Short term trades in the stock market •$$$$$•

[SpasticGramps]

This may be a good time to short some bank stocks though.

There is a big investigation coming down in Europe about illegal Credit Default Swap manipulation on most of the major banks.

I'm sure menial fines and wrist slaps will be abound.

European Regulators Investigate Banks for Credit Swaps New York Times

Ever since the financial crisis, when derivatives were blamed for exacerbating the panic, regulators have been looking for ways to make these complex financial instruments less risky. Now, regulators are also considering whether a small network of big banks unfairly controls the derivatives market itself.

European regulators in Brussels announced two sweeping antitrust investigations into the world’s largest banks on Friday, opening a second front in the battle to rein in a $600 trillion business that until now has operated mostly in the shadows. The regulators are focusing on whether the banks have shut out competitors in recent years in a bid to keep profit margins high.

The European investigations mirror one already under way by the United States Department of Justice, and follow an examination of derivatives market last year by The New York Times that highlighted efforts by large banks to control this lucrative corner of finance.

The European officials said they were investigating whether financial institutions, including international giants like Barclays, JPMorgan Chase and Deutsche Bank, used important industry committees to influence pricing and rules for a product known as a credit-default swap. These swaps provide a type of insurance against the risk of corporations or other borrowers being unable to pay off their debts.

The concern, the European Commission said, was that the banks had “an unfair advantage” in this largely opaque market. None of the banks cited by the European regulators commented on the inquiry.

Nice to see some of the dark investing pools coming to light though. Need more of this.

 

[SpasticGramps]

George Soros musing about Hayek and Austrian economics and philosophy. Long, but pretty good stuff.

George Soros Turns (Semi) Austrian: "Why I Agree With (Some Of) Hayek"

Why I agree with (some of) Hayek, by George Soros

Friedrich Hayek is generally regarded as the apostle of a brand of economics which holds that the market will assure the optimal allocation of resources — as long as the government doesn’t interfere. It is a formalized and mathematical theory, whose two main pillars are the efficient market hypothesis and the theory of rational expectations.

This is usually called the Chicago School, and it dominates the teaching of economics in the United States. I call it market fundamentalism.

I have an alternative interpretation — diametrically opposed to the efficient market hypothesis and rational expectations. It is built on the twin pillars of fallibility and reflexivity.

I firmly believe these principles are in accordance with Hayek’s ideas.

But we can’t both be right. If I am right, market fundamentalism is wrong. That means I must be able to show some inconsistency in Hayek’s ideas, which is what I propose to do.

Let’s start with Hayek’s influence on the twin pillars of my interpretation. I was a student at the London School of Economics in the late 1940s and read the great methodological controversy between Karl Popper and Hayek in Economica, the school’s periodical.

I considered myself a disciple of Popper. But here I was on Hayek’s side. He inveighed against what he called “scientism” — meaning the slavish imitation of Newtonian physics. Popper took the opposite position. He argued in favor of what he called the doctrine of the unity of science — that the same methods and criteria apply to all scientific disciplines.

I was drawn to this controversy by my interest in Popper. I had read his book, “Open Society and its Enemies,” in which he argued that the inconvertible truth is beyond the reach of the human intellect, and ideologies that claim to hold this truth are bound to be false. Therefore, he argued, they can be imposed on society only by repressive methods.

This helped me see the similarity between the Nazi and communist regimes. Having lived through both in Hungary, it made a great impression.

This led me to Popper’s theory of scientific method. Popper claimed that scientific theories can never be verified — they can only be falsified. So their validity is provisional — they must forever remain open to falsification by testing. This avoids all the problems of needing to prove scientific theories beyond any doubt and establishes the importance of testing. Only theories that can be falsified qualify as scientific.

While I was admiring the elegance of Popper’s theory, I was also studying elementary economics. I was struck by a contradiction between the theory of perfect competition, which postulated perfect knowledge, with Popper’s theory, which asserted that perfect knowledge was unattainable. The contradiction could be resolved by recognizing that economic theory cannot meet the standards of Newtonian physics.

That is why I sided with Hayek — who warned against the slavish imitation of natural science and took issue with Popper — who asserted the doctrine of unity of method.

Hayek argued that economic agents base their decisions on their interpretation of reality, not on reality — and the two are never the same.

That is what I call fallibility. Hayek also recognized that decisions based on an imperfect understanding of reality are bound to have unintended consequences. But Hayek and I drew diametrically opposed inferences from this insight.

Hayek used it to extol the virtues of the invisible hand of the marketplace, which was the unintended consequence of economic agents pursuing their self-interest. I used it to demonstrate the inherent instability of financial markets.



In my theory of reflexivity I assert that the thinking of economic agents serves two functions. On the one hand, they try to understand reality; that is the cognitive function. On the other, they try to make an impact on the situation. That is the participating, or manipulative, function.

The two functions connect reality and the participants’ perception of reality in opposite directions. As long as the two functions work independently of each other they produce determinate results. When they operate simultaneously they interfere with each other. That is the case not only in the financial markets but also in many other social situations.

I call the interference reflexivity. Reflexivity introduces an element of unquantifiable uncertainty into both the participants’ understanding and the actual course of events.

This two-way connection works as a feedback loop. The feedback is either positive or negative. Positive feedback reinforces both the prevailing trend and the prevailing bias — and leads to a mispricing of financial assets. Negative feedback corrects the bias. At one extreme lies equilibrium, at the other are the financial “bubbles.” These occur when the mispricing goes too far and becomes unsustainable — boom is then followed by bust.

In the real world, positive and negative feedback are intermingled and the two extremes are rarely, if ever, reached. Thus the equilibrium postulated by the efficient market hypothesis turns out to be an extreme — with little relevance to reality.

Frank Knight was the first to identify the unquantifiable uncertainty inherent in financial markets. John Maynard Keynes and his followers elaborated his insight.

Classical economists, by contrast, sought to eliminate the uncertainty connected with reflexivity from their subject matter. Hayek was one of them.

The methodological debate in Economica took place in the context of the larger political controversy over the role of the state in the economy. Hayek was on one side, Keynes and socialist planners on the other.

But Hayek subordinated his methodological arguments to his political bias. That is the source of his inconsistency. In the Economica, he attacked scientism. But after World War II, when the communist threat became more acute, he overcame his methodological qualms and became the apostle of market fundamentalism — with only a mild rebuke for the excessive use of quantitative methods in his Nobel Prize acceptance speech.

Because he was fighting communism, a scientific theory that proved that market participants pursuing their self-interest assure the optimum allocation of resources was too convenient for him to reject. But it was also too good to be true.

Human beings act on the basis of their imperfect understanding — and their decisions have unintended consequences. That makes human affairs less predictable than natural phenomenon. So Hayek was right in originally opposing scientism.

At the time of the Economica articles, Popper was between Hayek and the socialist planners. He was just as opposed as Hayek to communism’s threat to individual liberty, but he advocated what he called piecemeal social engineering rather than laissez-faire.

Here I sided with Popper. But Popper and Hayek were not that far apart. I was influenced by both — and I also found fault with both.

By identifying Hayek’s inconsistency and political bias, I do not mean to demean him — but to improve our understanding of financial markets and other social phenomena. We are all biased in one way or another and, with the help of reflexivity, our misconceptions play a major role in shaping the course of history.

Because perfection is unattainable, it makes all the difference how close we come to understanding reality. Recognizing that the efficient market hypothesis and the theory of rational expectations are both a dead end would be a major step forward.

As in that earlier time, the political controversy on the role of the state in the economy is raging today. But the standards of political discourse have greatly deteriorated. The two sides used to engage in illuminating arguments; now they hardly talk. That is why I was so pleased to accept this invitation to the Cato Institute.

As I see it, the two sides in the current dispute have each got hold of one half of the truth. which they proclaim to be the whole truth. It was the hard right that took the initiative by arguing that the government is the cause of all our difficulties; and the so-called left, in so far as it exists, has been forced to defend the need for regulating the private sector and providing government services.

Though I am often painted as the representative of the far left — and I am certainly not free of political bias — I recognize that the other side is half right in claiming that the government is wasteful and inefficient and ought to function better.

But I also continue to cling to the other half of the truth — namely that financial markets are inherently unstable and need to be regulated.

Above all, I am profoundly worried that those who proclaim half truths as the whole truth, whether they are from the left or the right, are endangering our open society.

Both Hayek and Popper, I believe, would share that concern. Those of us concerned with the protection of individual liberty ought to work together to restore the standards of political discourse that used to enable our democracy to function better.

 

[Mountain]

Just for the fun of it calculated what the May 40 ACOM calls gained with that move on Friday and they were up about 4,200%.

 

[TNTBudSticker]

Well...MMG in those trades that gave me some good gains is now changing their name Metalline Mining Company (TSX: MMZ, AMEX: MMG) ("Metalline") announces its name changed to Silver Bull Resources, Inc. (TSX: SVB, NYSE Amex: SVBL) ("Silver Bull"). The new Silver Bull trading symbols and website will be effective Monday, May 2, 2011.

I'm not sure what it means in price..but with Silver Jumping around and investors might fall for this name.And a Spark might assume.

Can't buy under $1.00...Can't short under $3.00 in most contests.
Now have to make a mental note of it's new Name.Gave me great gains 4 times in a row.Looking to see what the new month will bring.

 

[Madrus Rose]

Just for the fun of it calculated what the May 40 ACOM calls gained with that move on Friday and they were up about 4,200%.

Fellow trader had called ACOM the day b4 earnings & she was more familiar with the stock filling in some details in realtime . Had already done a quick DD as always before shorting anything not familiar with , just a quick look at the float, revs , RoI/RoE , PE , PEG, Qtr/Qtr growth . The revs were impressive enough & float small enough to make me veer clear and already caught up in shorting NTGR pop & we had all been shorting RIMM too .

Shorting

NTGR ...So many of these extreme spike moves on stocks already trading at highs in the market have been shortable for at least 1-2 points lately ..where you can go in heavy (1-3-5kshrs) and let profitaking do the rest . This market has been merciless on shorts that are in too soon , so trick i use is to always wait for the 2nd pop after the open & look especially for the "Double Top" in extreme overbought to short . But always DD, chart & know the float structure and watch trading in premarket . Also to know past trading patterns in the stocl & what it does after eps , which for ACOM i had no idea .

Susan let me know that ACOM powered the popular NBC show "Where do i Come From" saw they had great Qtr to QTR rev growth and also noted they were a Mormon/ Provo Utah based niche player and joked back that they're prolly going to throw all God's money at it ! lol. So did not short ...or go long unfortunately either ...but very good thing to have other saavy traders to network with .

Played CAT into earnings long for they never miss into friday and it did get a mild pop ...but noticeable these Big DOW stocks , Big Oils/OIH , Rails/Trans , HealthCare (exception) that all reported last week were pretty muted already traded up to the highs . All the big Oil/Refinery like Exxon , Chevron, Valero but most just stood still with exception of OXY .

Where do they rotate into if they keep this next wave up in the DOW & S&P ? The SOX?

SOX has been lifted by InTel but thats just completing its move here soon ( prolly good short scalp in here now ) and the Equipment makers have all got past their weak reports but Feb is slow period for semis into June/July is when they bid up into Sept Oct ....

 

[Madrus Rose]

Another trader was in REGN and gave an alert some drug approval news had come out , he was holding the stock & said he was selling this spike ...came within secs of catching this thing short but the time took to DD it was the missed opportunity ...saw it spiking to $70/$71 but hesitated .

Would have been , could have been ...turned out the drug was more expensive than a competing drug with more side effects or some such . BioTechs act like they're on drugs when they get excited , hardly ever play them . Takes a ton of work to study & stay current on them , at least for me .

(stem cells will be active on mon)

 

[Madrus Rose]

NTGR ...just so many of these kinds of spikes after the open , hav to be right ontop of but as shorts get squeezed up always waiting for the 2nd push up in the am , then look for an obvious pivot number getting tagged twice ...usually short is good from there .

Great little San Jose wireless network/ethernet company and really surprised but at $44 was matching a top~high not set since far back in Mid 2007...so many of these pops have these little pullback tails & all you need is that 1-2pts on the short . Waiting for that 2nd am pop up is key ...but for ACOM anyone shorting am pop that got totally run over .

Here's that morning open 2nd pop to look for for the short ,
always plenty of time to get ready trick is not be in a hurry
just stay cool & be ready .


Caught around $43.20 & was prepared to reshort again if it popped more (average up) but didnt have to. NTGR had already showed intial selling lower in the open but shorts drove it back up like they usually do the 2nd time . Also knew that most "longs" would b pretty ecstatic with getting even $38 , this was pure gravy hitting a 4yr high again .

Here's the Daily showing that "One Finger Salute" ...usually shortable

 

[SpasticGramps]

Silver is getting crushed in early global trading.

Silver Plunges On China Slowdown Concerns, Dollar Short Covering

In early trading, silver is down nearly 20% from Friday highs, and just under 15% from its Friday closing fixing, hitting just over $42 in a slide of $6 commencing just after 18:25 pm. The reason for the collapse is not immediately clear, although concerns of a Chinese slowdown and overtightening are rumored to have been among the culrpits. The circumstantial evidence is in the OZ pairs, with the AUDUSD which has long been a high beta proxy for China plunging in early trading as well. Oddly enough, gold has been spared most of the carnage in silver, and was down about 1% in early trading. Overall, this appears to be nothing more than a short covering episode in the USd provoked by nothing factual. We will keep an ear open for any incremental data to determine if there is any actual reason for the plunge, such as for example that the BOJ has suddenly decided not to pick up the baton in trillions of monetizations over the next few months, instead of just another bout of technical selling.

I've been hoping for a nice pullback so I can BTFD (buy the fucking dip). I suspect as we get closer to June and QEII comes to a close volatility is going to be up.

 

[SpasticGramps]

Interesting read.

The Feds Are Now Investigating The High Freaks For Quote Stuffing

About a year ago, we wrote an article titled "How HFT Quote Stuffing Caused The Market Crash Of May 6, And Threatens To Destroy The Entire Market At Any Moment" in which we advanced the proposal, first suggested by Nanex, that while High Frequency Trading was the primary reason for the May 6 flash crash, it was a specific aspect of HFT that permitted the Dow to drop 1,000 points in the span of minutes, namely "quote stuffing", or the process of blasting millions of bids and offers without and interest in executing a transaction, merely as a fishing expedition to isolate any "whale" orders and to front run them, making a few guaranteed cents in the process even as this materially distorts true market depth, liquidity and overall stability. And while we were not surprised that the toothless, incompetent and corrupt US securities regulator did take a passing interest in the issue, the topic of "quote stuffing" has finally attracted the interest of US prosecutors. From Bloomberg: "U.S. prosecutors have joined regulators’ investigation into whether some high-speed traders are manipulating markets by posting and immediately canceling waves of rapid-fire orders, two officials said...Justice Department investigators are “working closely” with the Securities and Exchange Commission to review practices “that are potentially manipulative, like quote-stuffing,” Marc Berger, chief of the Securities and Commodities Task Force at the U.S. Attorney’s Office for the Southern District of New York, said today at an event in New York." But, the traditional red herring justification for this criminal behavior goes, they provide so much liquidity which would forever be gone if it weren't for the high freaks.

From Bloomberg:

While regulators previously said they were probing possibly abusive algorithmic trading practices, the attention of criminal authorities ramps up the stakes.

The SEC and Commodity Futures Trading Commission sharpened their focus on technology-driven trading after the so-called flash crash on May 6, which temporarily erased about $862 billion from the value of U.S. equities in less than 20 minutes. Regulators have placed limits on price moves and proposed rules limiting other practices, and lawmakers banned “spoofing,” in which market participants try to trick other computers into making decisions that can be exploited for profit.

A joint SEC-CFTC report released in October found no evidence that the May 6 sell-off was triggered by manipulation.

The SEC last year established a market-abuse unit to investigate cases of manipulation. At the securities law conference in New York today, SEC Enforcement Director Robert Khuzami said investigators need better technology to adequately police markets and detect possible misconduct coming from high- speed and algorithmic trading.

“The question is, do we have enough transparency to detect wrongdoing if it was going on,” Khuzami said, adding that SEC investigators are probing other matters arising from the May 6 market crash.

This is all wonderful, although please wake us up when the SEC and/or regional DAs have actually put in one of the bigger hedge fund fish, instead of the 25 year old traders who only follow orders, and immitate what their bosses do. Until then we are a little skeptical anything will change.

Yet if it does, naturally, the elimination of HFT would remove opportunities for those who keep track of the weakest links in the market which provide easy ways to take advantage of algos gone wild. However since the trade off is a far more stable market structure, and one which may finally have a chance to revert to equilibrium pricing, the trade off of some return to fundamental analysis is more than worth it.

 

[megayields]

Just for the fun of it calculated what the May 40 ACOM calls gained with that move on Friday and they were up about 4,200%.

Doh nice......

 

[megayields]

I'm up 146% on my SLV ETF.....but if it retreats 20% more.... I'll buy more ;-)

 

[SpasticGramps]

Damn. Silver has already retraced most of what it lost. I was hoping for a deeper pullback.

I want to load up before the DXY breaks it's all time 2008 low of ~71. Once it breaks that level it should enter freefall. There is no technical support for it after that. Expect metals, commodities, and oil to explode after that.

It's at 72.87 right now so we are getting close to freefall for the dollar IMO.

 

[s13sr20det]

i hope i can get in on ren ren!! (RENN)

 

[SpasticGramps]

Wow. Gold had a flash crash today too. It's funny how they don't report all the one off flash crashes that have occured since the big May 6 Flash crash. Something that remains a threat to the markets.

Looks like the High Frequency Trading Algorithms going ape shit. Skynet is having fits. Or it's just he big boys crushing everyone to scoop some more up before takeoff.

Buy the Fucking Dip.

Golden Flash Crash

Gold just plunged by $20 for no reason whatsoever. So let's take a guess at what happened here: some ETF caused the NYSE to hit LRP thresholds, causing numerous stocks to "break", and the result is an immediate algorithmic margin call satisfied by gold selling? Or not, at his point does anyone really care. Point is obvious: scare all holders into submission. Can the royal "they" just confiscate everything not in paper form (and thus out of Fed control) already and end this charade?

Update: and gold is now back to pre crash levels. Thank you Johnny 5.

 

[Mountain]

Wow. Gold had a flash crash today too. It's funny how they don't report all the one off flash crashes that have occured since the big May 6 Flash crash. Something that remains a threat to the markets.

Looks like the High Frequency Trading Algorithms going ape shit. Skynet is having fits. Or it's just he big boys crushing everyone to scoop some more up before takeoff.

Buy the Fucking Dip.

Yeah I think part of it is peeps manipulating the system to pick some stuff up cheap.

 

[megayields]

Or a trader hit one too many zero's on his desktop ...saw that in the SPOO's pit a few years ago......some Barclay's trader sold10 million S&P contracts instead of 100K...lol talk about "fast crash".....

 

[Mountain]

Hey Gramps...what's the story with silver? Don't know what dynamics could be behind the recent pullback other than being overbought and extended. The first pullback bounced of its 10 MA without piercing it but today going trough it's 20 MA without blinking. I'm hoping for a better pullback than this.

 

[SpasticGramps]

The CME and other exchanges have been raising the margin requirements almost daily now for silver. I think "the regulators" are trying to do everything in their power to push down commodity prices. Eventually, the price of paper silver and physical silver will dislocate where paper silver goes down, but you can't find physical silver and if you do it will be at a premium way above spot. I think anyway.

I don't know if that's what's happening now or what. The self titled revolutionaries like myself who are hording physical silver in order to bring down the big banks are causing fits I reckon. We'll finish what the Hunt brothers started, but on a grander scale. Remember I'm hedging against the death of the Dollar.

Here's an article on it.

Precious Metals Recap: Facing Down the Barrel of Margin Hikes

Sell in May and go away. PM investors appear to be taking this saying a bit literally. On Monday, Gold (NYSE:GLD) and Silver (NYSE:SLV) closed lower amidst massive selling. Silver in particular closed sharply lower. Let’s take a look at some recent developments in precious metals.

Last week, the CME Group (NASDAQ:CME) raised margins on silver twice. One margin hike was for 9%, and the second was for 10%. On Friday, MF Global decided to end the week with their own margin increase of 75%. Apparently, the rising margin game isn’t done. On Monday, the CME Group decided once again to raise margins on silver, which marks the third margin increase in only 7 days.

The highly traded iShares Silver Trust (NYSE:SLV) dropped more than 8% on Monday. Margin increases aside, it didn’t help that it was unveiled today that well known fund manager Eric Sprott (PSLV) sold $35 million of his PSLV fund in April. This only added fuel to the fire, and everything related to silver sold off. However, Eric Sprott has now released a statement to Tim Kiladze of Globe and Mail that he hasn’t lost his enthusiasm for silver. Sprott went on to explain, ” Every dollar of money that was raised by selling shares of the Trust was reinvested in silver or silver equities.”

Investing in precious metals is certainly not for the weak of heart. It’s days like today that reminds investors of that. Even though gold has escaped much of the volatility seen in silver, that may change at a moments notice. In fact, Zero Hedge has now reported that in late trading there was a brief $20 drop in gold for no apparent reason.

Investors looking to capitalize on rising precious metals prices, may want to consider the following ETFs and stocks: iShares Silver Trust (NYSE:SLV), PowerShares DB Silver Fund (NYSEBS), ProShares Ultra Silver (NYSE:AGQ), First Majestic Silver Corp. (NYSE:AG),SPDR Gold Trust (NYSE:GLD), Market Vectors Etf Trust (NYSE:GDX), or Barrick Gold Corporation (NYSE:ABX).

Investors who are bearish in precious metals, or simply looking for a hedge, may find the following stocks, ETFs, and ETNs interesting: ProShares UltraShort Silver (NYSE:ZSL), PowerShares DB Gold Short ETN (NYSEGZ), or PowerShares DB Gold Double Short ETN (NYSEZZ).

I'm hoping we get back down to ~$30 or lower. I think as the Dollar (DXY) approaches 72-71 things are going get hairy and unpredictable.

More articles.

With Now Daily Margin Hikes In Silver, Is The SLV ETF Itself Next? ZeroHedge

Following relentless margin hikes in silver on various exchanges, here are some thoughts on what may happen as the "regulators" do everything in their power to bring down commodity prices down as the broader population increasingly creates their own gold (and as the case may be silver) standard.

From Shortetflist

Could FINRA raise the margin requirement on the Silver ETF (NYSE: SLV)?

Absolutely.

After trading 200 MM shares per day, along with outpacing the daily volume in the SPY, it is safe to say that the Silver ETF is leading the futures at this point so here is the question I pose.

When is Finra going to raise the margin on the SLV ETF like it did on all the leveraged and inverse products a couple of years ago?

Right now to buy the SLV etf eats up about 22K in margin buying power, imagine if this were doubled?

FINRA and other folks are keenly aware of this trading vehicle, particularly when an unhealthy market exists. Now if the Silver ETF trading settles down to normal levels, probably not much will happen but if it keeps this crazy pace up, it is very difficult to rule this out.

Just some food for thought on where this thing could go.

 

[SpasticGramps]

And Scene: CME Hikes Silver Margin For Third Time In 7 Days, Raises Initial, Maintenance Margins By 12%

Last week two silver margin hikes of 9% and 10% did nothing, which is why this week's first hike (of many more) by 12% to the maintenance and initial margins was to be completely expected. We believe that nothing short of 100% margin (coupled with not one single ES margin hike by the Globex) will eventually placate the ardent Comex risk managers who are terrified their models may end up being wrong about "stuff." One thing is certain: the panic is palpable and the administration will stop at nothing to prevent the $50 limit order from triggering silver's surge to triple digits. We wish them all the best in this endeavor and are grateful for any and all BTFD opportunity.

I think we are making the banks squirm. They will of course do everything to keep the price below $50 IMO to maintain the illusion of monetary stability. I do however believe we are in the final death throws of the monetary system where end game is months away rather than years. I expect to see panic from the "regulators" shortly. In fact I think they already are.

BTFD.

 

[Mountain]

I was hoping it would go down to at least $40 and there and then some at this point. For sure am looking at a big entry if I can time it correctly. If it gets back to $30 I'm all in.

Thx for the info Gramps!