Alchemy Real-Time Stream From Monday, 10/11/10 - VanEck Biotech ETF (NASDAQ:BBH)

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Last Call: To The Table 10/11/2010 3:45 PM

"I've said it before, and I'm going to say it again, because it cannot be overemphasized: the most important change in my trading career occurred when I learned to divorce my ego from the trade.

Trading is a psychological game. Most people think that they're playing against the market, but the market doesn't care. You're really playing against yourself. You have to stop trying to will things to happen in order to prove that you're right. Listen only to what the market is telling you now. Forget what you thought it was telling you five minutes ago. The sole objective of trading is not to prove you're right, but to hear the cash register ring". -- Marty Schwartz

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There goes 11,000.

About 45 minutes ago the negative Ticks started and they've been going ever since.

Not huge, but enough to know stocks down a notch.

True, and we know coming in today that there were indications of an overbought market, so this isn't shocking. Surprised that i's not more violent, and that could be coming tomorrow.

Meanwhile, I've become convinced that the Fed is screwing up, as they always do, and setting the stage for the next great inflation, not deflation.

If that happens, Treasury Bonds are going to the embalming table, and they'll take the public on the same ride.

Back to update, and good luck into the close.

Stephen

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3:00 Final Lap

2:46 5 Minute ETFs

2:37 Meltzer or Saint Ben? I know who I would choose. Bernanke is a guy with a high I.Q., no doubts about that. But the institution of the Federal Reserve does something to people once they enter the place....they become dumb overnight. They are going to create the next great inflation

2:03 Retail stocks are screaming higher

2:00 Final Laps

1:55 Now an "18" handle on VIX......thanks to Saint Ben The Beneficent.....but you have to be foolish to be short, and so ride the wave as long as possible.....SLV close to that 21 Minute Buy TDST

1:37 Incredibly dead....no pulse at all....should be playing with corn. We know that something more trendy will come from this in equities within a day or so at latest

1:00 5 Minute ETFs

12:57 Who are the people making fortunes in Agriculture? Gartman apparently took a nasty spill on the short side in Corn -- he's claiming that the USDA crop reports are rigged....it's an incredible run of limit up days, I guess similar to what happened in the 1970's

Canonized 10/11/10 11:45 AM

They're canonizing Bernanke the way they did with the Maestro Of Moral Hazard, and it will come to a bad end.

Tepper is talking his book when he goes on cable financial TV, but no doubt he's protected on the downside unlike most people who are riding this Bernanke wave.

To see VIX blowing down through that Weekly Sell TDST, now with a "19" handle, says it all -- Bernanke will bail us out no matter what happens.

He will until he can't.....that's inevitable

Back after lunch.

Stephen

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11:25 21 Minute Trin

11:18 Some respected investors, including David Tepper, the billionaire hedge fund investor who runs Appaloosa Management have publicly extolled the virtue of a “Bernanke put” for the stock market. Mr Tepper, for his part, has taken to the airwaves arguing that, .should the economy weaken further, then the Fed's embrace of renewed monetary easing should protect equities from the risk of losses. The central bank's stance, in other words, amounts to an equity put option for investors

Don't fight the Fed. That is the mantra driving financial markets now. As the prospect of another super-sized dose of cheap money from the world's most powerful central bank has gained traction,

the dollar has tumbled. Almost everything else, be it Brazilian government debt, the Thai baht, UK gilts, gold or the price of crude, is rising. Equities, though, are among those assets that have felt the biggest impact from rising expectations that the Federal Reserve, under chairman Ben Bernanke, will revive emergency efforts to pump money into the US economy through the process known as quantitative easing – in other words, buying government bonds and other assets to stimulate bank lending. Since the Fed's last policy meeting in September opened the door to another round of bond purchases, being dubbed QE2 in financial markets, all the main global stock indices – S&P 500, FTSE 100, the FTSE Eurofirst 300 and the Nikkei 225 Average – have rallied strongly. Emerging market equities have surged, too, boosted by the idea that the money created by the Fed's buying of bonds will end up in other assets worldwide. . Weaker than expected US jobs data on Friday only reinforced speculation that the Fed might resume its asset purchase programme when its interest rate-setting committee meets in November to prevent sustained disinflation and a feared double-dip recession. Some investors believe that the Fed itself has been encouraging that belief. Speeches by Fed officials have drawn attention to its unhappiness with America's fragile economic recovery and the fact that core measures of inflation sit below the bank's targeted level. There is a widespread view the Bank of England could also act. “Some market participants believe that QE is not a good idea from a fundamental view, but Bernanke believes it and, as a result, we view QE as a certainty,” says Richard Tang, head of fixed income, forex and equity sales, Americas at RBS Securities. As those expectations have hardened, so the relationship between equities and US Treasuries, which have tended to move in opposite directions this year as investors' appetite for risk has fluctuated, has reversed. Now stocks and bonds are rising together. One reason for this is the falling dollar: a cheaper US currency is good for S&P 500 companies, who derive half their revenues from outside America. Another reason is that a heavy dose of quantitative easing, assuming it is successful, will not only support the bond market, but lower borrowing costs for households and companies, stimulating growth. ......... For stock markets bulls, much is riding on the Fed delivering QE2 on a scale that justifies the run-up in share prices. The problem is nobody knows how big any asset-buying programme might be. Too small and the market will be disappointed. Too big and sharply higher inflation may follow. Beyond questions about the scale and scope of QE2 – or the “Bernanke put” – a bigger risk for investors is that quantitative easing fails.

Tony Crescenzi, portfolio manager at Pimco, says the effectiveness of quantitative easing is “a major unknown even for the Fed, as few truly know the effect that a given amount of QE will have on financial conditions, and few truly know the impact that any loosening of financial conditions will have on the economy”. The pessimists point to Japan, where quantitative easing has failed to stimulate the economy, or the stock market, over the past decade. Some analysts argue that, if US banks remain reluctant to extend credit, then the Fed is unlikely to prevent a prolonged period of anaemic growth, or even another recession. There is no guarantee that QE2 will work, says Ken Wattret, chief eurozone economist at BNP Paribas. In Japan's case, deflation – falling prices and economic stagnation – was the outcome. He adds however: “The difference in the US and the UK is that they have moved much more quickly than the Japanese did and the financial injections have been much greater. This means the chances of success are much higher, which is good news for equities.” Mr Tepper, and other fund managers betting on a Fed-inspired recovery rally, will be hoping so. -- FT 10/11/10

11:04 I'm putting a stop on SLV at 22.30 .........more and more it's looking like deflation is not the problem it seemed to be. The Fed and their QE2 coming up after the election are possibly making inflation the next burning issue. They are doing everything possible to rule out deflation, but there are only so many fingers to plug up all the holes......it would be fitting for the equity market to collapse right after the election and that is my template for now.....they ran out of bullets (fed funds) and good luck to them

11:00 5 Minute ETFs

10:34 I bought a 10% of equity position in Silver ETF (SLV)

10:12 I bought the Nov Spider 116 puts to open, 3/4% of equity......I look at that top panel on the Two Oscillators chart, among other things

10:00 5 Minute ETFs

9:40 VIX crashed down through 20....saw that Larry Williams, who sometimes has good calls if you cut through the hype, is very bullish on stocks due to his "Will Go" indicator turning up

9:15 Look for Pivot Range support initially, then if the Sell TDST comes into play we've got a bad day going.....beware of the first 30 Minutes after the opening

9:12 Daily S&P 500 and Dow Industrials

8:57 Much potential for market dislocations.....and Bird made the point that if there is one person to make trash of that Presidential Election Cycle in stocks, it is this current President

8:55 Corn prices have surged more than 15 per cent over the past two days, making the jump one of the biggest in recent history and prompting some analysts to warn that the world was fast moving into another food crisis. UN officials acknowledged over the weekend that the balance between supply and demand in the corn market was “fragile”, but insisted that the world would not see a repetition of the 2007-08 crisis..........

Global economic co-operation was in disarray and further battles in the currency war looked likely after the weekend's international meetings of finance ministers and central bankers broke up with no resolution. The world's largest economies remained as far apart as ever on currencies. China accused the US of destabilising emerging economies by allowing ultra-loose monetary policy to flood the emerging world with money, while the US insisted the International Monetary Fund should intensify its focus on exchange rates and the reserve accumulation of China. The lack of any substantive agreements and brinkmanship on proposed reforms to the IMF is likely to exacerbate currency volatility in the month running up to the Seoul Group of 20 summit. Mohamed El-Erian, chief executive of Pimco, the world's largest bond investor, said: "A once promising global response has now been replaced by inadequately co-ordinated national economic policies and growing frictions among countries." -- FT 10/11/10

8:35 Every bull is counting on this

A Presidential Reason to Buy Stocks

8:30 Currency Matrix

8:25 The San Francisco research firm TrimTabs reported that its survey of hedge fund managers conducted in early October with a unit of Barclays found that only 31% were bullish on

the S&P 500. Furthermore, only 37% of the 109 hedge fund managers surveyed in the past two weeks were bullish on any other kinds of stocks either, while 32% were neutral.

Keep in mind that this is supposed to be the smart money, and yet most have not participated in one of the most epic advances in stocks in the past decade. How could that be? My sources say the September surprise in stocks may actually have been engineered and dominated by sovereign wealth funds, such as the ones operated by the governments of Singapore and Kuwait -- and caught short-sellers and uninvested investors flat-footed. The first stage of a beta chase occurs when short-sellers cover their bad bets in bursts. Now it's one thing to cover, because that only saves you from losing money. The next stage is to reluctantly buy, and then to start getting with the program and borrowing to buy, and then finally to leverage and buy enthusiastically. This can happen even in a weak economy, as it did in 1995, because hedge fund managers are paid for performance, and they can absolutely, positively not let a big advance happen without them. They will add leverage until their fingers bleed from hitting the Get Me in Now! button. "While managers dislike stocks, bonds, and the greenback, many aim to lever up," said Vincent Deluard, an exec at TrimTabs. "Short rates are essentially zero, the 10-year Treasury yields a scant 2.5%, and real interest rates are negative. Where there's an incentive to increase leverage, managers will act." -- Jon Markman

8:15 I've had to make a change the updating of the Stock Sectors Page to Wednesday of each week. There's a scarcity of time to get it done on the weekend, and these are charts that I have to draw the trendlines in myself, can't delegate it to someone else

Big Cluster Of Daily TD Sequential/Combo Sells

10/8 Close -- Nasdaq 100 ETF (QQQQ) Combo Sell...Drug Index (DRG) Seq Sell...NYSE Comp Seq Sell...BLDRS Developed Markets 100 ADR Index (ADRD) Seq Sell...Biotech HOLDRs (BBH) Combo Sell... Precious Metals (DBP) Combo Sell...DB Gold (DGL) Combo Sell...Emerging Mkts (EEM) Combo Sell...MSCI EAFE Index (EFA) Seq Sell...MSCI EAFE Value Index (EFV) Combo Sell...Dow Jones Large Cap (ELR) Combo Sell...Pacific ex-Japan (EPP) Combo Sell...Sweden Index (EWD) Seq Sell...Singapore Index (EWS) Combo Sell...CurrencyShares Euro Trust (FXE) Combo Sell...S&P Global 100 Index (IOO) Seq Sell...Listed Private Equity (PSP) Seq Sell...Retail HOLDRs (RTH) Combo & Seq Sell...Silver Trust (SLV) Seq Sell...Software HOLDRs (SWH) Seq Sell...European ETF (VGK) Combo Sell...Vanguard Pacific Stock ETF (VPL) Combo & Seq Sell...S&P Biotech (XBI) Seq Sell...Consumer Staples ETF (XLP) Combo Sell...S&P Pharmaceuticals (XPH) Combo Sell

...and I mentioned this on Friday......

Weekly S&P 500 -- Interesting that at 1166.59 -- I mentioned this several weeks ago -- the TD Sequential 13 Sell finally becomes "perfected"....meaning it is valid when price gets above the close of bar 8....but it's been such a long time for it to happen that it may not be significant

........and in addtition, can't help noticing what the Commercial Hedgers keep doing. We'll know soon if they are complete morons, and whether this metric has much meaning anymore

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Note also that the top panel on this chart is about as overbought as it gets

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Weekly VIX is at a key level too. If it can plunge through that Sell TDST at 20.47, equities probably going much higher. No way to know if it can, but I'm doubtful

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Should we be worrying about inflation, not deflation? Inflation is a monetary phenomenon according to Milton Friedman, and the Fed is creating lots of it which has to go somewhere

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