scott Turkell
| | | | | | 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 Head Fake 2.0 Despite what the political pundits may say, today's fall in the stock market was not because of Obama's relection. In fact, SPX futures prices were unchanged before economic reports from Europe hit the markets at around 7:00am EST.
First, German industrial output was reported to have fallen 1.8% in September, far greater than expectations for a 0.5% decline. Second, the European Commission slashed forecasts across the board, seeing German 2013 GDP growth of 0.8% vs. 1.7% previously and U.K. growth of -0.3% vs. +0.5% previously.
They also reported that Spain was expected to miss its budget deficit targets by wide margins, and Greece's Debt/GDP to be 177% in 2013 and 188% in 2014. Finally, (one-two-three punch--knockout) Mario Draghi said the weakness in Europe's economy has begun to affect Germany. Today in class, we analyzed a contrarian play on volatility having spiked today by looking at selling the Nov VXX 32/35/37 iron butterfly spread for 1.78 credit.
| | |  | | | | Currency Spotlight | | | | Every now and then, a story emerges out of Europe that becomes a potential game changer. The Greek Tragedy, a Portugal Bailout, Spanish Banks, a German Recession, and the list goes on and includes an occasional kicking the can down the road headline. During the past few weeks, the focus fell heavily with Greece on whether they would secure 31.5 billion euro in bailout money. The key story very well could end up being if the European Parliament is unable to pass its budget for 2014 – 2020. This story could be a very grave problem for Germany and the troika. Yesterday, David Cameron, the British Prime Minister had dinner with Chancellor Angela Merkel of Germany. Germany’s nervousness is growing, as Britain, a member of the European Union (27 –nation bloc) could very well veto 100 billion euro increase for EU’s budget. This type of event could be disastrous for the euro currency. Another solution is for Britain to potentially leave the European Union. At the very least, Mr. Cameron will stronghold his agenda and attempt to ease the financial burden on Britain. Other countries will likely follow. Regardless of how this plays out, extra pressure will fall on Germany. In Greece, the protests are growing, but leadership is still succeeding in keeping Greece in the euro. Yesterday, 80,000 demonstrated outside Parliament, while the austerity bill passed. Greece will get its next tranche of bailout money. The eventual outcome is still likely that the Greeks will want to leave the euro and when they do, hopefully they will be able to move forward. The big concern for European officials is that epidemic that hit Greece could come to Spain and Italy. While both are not in the same position as Greece, they are getting closer. The only thing preventing the euro from collapsing is the ECB.
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|  | | | | Watch List | | | The market took a dive today and its easy to assume it was all due to the election. All in all I feel it was only a small part of the reason, and I am putting more emphasis on the fact that Draghi came out and spoke about the state of Germany. Now Germany was supposed to be the fiscal powerhouse of the EU, and the numbers they just came out with was startling to say the least. The market reacted negatively to that news, not Obama take office again for anther term.
Most stocks took a dive and kept at it with some small pullbacks in the market taking place through out the day. The only time the market stalled out was right before Boehner spoke about the upcoming Fiscal Cliff and the measure they are looking to take. The market was not in favor and sold off right after he spoke all the way into the close.
AAPL had a rough day and the down trend continued with even more momentum! Do not be surprised to see AAPL test the $550.00 mark and meet some stiff support. I feel it has a great chance to break that level and test the $525.00 price point which I have been alerting our program on for about a month now. AAPL will recover at some point, but do not expect it any time soon. With the revision of their Q1 guidance and increasing sales for the competition I can't see AAPL ever hitting the magical $1000.00 mark analysts have been saying is a GIVEN. I certainly don't hear those talking heads saying it anymore. Open Position: CHKP Stocks to Watch: AMZN AAPL GMCR NFLX RIMM GS BAC FSLR IBM | | |  | | | | Futures Data | | | ES 1401.50 / 1390.00 POC… 1396.75 YM 12976 / 12880 NQ 2630.75 / 2610.75
Notes from the Pit
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