You're correct, Gleno, and I got out of QLD almost as soon as I bought it. We'll bounce eventually, but apparently it's not in the cards yet. Two

Anyone else get a QLD buy signal around 10:10? Probably just a bounce, but I'm playing it for now. Two

LOL, blasher. She's a real "drip," all right. Two

john, looks to me like all the indexes have a little more upside ahead on Monday. Then perhaps everything goes down in earnest starting Tuesday? That's how I see it. Good weekend to you and all. Two

Sure she will. Just be sure to bring a box of candies...and a whip. Two

Hi, John. You're also helping Abby Jo keep her fabulous NYC penthouse and GS salary. I'm sure she appreciates you. lol. Two

Quote of the day: Premarket trading saw BAC shares climb about 10 percent despite the coming dilution to shareholders from a stock sale. So what did BAC CEO Lewis have to say about this?

"It does seem to be counterintuitive." But then he added: The rise in shares reflected the "clarity and certainty" brought about by the release of the stress test results."

(Yeah, sure it did, Ken.) Two

"Stress tests" are already invalid, according to Denninger in his column this morning. Why is he the only financial journalist to recognize this and report on Fannie's problem, I ask rhetorically? Two

===========================

Note that the PRESENT serious delinquency rate on Fannie's credit book for single family homes is at 3.15%, up from 2.42% last quarter.

What's worse is that a lot of the paper Fannie holds was written before the bubble. If you look at only the "bubble-era" paper (e.g. ALT-A) or even prime paper written in 05, 06 and 07 the numbers are going to be far worse.

We have the largest lender in the United States reporting current "prime" serious delinquencies, almost all of which will end up as foreclosures, equal to the most serious stress tested level right now and twice the so-called "baseline" scenario.

Furthermore, Fannie's credit-related expenses nearly doubled quarter/over/quarter and was 2/3rds of the full year 2008 expense in one quarter alone!

Folks, there is absolutely nothing to support any claim that these "stress tests" were or are realistic when market performance in the nation's largest lender and one that allegedly has written all "prime" mortgages states (not "suggests") that their credit book delinquency rate has reached the "more adverse" stress level already.

Nowhere in the "mainstream media" (e.g. CNBC, etc) has this been mentioned but it is literally right in your face while reading the Fannie quarterly report.

Everyone is entitled to be optimistic.

But nobody, especially not anyone in the government, has the right to intentionally mislead the markets and investors as to the validity of what they're allegedly doing.

Given the Fannie report, which was known to the government (since it is under conservatorship) for a significant amount of time prior to being filed, there is absolutely no excuse whatsoever for The Fed's "Stress Test" report to be published without a footnote indicating that the "most adverse" metrics had been proved met by the largest prime mortgage lender and guarantor in the United States already.

Investors deserve a government that does not intentionally mislead them.

If you are buying into this rally and the recovery of the banks based on the so-called "Stress Tests", you have been lied to and must consider the "severe" stress scenario as the "baseline", which implies that should the economy deteriorate further the banks will not make it with their alleged "capital cushions."

Period.

This is an outrage; we are no longer just talking about my estimates, Roubini's estimates or even the IMF's estimates.

We are now talking about actual reported financial results.

In short, we have all been had.

Again.

Disclosure: Short Ben Bernanke, The Fed and Treasury

Hi, OTC, but didn't Abby Cohen just tell everyone the S&P was heading to 1075 (lol)? Two

Hi, blasher. Only time will tell. Two

Hi, Gleno. If you don't mind, here's my take. Daily charts suggest strongly that NDX topped on a closing basis on May 4. On May 5, I got an interim sell signal (closing basis) that was repeated on May 6, as well. This sell signal is the beginning, in my opinion, of a counter downtrend within the overall up-trend that started on March 10. Sometimes these counter trends can be quite deep. Or they can be short and last only a few days or a week. My guess is that this counter downtrend will be relatively short and play out during OE week. Looks like we'll bounce tomorrow, but I probably won't be long going into next week. JMHO. Two

Hi, rich. I'd like to help, but my calculator won't hold that many zeroes (lol). Two

Hi, rab. "Why isn't Washington that smart?" Because if Washington implemented that guy's plan no one in Washington would get rich through bribes, kick-backs, campaign donations, etc. Sad, isn't it? Two

My guess is that the pullback continues through most of next week (OEX), then the rally resumes into June 19 (or even mid-July). But one thing I'm certain of...the rally isn't over. Two

Hi, NM. My daily charts strongly suggest that the NDX pullback that is now commencing is still part of a larger rally that has not ended yet. It may not be as deep or long-lasting as you suggest(?). Two

Dan, unless I get a sell signal, I usually hang on until break-even. This trade is still up in the air (entry was QLD 33.88). Two

Hi, Dan, it could be the "morning low" and not much more(?). You know how these guys play it. They'll take it up for a bit, then drop it in the afternoon to a slightly lower low. Then take a lot of it back as prices rise tomorrow morning. That's my guess (and it's usually wrong...lol). Two

I know how you feel. It's probably only a bounce. But I'll play it out. And since Dan is with me, I'm in great company! Two

Careful, they're playing games. Got a QLD buy signal at 11:25. It may not amount to much...but who knows? Two

Hi, aj. My CSCO daily charts suggest this stock could bounce tonight. I don't know why it should? But that's what I see. From your perspective, is this a possibility? TIA. Two

Yes, everyone loves the fibbing. This was posted a few minutes ago on aj's site...and it makes me want to puke. Two

================
Goldman Sachs has hit a new trading profit record: in the past quarter the company generated over $100 million trading profit on an absolute record of 34 trading days, according to its 10-Q filed today. Not only that, but GS was profitable on 56 days in the quarter and lost money on only 8, meaning it was profitable 87.5% of the time trading in the last quarter (and this isn't even a weighted number). Notable is that the ratio of +$100MM days to -$100MM days in Q1 is 34 to 0. If one adds the orphan month of December, the $100 million+ days rise to 44, and Total Profitable Days rise to 70. The last record for GS was 28 $100MM+ days in Q1 2008. As all regulators' systems are based on statistical analysis, maybe this multiple sigma deviation event will finally set off some red flags.

Or maybe the simple explanation is that the current Oracle of Delphi at Goldman's trading desk is seeking to retire and effectively predicting every single market move with 87.5% accuracy in order to be allowed to vest her 401(k) immediately.Sanford Bernstein analyst Brad Hintz, who has a knack for understating, provides the following observation:

“It was a good trading quarter. Their revenue return on trading assets was very, very high because bid-offer spreads were very high.”
Now correct me if I am wrong, but isn't the main reason for the NYSE's Supplemental Liquidity Provider program exactly to reduce the bid-offer spreads? And isn't the fact that Goldman is the de facto sole provider of SLP supposed to be somehow benefiting the exchange and other participants, not so much itself? Maybe this is not a question so much for GS, but really for the NYSE which has been so staunchly pushing for the SLP (and its extension), yet the only member firm it seems to be benefitting so far, is really only Goldman Sachs?

One last observation: GS also discloses not only its VaR for the quarter (which has also risen to an astronomic $266 at the end of March 31), but also the progression of the VaR over the past year. Zero Hedge would like to point out the eerie similarity between the company's overall VaR (as disclosed in the 10-Q), and the percentage of Total NYSE Principal Program trading that Goldman Sachs Principal trading desk controls (as disclosed by the NYSE), a topic Zero Hedge has discussed extensively before. Comments from readers and from Ed Canaday are very welcome.


http://zerohedge.blogspot.com/

Hi, mark. Looks like the NDX closed on a high on Jan. 6. I don't think it will do that today. Probably end slightly negative. If I'm correct, the pattern will look like the close on 4/28...which resulted in more upside in the days that followed. It's tough to play out these patterns, isn't it? Two

Hi, blasher. My old pal and mentor "Sponge" used to tell me that the news didn't drive the market. Speaking of lies, another old pal, Jesse, posted this excellent analysis of the banks and, in particular, BAC. I remember all last year how CNBS kept inviting Dick Bove to talk about the financials. Bozo Bove constantly pumped them all as they dribbled downward for 12 months. And here he is today telling the same old lies. Two
========================


06 May 2009
Red Pill or Blue Pill?

You take the blue pill, the story ends, you wake up in your bed and believe whatever you want to believe.

You take the red pill, you stay in Wonderland, and I show you how deep the rabbit hole goes."

"Morpheus in The Matrix


Blue Pill


Dick Bove was on Bloomberg Television this morning justifying a bullish outlook for the big banks, and the Bank of America in particular.

As you know, the story is that Bank of America has to raise many billions of dollars in additional capital according to the stress tests.

Dick Bove reasons that Bank of America will raise this additional capital, handwaving the costs and any contingencies a bit.

This additional capital will be leveraged, so Dick believes, in profitable transactions in trading, lending, and the extension of credit.

These transactions will generate a spectacular boom in bank profits. Mo' capital, mo' profits. Just do the math and including plenty of leverage.


Red Pill


The problem that the financial system has is an outsized financial sector with too much capacity for credit and financial assets. This excess capacity led to speculation and extension of credit in deals where the risk was not adequately balanced.

Hot money chases unreasonable risks. Too much capacity lowers the bars for deals which cannot possibly be profitable in any realistic model. Bubbles tend to distort the models for growth assumptions.

The only way to achieve a sustained recovery is to reform the financial system, break up the big banks, and return to a more balanced economy.


The elite and their acolytes seem to believe that by sustaining the illusion of the Financial Matrix that we create a confidence that will support a national economic system that is based on a credit bubble and a mass illusion of wealth based on paper.

The money center banks are instruments of power, the power to control the nations of the world.

All we have to do is believe, and act as though it were true. After all, its so confusing, who can understand it? Better to just believe.

Can we delude ourselves to prosperity? Can a powerful nation and otherwise intelligent people be that venal, faithless and craven?

Yes we can. We have been doing it for years. And it can only continue if we gain more control over the real world and the people in it, and bend them to our increasingly irrational will. The triumph of the will.

And then comes the Faustian bargain, and a descent into madness.



Posted by Jesse at 10:09 AM

NM, today's NDX pattern looks very familiar. I see it again and again over time. They drop the price to a morning low (which in this case came around 10:30), then rally price up a bit before dropping it again during the late afternoon to a level slightly lower than the 10:30 low. Will this pattern play out again today? I think so. Two

Hi, fish. Remember those idiots who reported the other day that the recession was over? FYI...here's an analysis that debunks those notions. Two

http://market-ticker.org/archives/1009-Two-of-Three-More-Crooning.html

Hi, john, they've used this "adjustment technique" for years. It's no wonder the public is cynical about these reports and government in general. Two

2bit, I'm with you. But it looks like the NDX wants to gap up a little in the a.m. Two

Thanks, RCKS, you could be right. If the NDX closes lower than yesterday's close, however, I'll be inclined to think tomorrow will be down day. Two

Hi, you. You stumped me on "mercury retrograde." Expand my understanding, please. TIA. Two

Anyone know when the "stress test" results will be revealed? I thought it was scheduled for May 7? In any event, any downside today and/or tomorrow could be a set-up for a rally based on those results. I'm suspicious that the results will be rigged to make the banks look healthier than they really are. Two

The banks are, of course, with our tax dollars. Two

Hey, 2bit. Is this what BB said this morning?:

"The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance."

Actually, those were the words of Cicero in 55 BC. I think he was a little smarter than BB and the rest of our current leaders. Two

Major sell signal on my NDX daily charts at yesterday's close and this morning. JMHO. Two

Do you believe that report? Two

Well, how 'bout that, we actually do have a few reporters around, such as the WSJ's Kate Kelly, who tell the truth about the banks and nation's financial illnesses. If you're interested, here is Kate's report on the NY Fed's Friedman, a Goldman Sachs minion who got around the law to make $millions. Her report, in my opinion, illustrates the insidious nature of Goldman and how the company inserts itself into government. Two

http://www.ritholtz.com/blog/2009/05/goldman-connection-puts-ny-fed-official-in-tight-spot/

If we do, I'm out of QID, that's for sure. Two

It may turn on me yet, Gleno. Two

For what it's worth, I got a strong sell signal when the Qs hit 35.04 and bought QID. Two

Gleno, my "guru," McHugh, just emailed an advisory stating that "this rally will continue higher." Then he added that "there are risk factors that suggest a correction is approaching" and that "any correction should be followed by significantly higher prices...." Be nice to catch that correction, now wouldn't it? Two

Hey, john. Buffett bought a big hunk of Goldman with a quaranteed dividend. Where Goldman goes, so does the market. Thus, Buffett is now the market's biggest cheerleader (one notch above CNBS). Two