Bailout Bill Stocks Limp: How Could that Be? The reason why stocks sold off after bill passage is technical

We are reading articles on many websites, and newspapers that seem to completely not understand how markets work. An example of such articles are below.

Here is the correct analysis and the mistake these analysts and writers are making.

Recall that before the annoucement of the bill passage we called the top of the day here on this blog (read previous post). The market was going to sell off no matter what the outcome of the bill vote would have been.

The reason of the sell off is technical. How come: The move that took place after the bailout bill passge is normal, as the market was in the area of sellers and had to go down to search for the buyers.

It has been doing this since the Monday bottom. We have been using this observation to time this market since Monday end of day, and we have been right in timing each and every daily top and bottom area since Monday. The regular reader knows this as he has been following the release of market calls in real-time on this blog.

For instance we issued a call to buy the bottom of Thursday, and to sell the top of today (Friday).

PS: the analysis in Minyanville article is wrong. The prove will come this coming week when the market will rise, but they would come up with another explanation which would also be wrong. The real reason is rooted in supply and demand for stock. That is it. Know where demand is, and where supply is, and you know how market will be behave.

Excerpts from an article by a professor on Minyanville:

"How can this be? How can the passage of the Bailout Bill find stocks limping awkwardly into the close? Wasn't this supposed to be our finest hour? The desperate resolution to the year-long crisis? Well, the reality we have tried to reveal here in Minyanville is that the Bailout simply will not work.

The credit markets have spoken. And they are saying - no, they have been saying all along - that the $700 billion Bailout Bill is nothing but a gnat attacking a buffalo. There has been an ongoing disconnect between stocks and credit markets for months now and even the action on Monday did little to correct it.

There is only one thing necessary to understanding what is happening and it is this: no one at U.S. Banks, no one at the Federal Reserve and no one in politics can accept the reality that real estate assets in this country remain oversupplied, overpriced and overleveraged."

"It is that simple." (This is wrong analysis and conclusion).


"TAF, TSLF, SuperSIV, TARP, none of that matters. No matter what acronym is created to disguise the fact that assets are overpriced, or what government intervention is created to prop up those asset prices, the market will inevitably overpower it. This time is not different. In fact, it is continuing to play out almost exactly as the Great Depression did. The bottom line is that despite the bailout, risk in owning stocks has increased, not decreased."

NQ, NQ QQQQ, QID stock trading: Market Timing Experiment (Friday October 3, 2008)

Dear stock market traders and investors:

The gap up of today is proving that our call on this blog for a bottom yesterday,
and on Monday were right! Please re-read all the calls of this week.

11:39AM: with NDX at 1543, we are starting closing the long NDX positions entered into yesterday. Profits to be calculated later, but I could see one of them with close to 40 NDX points.

2:58PM: with NDX at 1501, we are back entering on the long side of NDX. We are going long, by selling ITM puts on the QQQQs.

AIG Stock Bankruptcy Bailout Crisis: Fed AIG Drawdown reaches $61 Billion

There are reports that AIG Stock Bankruptcy Bailout Crisis: Fed AIG Drawdown reaches $61 Billion. Bloomberg also reports that federal reserve loans to banks, dealers and AIG increased to $410 Billion.

It is a good thing that the Fed is working to keep the system working. God help the fed workers, who must be under unusual loads.

Tomorrow we anticipate a really, and the talk would be different.

NQ, NQ QQQQ, QID stock trading: Market Timing Experiment (Thursday October 2, 2008)

10:11AM: with NDX at 1520, we are starting to scale in on long side with NDX (NQ, QQQQ)

10:25AM: with NDX at 1515, we have just completed entry of half intended size. Just in case the market breaks down suddenly we have place order to buy the second half in area 1480.

11:15AM: with NDX at 1506.ish, we completed the entry. The orders to enter in area of 1480 have been cancelled.

We are predicting the beginning of a rally between today and tomorrow Friday.

11:48AM: NDX is now at 1522. All entries (read above) are profitable.

11:49AM: PROFIT TAKING: with NDX at 1523, we took half of the part of the position (we entered at 11:15AM), off. We are putting orders to get back in the area of the current low, plus 1 to 2 points (around 1505).

Price Prediction Timing Experiment: NQ QQQQ NDX QID stock trading: Re-entry on long side (Wednesday October 1, 2008)

Price Prediction Timing Experiment. The timing of market bottoms and tops continues. The successful series continues unbroken. Let us turn today's timing of NQ QQQQ NDX QID stock trading: Profit Taking (Wednesday October 1, 2008).

Please make sure you read the conclusion at the end as this blog is written in chronological order, and as trading progresses we do not know what would happen to the calls, although from a historical point of view the calls of this blog have been (deadly (to the opposite side)) accurate.

10:51AM: With NDX at 1550ish: we are starting to scale on long side of NDX.

(The next trades were not made in real-time as it was an "observable" holiday for me, but I can share with the readers a copy of the execution reports that will ascertain that what I write is the absolute truth and the facts. This is particularly useful to those of you who are going to sign up, and I encourage you to sign up).

12:55PM: take profit of long position of 10:51AM, and go short NDX.

1:44PM: take profits on short position established at 12:55PM, and go long NDX.

The last NDX long position is via selling an ITM put since vol is high and if the bailout deal passes (as I think it will), the market should pop up tomorrow, and/or volatility collapes.

CONCLUSIONS:

1. We nailed not only the bottom of the day, but BOTH the bottom of the morning, as well as the bottom of the afternoon.

2. I have check it yet, but I think we also nailed the top of the day as well (if market topped little before 1PM. But I have to check this one.)

3. As I promised the above trades that were not made in real-time can be shown to be true with a copy of the execution report. Please write "Execution Report 10-01-08" in subject if you want me to email it to you.

I hope that those who did not sign up yet, will hurry after seeing another evidence in the accuracy of the market timing experiment.

AIG, European Banks Crisis, US Government FED: Potential Collapse of European Banks

The k-10 report of AIG reveals that AIG has been providing credit swaps which allowed european banks to meet capital requirements required by the regulatory requirement. This item appears on AIG K-10, which means that some banks in Europe are over-leveraged.

By bailing out AIG, the US is in fact saving european banks.

What would happen if the US does not recognize the swap obligations of AIG to european banks? Some banks will definitely be oveleverage as the insurance that was provided by AIG evaporates. Remember, an insurance is only as strong as the insurer!
This can lead to a fall of some banks in europe, and a chain reaction in banking crises.

In the meantime, the US government and US tax payers is saving the european banks.

Also, it is likely that the european central bank will have to lower interest, similar to what happened in Japan years ago. The euro should fall like a rock!

NQ QQQQ NDX QID stock trading: Profit Taking (Tuesday September 30, 2008)

NQ QQQQ NDX QID stock trading: Profit Taking (Tuesday September 30, 2008):

It is now 2.34PM: With NDX at 1580, we are taking the profits on the long positions we established on NDX towards the close yesterday. We will do the count later, but they are very good profits (around 40 NDX points).

NQ QQQQ NDX QID stock trading: The Bottom (Monday September 29, 2008)

Stock traders and investors, Option traders, Forex traders and Market watchers:

The topic of this stock trading blog post is to present outcome of our analysis of future price action based on current and most recent price. Our analysis indicate that a bottom is forming on NDX. Thefore we are starting to scale in as follows:

12:20PM: with NDX at 1575, we started scaling in on long side of NDX (first half size).

1:47PM: with NDX at 1535.ish, the second half size is added.

1:55PM: with NDX at 1568. Took 33 NDX points PROFIT on half size entered in area of 1535 at 1.47PM.

2:09PM: with NDX at 1537 (filled at 1532), re-entry of half size for which profits was taken at 1568. This moving fast. FILLED AT 1532!

2:27PM: with NDX at 1563, profit taking of position entered at 1532. PROFITS= 31 NDX points

2:33PM: with NDX at 1543, re-entry on long side.

(I now have some things to do. I will be back later to blog.)