trading recap

Global purchasing manager indexes roll-over from strong growth mode. Biggest-ever decline in US pending home sales, drop in Chinese LEI, austere G20 communiqué, and fears over a sequential decline in stimulus spending prompts continued risk-aversion. Weak job growth caps a terrible run, with S&P’s -12% in Q2, at new lows for ’10. Analysts/strategists reluctantly revise forecasts lower, Goldman softening and Merri

A Mon rally on China’s FX flexibility failed miserably, setting a “sell-rallies” tone for wk. Ozzy presented an austere looking budget — said the right things. Japan’s Kan pledged to cap spending for 3yrs, the German cuts thru ’14 look to be 80bln Euros. Austrians in; Keynes out. Soros warns Germany leading EU down deflationary funnel (The Economist, Krugman and his ilk agree). US housing data collapsed, sparki

Moody’s downgraded Greece and BP 3-4 notches, as always, ahead of the curve. S&P 500 and EM equities flipped the bird and extended rally from June 7th low to 6.4% and 7.2% respectively. Spain bond auction went fine, spread to Germany tightened from 212 to 186. CDS on European junk bonds fell to 1mth low of 521. $2.5bln EM equity fund inflow is 2nd highest of yr. No real changes to earning expectations in the US l

Volatility of both prices and sentiment rule the day. Papers and mags starting to call this a trading range, they’re exhausted like everyone else. The Economist ran “Hope at Last” 6wks ago and then ”Fear Returns” last wk. Israel is now the mag’s cover (much easier to deal with the Middle East than stocks). Blackrock’s Fink gives the all-clear for a bull run on Wed; on Thurs Hungary’s new PM says he may default. Echo’

Worst May for DJIA since 1940. At Tues low, mkt had ~15% correction. Economist runs cover “Fear Returns”. In April it ran a cover “Hope at Last”. They’re not the only ones buying highs and selling lows. AAII wkly poll of retail investors show over 50% bearish for 1st time since Nov. No one seems to be making money and risk levels keep dropping. HFRX HF Index -2.7% in May and -0.3% ytd vs

German regulators panic and spark mayhem. US Fin Reg reform passes despite 3,000 lobbyists at play. Australia slaps 40% tax on commodity producers. As big brother stomped through the underbrush, investors ran for cover, bought hedges, pushed VIX to 46 (closed wk at 40). $5.3trln lost in global equities mtd. Margin clerks took charge; pain ruled the day with a Euro rally as risk assets plunged. Market braced for anoth

The $1trln shock-and-awe saved the world though plenty of smart investors/traders doubt short & med-term success. The EU went “all in” so we can expect more help if need be. Still, everyone knows it just papers over long-term problems. The failed relief rally gave way to consensus that EUR can only fall. EUR shorts and sentiment hit historic highs. Debate now centers on question “can EUR fall an

Week #6 marked a violent end to the bullish capitulation trade. VIX jumps to 41 from recent lows around 15. Greek 2yrs trade 18%. Fat fingers get blamed for Thursday’s plunge but we all know the story is far bigger. Pimco’s El-Erian provoked panic with view that “crisis is on verge of going global”. If it does go global, panic will be the standard response. Every politician and central banker

Week #5 of bullish capitulation ends with VIX jumping 5pts. Trench warfare between (1) Greek and Goldman drama plus more China pressure to limit property speculation, and (2) Blow-out earnings and improving global growth leading to rising forecasts for ’10 & ’11. I met 22 investment firms this week and found only one unabashed bull (interestingly he was Chinese). Investors feel the potential downside