It’s happening all over again… We have MF global filing for chapter 11, which basically means they are unable to service their debt and pay creditors.
Angela Merkel is pulling her hair out with the pending referendum on whether or not Greece should accept the aid package that the rest of Europe has not so kindly) gift wrapped.
Credit Suisse are cutting over 1500 jobs which adds up to a tidy sum when totalled with the loss of more than 2500 coming from MF Global.
Where is this going…?
Well, we have 2 huge investment companies cutting jobs and going bankrupt. Will the employees go to other banks? In this state of affairs, they may have to settle for less, which will be tough going as the job market below that tier is struggling more.
So, will it be holidaying next year to the Greek islands spending the newly formed and obviously inexpensive (comparative to Euro) Drachma? I bleeding hope so!
Greece should get out and face the jungle of lions themselves and hope for the best, otherwise the Greek islands will be owned by (the now much fatter) bankers.
‘Mother F*****g’ global!
Sorry, but it’s another AIG all over again.
The government are not waning in here with immediate effect due to the company’s demise like they did with AIG, but there seems to be another matter of a LOAD of cash disappearing into the stock market black hole.
Well, the cynic in me would say that MF Global diverted some customer funds to support its own trades as the firm saw the last days looming. MF prop traded, which meant that the firm trades stocks, bonds, currencies, commodities and other financial instruments, with the firm’s own money as opposed to its customers’ money, so as to make a profit for itself.
However, as there are now federal investigations into the disappearance of hundreds of millions of the green stuff, would it be that cynical to suggest that through the shortfall of personal cash, (due to their exposure in Europe) MF supported positions with client cash? Hmmm, up to you to figure out. But think of it – how much of the positions were supported? How can this be audited?
Just like the missing 2.3 trillion from the pentagon (Google that) on Sept 10th 2001, is it best left and written off? It may be less expensive to leave and put it down to a bad 3 years worth of risk taking.
Watch the space for Goldman to appear and snap their jaws at this very soon!
But I wouldn’t suggest that oh no, not when you have a man like Jon Corzine (Ex-Goldman Sachs CEO) in charge at MF.
Now this makes me nostalgic from just 3 years ago, where I would have thought that Securities firms like MF surely would have learned a lesson.
The trouble is precisely Jon Corzine – The man takes risks and does not care!
Let me take you back to 1986 (the trade that made Corzine famous), where Jon sat down at his desk and directly set up a trade of buying one yield of a treasury security and selling short another yield of a treasury security. The trade bombed and so Jon’s task was turning a 150 million loss (big bucks for 86) into a squeaky clean gain of 10million over the following 7 months.
The man did well (per se) and this eventually put him on a much higher trajectory with GS, hence moving up to co-head fixed income at GS.
However, what Jon did with long term capital management by taking information on the trades and then trading against them, was less of a trading incident and more of a vulture like scenario taking advantage of his position. This made the man some enemies and hence he should go and bury his head in the sand.
What does this mean for the markets…?
Well, I called a top for the 2nd week of Nov or possibly just days before that. Now, if we do not see this market ramp up by Thursday, 3rd November than we will have already seen these tops play out.
Even if we do see a reaction rally from lows on Tuesday, 1st Nov, I don’t think it will surpass Friday’s highs of last week. It will just about reach that zone, or maybe breach levels 1% higher than them.
My target for the imminent sell-off is as follows…
Dow Jones – 9600-9800
S&P – 1000-1030
Ftse Index – 4700-4800
I see these noted levels being reached by December!
What will happen to the £/$ (cable) over the coming week or so?
As I stated previously, the £/$ index needed to break the 200-day MA line by Halloween. It failed on the day for the second time in as many sessions and now we will see a continued downside extension play out.
Let’s get technical
After breaking the neckline (blue line) of 1.57 back through at the middle of Oct, the market went on to achieve its double bottom (22nd sept&6th Oct) objective that was the 200-day MA line.
Gains were always going to be capped after a brief 600-700 pip rally from the double bottom pattern.
I see that gains will be capped in and around the 1.61 zone, and with cable having bounced from the red line (10-day SMA) on an intraday basis for the 31st Oct. I see this giving way and becoming resistance also.
A break below the red line, will lead to the green (20-day MA, 1.586) line sculpting cables path for the short term. The market will either struggle to break this level, or it will break within 1-2 sessions of testing. Either way, it will eventually break the green (20-day Ma) line to land at 1.57 by Mr.Fawkes’ anniversary.
From there, if no bounce is seen within two sessions (Mon, Tues -7th, 8th) Expect 1.55 to be seen imminently.
There is no other option but to short this market, but I am holding off until I see a drop below the 20-day Ma line. My level of entry will be between 1.58.1.583.
For Fixed Odds, I will endeavour to position the No Touch level ABOVE the 200-day MA line, and short this market straight at £50 per point (1.58/.583) whilst looking to exit at 1.57/571.
And for the mighty Dow
With the short term Dow trend being highly bullish (due to 10day crossing over the 20day Ma) and the target of 12000 being reached so soon after, I think ironically pushed the index into overbought territory.
With that, we see the Dow take charge of the 12000 resistance zone for LESS than 2 sessions, before the wave commenced lower back on Monday.
If a retest of that area is NOT seen by Mr Fawkes’ ass burning, then we will have confirmed the highs at these levels back last Friday.
I am not buying this market right now, instead I will wait to the end of the week to see if a reaction rally can take this market up to and potentially beyond last Friday’s high which will give me a better leverage for shorting these markets.
If not on the other hand, I will be selling regardless come the end of the week no matter what the level.
I will open up at LEAST 2-3 High No Touch trades, on the S&P and Dow and also shorting the market by £50 per point on my spread betting account.
As of the end of Tuesday’s session, the Dow and the S&P closed at the intraday lows.
If NO upside momentum is seen by the close on Thursday, gear up for the burst pipe next week.
Err, it may be clear what I think for Gold right now…
Buy after the 5th November and hold!
Matt $haw
P.s. To receive this blog piece in PDF and the rest of it with full colour charts – please email: fixedoddssuccess@gmail.com
no santa rally this year then
NOPE