The S&P closed +2.81 at 1068.30. Spot gold ended at $1,006.15/oz. The USD index closed +0.237 or +0.31%. Comex Copper was off 3.83% or 11.10 cents at $2.7850 per lb. The dealers I spoke to said copper weakness was due to talk of a slowdown in Chinese imports.

China

The Shanghai composite closed -3.20% before Friday’s open in the states. After topping in early August, Shanghai found support in Early September and has rallied from a low of 2770. The rally has taken the index to the lower end of my regression analysis. A short has signaled with stops above last week’s high and target at +/-2700.

Shanghai Composite - Daily

Housing

Toll Brothers has been raising capital — most recently on 15 September $250M of 10Y notes — to pay off shorter term maturities. By paying down shorter term debt, the company is attempting to protect itself from cash flow troubles. Coupled with paying off shorter term debt, insiders are hitting the sell button in large numbers. The CEO recently sold 1.58 million shares on 16 September. In light of these data points, JP Morgan upped the shares from neutral to overweight ($29 price target).

Disconnect

Ubiquitous as the signs of fundamental weakness are, the trend in equities remains one of re-risking as opposed to de-risking. Vol term structure (VIX/VXV) is indicating risk ahead. The credit market has priced in far more risk than equities. As tough as it is to fade this move higher in equities — on a technical basis — the earnings multiples have definitively priced stocks for a V shaped recovery.

Opportunity

In light of these cross currents, these times offer tremendous trading opportunities. In conversations with several traders last week, I sensed frustration at their performance to date in 2009. Odds are, if you were short last year, you were not long this year. It was very tough to nail it both ways. No matter, it’s about what lies ahead. The fourth quarter is upon us. Gains of large proportions tend to manifest themselves in Q4 each year. Are you ready?

Ready or not, one thing is certain. The beat goes on.

After some investigative journalism in the windy city last night, I find myself back in the office looking at the final scores. The S&P closed off 3.27 points at 1065.49. Spot gold sits at 1,012.20/oz. Trade was relatively tame today. Technically, there wasn’t much change in the short term bullish outlook on US stocks.

Sports Television

On business television this morning, there was an in depth discussion whether Corona beer is good with or without a lime. As business TV gains market share, the likelihood it attracts sponsorship from the major brewing companies becomes more certain.

The 20% Above Buy Signal

There was also mention that the S&P is 20% above it’s 200 day moving average. A historical study was presented and viewers were assured that this is a sign of strength. The market remains overbought but it remains tough to be short stocks here. However, I’d be cautious viewing this stat as a buy signal. No two periods in history are the same, and our history is built by surprises.

The Dollar

Dennis Gartman of The Gartman letter commented that the “gold trade is crowded, but you can’t be short of it.” I agree. If the dollar suddenly catches a bid, gold is vulnerable to a quick move lower. As time goes by and the dollar trades lower (equities higher) we become more and more vulnerable to a treasury intervention. In the currency markets, the key is to catch traders off guard. Robert Rubin did this in the 1990’s. A sudden spike in the dollar would come as a surprise to most — and the surprise factor could be a catalyst for other news.

Back at the office, the daily scores are being posted while analysts on television are being pushed by commentators to offer whether they would “increase their position in Oracle (ORCL) or not” given the latest figures out of the tech behemoth.

The cash scores are as follows: DOW +108.30, $SPX +16.13, NASDAQ +30.51.

2.74 billion shares traded on the NASDAQ and 1.58 billion on the NYSE.

Spot gold continued higher and currently trades at $1,017.30 per oz.

Paul Volcker

Economic advisory board member and former fed chairman Paul Volcker came over the wire today and said that recovery from the recession will take a number of years and the United States needs to decrease it’s reliance on financial acrobatics. The market obviously does not understand the extent of the acrobatics that are still happening as can be seen by the upward ascent the S&P has engaged in since it pulled back slightly in late August.

S&P 500 Cash Index

Sensationalism

While the sensationalism of the crash of 2008 continues, the troubles at hand here and now are being left out in the cold. Perhaps we’ll worry about today’s troubles after this year long anniversary passes. A year from now, I wonder whether we’ll be celebrating the 2nd anniversary of the crash of 2008 or the 1st anniversary of the crash of 2009 or both. Stay tuned.

If one thing is certain on Wall Street it is this:

The beat will go on.

The beat goes on mid day in New York.


The S&P 500 is up 11.86 points, the DOW up 79.65 and the NASDAQ Composite up 21.35 at about 1:15 EST.


Steve Liesman reported earlier that commercial real estate exposure at large regional banks is undergoing major review by the Fed. Further, the Fed has yet to decide whether or not to do full stress tests.

The bank “stress tests” earlier this year were rigged. REITs have raised a tremendous amount of cash through equity and debt offerings in the past 6 months. Unfortunately, the leverage in the sector was immense, and the repair is just getting started — in spite of whatever public relations stress tests are administered.


Last evening, Polish central banker Stawomir Skrzypek was over the wire saying the financial crisis is entering a new phase and that asset sales cannot be the only method to amend the budget. In other words — we can’t just sell things, we need to cut spending. Sage advice. Perhaps central bankers around the world will take note. I am keeping an eye on Poland for several reasons. First, they are extremely vulnerable to credit risk. Second, there was a failed government bond auction last week — only half of the five year notes offered by the finance ministry were purchased. In reaction, analysts recommended selling Polish bonds across the curve. Last week, Polish central banker Dariusz Filar stated that Poland’s 2010 budget assumptions are appropriate, and he believes 2014 is a realistic date for Poland to adopt the Euro. Talks of a currency crisis have begun to make the rounds. The Polish Zloty is certainly vulnerable.


The National Banking League (NBL) received coverage in analyst land last evening. Analysts at BofA/Merrill see sales of Citigroup (C) shares by the government as having little dilution and maintain their buy rating.

“It is highly unlikely that the government would exit it’s position in Citigroup (C) in a disorderly fashion. Common shares will be disposed of through secondary offerings of large blocks of shares to institutional investors.”

“7.7 billion shares should be considered in the context of recent daily trading volumes of 1 billion shares per day.”

As BofA/Merrill competes for the banking fees to run the (C) secondary, there isn’t possibly any conflict of interest in these analyst comments. Are there?

Alan Greenspan is over the wire…

– The US economy appears to be turning and he sees “global disinflation for a short period.”

– A single systemic risk regulator is not feasible.

– He sees “no inflation and good growth” over the next 6 months.

–The US National debt is at very dangerous levels.

Respect: Alan Greenspan