Tuesday, June 19, 2007

Update

Lots of people have been chiming in with their 2 cents worth on the formerly known as Bear Stearns High Grade Structured Credit Strategies Enhanced Leveraged Fund margin call debacle. Before I go off, what I want to know is who came up with that fund name. They shoulda called it the BS Toxic Crap Hyper Margined Fund. Well, the word is that Blackstone is riding in there at the last minute telling everyone (included Merrill which was pulling the rip cord) to hang on, the white knight has arrived. These guys running these funds have been sitting on this CDO (collateralised debt obligation) crap and won't mark it to market(actually last bid if they could get it is probably weeks old) so everything looks great. The rating agencies are scared to downgrade the garbage, (which is what it is) for fear of offending their masters, but one day someone wakes up and wants out and the next thing you know a panic ensues and it all starts to unravel. I have some advices for the hedgies out there, well its not mine but grandpa gave it to me, he who panics first panics best. Remember a problem is never a problem till its a problem. Good luck to you guys, it couldn't be happening to a nicer bunch.

Crude - nice breakout thru $67.50 on the daily and weekly,(weekly breakout carries significant weight), and we are getting some follow thru after the fact. Charts look very bullish on all fronts, short medium and long term. How crude at $7something or even higher is good for the market and the economy is beyond my comprehension but mark my words, some shill (probably Don Luskin or Ned Riley) will be on TV harping about the bullish effects of $80 crude. Maybe CNBC will change their theme song to, Dorothy singing we're off to see the wizard.



Real Estate - sub prime, alt-A, neg am, adjustable rate ( shall I go on ?) debacle is well documented, the market cares not a whit for now, but believe me it will and when it does you won't want to be anywhere near it, unless you're short. The IYR has broken the neckline and is testing the old low for a 3rd time. the 50 is headed down but yet to cross the 200 and coincidentally this is happening right at the former neckline of the H&S. Stay short or long the SRS. The IYR had a 3 day rally last week on light volume and cracked down again on heavier(150%) volume

10 year note - sea change event here with major downtrend lines being broken. Expect backing and filling, to shake out the nervous nellies. The news is a smokescreen and as I have said before conforms to the tape, which is what you should be watching. They (the enemy) will say many things but their actions will be reflected by the tape.


Merrill Lynch - still has not bettered its old highs, the bulls need to see $95 then $98. 75 taken out. It does look tired but need to let the tape tell us. A break below $87 would do it.

Spider Financials - The XLF has all the makings of a double top on the weekly. Financials have taken a back seat and that is not a good omen for the bulls, but they never need them in the first place. Good luck and good trading to you.



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