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| | | 12-21-12 | | | | | | Not only are the folks in Washington inept, they are serious thunder stealers. We’ve all been so focused on the fiscal cliff that we've all but forgotten the end of the 25,000 year Mayan calendar. Supposedly on December 21, at which time - depending on who you talk to - the Earth's poles will reverse, the Sun will disappear for a while, and a select few will be saved. Higher taxes and a stalled economy don’t seem so ominous compared to eternal darkness. Perhaps the precipitous slowdown in market activity this week is not due to the stalled talks, but the anticipation of the end of the world. A 401k plan doesn’t really make sense for an impending apocalypse. Yes, the Mayans and their doomsday followers may be limited to the societal fringes; the mainstream is in fact growing worried. Just four in ten Americans believe that a deal will be reached to avoid the fiscal cliff by years end according to a poll released by the Pew Research Center Tuesday morning. Plus more than 110 companies have announced special dividends totaling more than $22 billion this quarter – more than three times last year's fourth-quarter total, according to Markit Equities Research. The payouts are aimed at beating a potential increase in tax rates for dividends. Dividend payments are currently taxed at 15 percent, but the rate could go to 43.4 percent for some top earners if the Bush-era tax cuts expire. Still, at these levels, the “no news is good news” pervasive mentality of the US equities markets has priced in a deal getting done. As for the Mayan question, it seems to be that most folks will still be showing up for work on 12-21-12. Unfortunately, that includes Congress, the administration and the folks at the fed.
Trade well and follow the trend, not the perma-bull OR perma-bear “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 Edward Anderson
Results: 5.5 points per contract and I stopped trading at 12pm! 11 points total!!!
Quotes: " I have been doing this a long time but I am glad I signed up for the program! I like the program very much!!!" | | | | 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 Futures Pricing in a Decline in Volatility VIX December expiration is 2 weeks away--the last trading day being December 18th. While spot VIX has risen 13.7% from 15.06 on 11/29/12 to 17.12 within 3 trading days, VIX December futures has risen on just 8.2% to 16.5 and is now trading at a discount to spot VIX. VIX January futures also rose a mere 5% during the same 3 trading days. VIX Jan futures are trading at just 4.3% premium over spot VIX. Volatility or VIX is often binary, meaning it either drops quickly to a lower equilibrium or rises quickly to a higher equilibrium. Furthermore, when front month VIX futures trades at a discount to the spot VIX, one of two things happen--either VIX is seen at its high equilibrium, therefore vulnerable to sharp declines or the VIX futures market having misjudged the risk environment spikes up along with the VIX. Expecting that VIX may have hit its upper ranges and could easily fall, we looked at the risk vs reward picture of buying the Weekly VXX 30.5/29.5/29 broken wing butterfly put spread. Some events that could make VIX spike from here, obviously is failure of fiscal cliff talks, but also the possibility of US being pulled into a war in Syria.
| | |  | | | | Currency Spotlight | | | | GFT one of the largest forex brokerages in the world decided to pull out of the U.S. market this week. The decision was a surprise and angered several U.S. and Japanese clients. Initially traders were emailed the following on Sunday evening: GFT will delay the scheduled 5:00 PM EST market opening Sunday, December 2, 2012. We anticipate a two hour delay and are planning to open at 7:00 PM EST. Eventually their homepage posted this message: GFT has made a business decision to move our U.S. retail forex trading accounts to one of our valued partners. Very quickly traders discovered they could only exit positions and not enter into new ones. The key words are “valued partners”. The valued partner for U.S. clients is TD Ameritrade; we are not sure who will get their Japanese clients. This business decision might be an opportunity for GFT to penetrate a very large book of stock traders. As a privately held company, GFT took advantage of this opportunity to do whatever it pleases. In addition they freed up about $20 million that was used for capital requirements. It might be very Merry Christmas for Mr. Tilkin (CEO & President of GFT). After the frustration settles and before traders get excited over the idea of benefitting from the unification of TD Ameritrade and GFT, remember how the merger with TD Ameritrade and ThinkorSwim went. Partnerships and acquisitions of this magnitude tend to never go smoothly, especially when complex trading platforms, various liquidity provider feeds are involved.
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|  | | | | Watch List | | | We faced slower market conditions again today. It is that time of the year where we will see lower volume in stocks, but I am surprised at the lack of volatility. With the pending Fiscal Cliff issue hanging over the market, it would seem to make certain sectors benefit from the uncertainty, while we would see people positioning themselves for some value plays. Also we should be getting movement from people liquidating their position taking whatever profit they can. On top of all the dividend plays being pushed into this month, the fear is that if the Fiscal Cliff issue is not resolved, the fallout of raised taxes would be enormous for companies on the dividend payouts.
Netflix and Disney announced a partnership today and Netflix responded by jumping 14% during the trading session. Now they didn't disclose the dollar amount, but estimations are wide ranging from hundreds of millions to billions of dollars. To put it into perspective, Netflix is valued around 4.8 billion dollars hereabouts. So if they had to outbid the likes of Hulu and Amazon to get the services of Disney among other channels and shows they offer, you can only imagine how much they had to cough up to win the bid. While it might be a short term bull play here, I would not be surprised this stock make a run and then come back down to earth like it has in the 2012 calender year.
I would expect these market conditions to continue. Look for weaker volume overall in the market, but increased activity in stocks that are offering early dividend plays. Keep the positions shorter term and look to take profits early and often. Open Position: IBM Stocks to Watch: IBM AAPL GOOG PCLN RIMM FB NFLX GMCR BAC C GS CAT FSLR TIF | | |  | | | | Futures Data | | | ES 1408.50 / 1404.00
POC… 1406.50
YM 12975 / 12941
NQ 2669.50 / 2657.00
Notes from the Pit
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