Insight

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Scopelabs Insight – Tuesday, January 12, 2010

The wheels of Fed inspired speculation go round and round. Much like homes were overpriced leading up to 2007, it seems that cash is now the new Sub-Prime asset. Whereas homeowners had borrowed their way into oblivion for the uptick of the housing bubble, the world’s largest financial institutions have now leveraged up on cheap money like never before. And we all know what happens when something gets over-leveraged – just ask Lehman and Bear Stearns.

In looking at the TED spread in the summer of 2007 the spread between LIBOR and 3 Month US Treasuries had risen to between 50 and 80 basis points. As the Sub-Prime crisis morphed into the global credit crisis come September 2008 the TED spread had blown out to 400 basis points as LIBOR shot into the stratosphere. Today, fueled by the ever-gracious money-pumping Fed, the TED is back down below 25 bps – its bubble blowing groove. Hello cheap money. The problem now is the asset being leveraged is cash itself – on the backs of savers. It’s not being loaned. It’s not being invested in growth. It’s being plundered.

Commodities have obviously benefitted from the low cost of carry. But the Dow and the S&P? Can we really believe this dead cat bounce is based in any sort of fundamental recovery? I think not. Job openings are now at record lows. Since the job market’s peak in June of 2007 there are approximately 50% fewer job openings for America’s 15.3 million unemployed. Any recovery is solely based in debt and cheap money. Ben Franklin once said, “When you run in debt, you give to another power over your liberty.” Well, in the first quarter of 2010 the Fed is adding another $1.4 trillion to its already bloated balance sheet. So who has dominion over our liberty now?

The Dow closed down about 36 points and the S&P about 10 points today on “bank worries”. Bank worries? What are they worried about? The giants won’t be able to gobble up the little people quick enough? Are they worried the Fed is going to raise rates? Or quit buying mortgage backed securities? The only thing we should be worried about is how to bury the likes of Goldman Sachs, JP Morgan, and Citigroup.

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Scopelabs Insight – Monday, January 4, 2010

So we start out twenty-ten with a bang!

If one hadn’t the ability to read, use logic or reason, or perhaps the advantage of opposable thumbs, all is well in Denial-Land. Today we witnessed another manufactured surprise as the Dow closed up 155.91 points to end the first trading session of the new decade at 10,583.96. The S&P 500 (SPX) closed up 17.89 at 1,132.99. I must say, from a purely technical standpoint the S&P is acting like she would rather make a run at the 61.8% retracement level of 1,229 mentioned in previous Insights. But, throw in the pesky issues of logic, reason, and simple mathematics, and one wonders how severe and violent the impending “correction” resulting from the resumption of the seemingly forgotten debt crisis will be. This insane degree of complacency brought on by economic amnesia will catch everybody unprepared for a correction surely to come.

When I was younger and less risk averse a very oversold VIX and a very overbought market like we have today would already have me rolling the marbles at the downside. However, with today’s government manipulated market, where “want” is the only criteria for a new false stimulus package, it’s too risky to butt heads with the government. Conversely, if you make money on the long side you’re lucky and if you lose you deserve it.

In other sectors the dollar continued its beating today while gold bounced nearly $30 in the last 30 hours. That’s a buck an hour.

So what’s left? Be nimble and trade, or sit it out and stay in risk-less rate of return vehicles where after-taxes you might break even.

Speaking of manufactured data, on the calendar tomorrow we’ve got; Pending Home Sales, Auto Sales, and Factory Orders. I wonder what kind of rally we’ll see when these reliable numbers come out.

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Scopelabs Insight – Monday-Tuesday, December 28-29, 2009

Trading is light this holiday week. The VIX remains below 20 and the Dow (at 10,545) and S&P have seen nominal changes Monday and Tuesday. That said, the S&P is holding above the previous resistance level of 1,122, closing at 1,126.20 today. Moving into the first week of the new decade the direction of the S&P will definitely set the tone for trading early next year.

We’re not looking for any surprises over the next few days barring unforeseen economic data, terrorist attacks, european bank failures, or unknown unknowns. On a final note we came across an intriguing article on the causes of hyperinflation – check out this link: James Turk – Hyperinflation Watch

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Scopelabs Insight – Thursday, December 24, 2009

The Santa Claus rally continued as the Dow ended the holiday week at 10,520.10, up 53.66 points on the day. The Nasdaq rose 16.05 points closing at 2,285.69 and the S&P 500 (SPX) closed up 5.89 ending the session at 1,126.48. The S&P has officially broken the 1,122 resistance (a 50% retracement from the March 2009 lows) and could be poised for a breakout to the next resistance level at 61.8% or approximately 1,230. So what could have been a quiet Christmas Eve day may mark another leg up for the S&P. Keep an eye out for continued strength above 1,122.

Today’s rally was spurred by new orders for long-lasting U.S. manufactured goods excluding transportation surging in November, and applications for jobless benefits falling last week, pointing to a firmly entrenched economic recovery – or so the official spin goes.

Initial claims for state unemployment benefits fell by 28,000 to a seasonally adjusted 452,000 last week. That was the lowest tally since early September 2008 and below market expectations for 470,000 new claims.

The U.S. Commerce Department said Thursday orders excluding transportation surged 2.0 percent in November after falling 0.7 percent the previous month, beating market expectations for a 1.0 percent rise.

It’s Christmas. Have some egg nog or something stronger. Enjoy the holiday weekend. Cheers.

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Scopelabs Insight – Wednesday, December 23, 2009

The Dow and S&P closed nearly even on the day while the Nasdaq inched higher based on a Santa Claus rally fueled by expected tech gadget sales this holiday season. The Dow closed at 10,466.44 up 1.51 points or (+0.01%), while the S&P 500 (SPX) was up 2.57 points to close at 1,120.59. Keep in mind the key Fibonacci benchmark of 1,122 on the S&P – any meaningful closing above that number could bring a breakout toward the 61.8% retracement from the March lows.

On another important note the Volatility Index (VIX) is becoming a bona fide story at this point. It’s officially in the teens closing at 19.71 today, up .17 points from yesterday – see the 1 year chart below.

The markets had opened higher in the morning but quickly faded on disappointing new home sales data, which tumbled 11.3 percent in November. Investors might be realizing that previous positive signs in the housing industry were the result of government stimulus and are therefore unsustainable.

VIX 12.23.09

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Scopelabs Insight – Tuesday, December 22, 2009

The Holiday rally is still underway. The Dow closed up 50.79 points at 10,464.93 and the S&P 500 ended up 3.97 at 1,118.02. AND the Volatility Index (VIX) is now officially a teenager at 19.54. This is normally a very bearish indication suggesting over-abundant complacency and not enough fear in the system.

As we’ve repeated time and again every close below 1,122 on the S&P is just noise in the system. A meaningful close above 1,122 would suggest a potential breakout and allow the 61.8% retracement to be tested, which, as you can see on the chart below pegs the S&P at nearly 1,230. The problem from a risk/reward standpoint is a regression to the downside offers between 2x and 2.5x the risk – implied odds I do not find favorable.

So, can the rest of the week bring any fireworks? Anything is possible coming up to year end, and a decade’s end for that matter. Consumer sentiment and new home sales are due out tomorrow; jobless claims and durable goods on Thursday, but we are in a shortened trading week when the year has brought us enough surprises already.

Click chart to enlarge.
SPX CHART DEC 22

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Scopelabs Insight – Monday, December 21, 2009

The Dow Jones industrial average (INDU) closed up 85.25 points to end today’s session at 10,414.14, or .83%. The S&P 500 index (SPX) was up 11.58 points to close at 1,114.05, or 1.05%. The Nasdaq composite (COMP) advanced, 25.97 points, or 1.17%. The Volatility Index (VIX) is flirting with the teens closing at 20.49, down 5.49% for the day.

As we wind down the decade we are poised for a negative return on the S&P 500. Barring an almost impossible last-minute rally, the widely tracked index is headed for its first negative decade ever. A negative decade could not come at a worse time – think Baby-Boomers. An entire generation largely relying on the last ten years being a growth period so as to sell their equities and move to fixed income and clip coupons in their golden years. Now their equities are in shambles and their fixed income pays zero. Their once rosy retirement landscape has now been decimated. Boomers have not only lost money over the last decade but the illusion of cashing out of equities and into 6%-7% interest rates on secure fixed income instruments is now a pipe dream.

Looking forward to tomorrow the day largely hinges on GDP and existing home sales reports respectively. How the markets react to what is perceived as good or bad news will be reflected in price.

We apologize for the lag-time between our Insights but we were busy producing soon-to-be-released advisory product.

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Scopelabs Insight – Wednesday, December 9, 2009

Tuesday, December 8, the Dow shaved triple digits to close at 10,285.97, the S&P was down -11.91 to close at 1,091.94 well below the 1,120 resistance. There were many suggestions in the media as to the cause of today’s sell off. Our causality vote at RealityArbiter.com came from a horrifying headline by the “slow to point out disaster rating service” Moody’s, that read “The USA and UK are both testing their AAA boundaries.” What that means in plain English is that these two government’s are like Britney Spears and Nicolas Cage running through the mall on a spending spree with a no-limit credit card. In addition to our venerable government’s lack of fiscal responsibility, I happened on the chart below and was quite amused that somebody actually did a survivorship bias study on mutual fund manager’s performance, or lack thereof. In a bull market from ’04 to ’07 Wall Street’s best and brightest fund performance imploded with nearly 96% of fund managers failing to beat their respective benchmarks.

Was the money we paid the Wall Street crooks and Banksters for their lack of performance the tipping point to cost the USA its AAA rating thus creating higher borrowering costs for future generations? We vote yes.

Click here or click on image to enlarge
Equity FUNDS performance D8

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Scopelabs Insight – Tuesday, December 8, 2009

bernankelistenI beseech you to watch this video. It speaks volumes of the ineptness of this man. This man had a three year head start to get in front of this problem and instead he followed his predecessor’s lead and drove us off the financial cliff.

When Ben Bernanke speaks, people get comforted, whereas I get nauseated. Today, he vowed to keep interest rates low. What other choice does he have? He reminded people that forces like unemployment and tight credit would keep the economy to moderate improvements. Thanks for sharing the obvious, Ben. Why didn’t you do something meaningful leading up to this meltdown to head it off before it turned into our worst nightmare? Or, why don’t you share with us how you plan on gracefully exiting your desperate mortgage-backed-securities buy program without cratering the entire global economy? How about laying out a cohesive plan for that impending disaster?

We’ve got some Treasury auctions throughout the week. Watch for Thursday’s Jobless Claims report and Friday’s Retail Sales, Import/Export Prices, Consumer Sentiment, and Business Inventories.

Stocks are likely to drift as investors await more details from the Fed, which will host its last policy meeting of the year next week.

On Monday, December 7, 2009 – The Dow Jones industrial average (INDU) rose 1.21 to finish at 10,390. The S&P 500 index (SPX) lost 3 points, or 0.3% to finish at 1,103.25 – remember, anything below 1,120 is just noise. The Nasdaq composite (COMP) shed 5 points, or 0.2% to finish at 2,189.61. European markets fell, with London’s FTSE 100 and France’s CAC 40 little changed and Germany’s DAX down 0.5%. Asian markets ended mostly lower, with the exception of Japan’s Nikkei, which gained 1.5%.

Monday, Gold fell $28.10 to $1,141 an ounce.

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Scopelabs Insight – Monday, December 7, 2009

Scopelabs is going go out on a limb here and take a shot at a market commentary we read for Friday, December 4, that just about made us ill. We’ll start with the basics – which are simply the facts and easily digested. From Financial News USA:

The Dow Jones industrial average (INDU) rose 23 points, or 0.2%, to close at 10388.90 after hitting a 14-month high of 10,516.70 in the morning. The S&P 500 index (SPX) rose 6 points or 0.6%. The Nasdaq composite (COMP) rose 21 points, or 1%. All three indexes gained for the week.

There, we got that out of the way. Now for the nausea.

A strong dollar sent gold prices tumbling and also hit commodities and stocks that benefit from a weaker greenback.

What the fuck? A strong dollar? What planet are these people from and what kind of hallucinogens are they on? Gold was simply overbought and it’s correcting. Strong dollar? Even a dollar in free-fall will have a dead cat bounce.

The jobs report “blew us away,” said Phil Orlando, chief equity market strategist at Federated Investors. “It confirms that the recession ended in the middle of the year and that we are moving ahead, even with some choppiness.” However, he said that while the labor market is healing, it still has a long way to go. That realization, combined with a little end-of-the-week fatigue, may have limited stock movement Friday.

This guy must live on the strong dollar planet and supplies all the hallucinogens.

Hey I’ve got a suggestion for this guy – don’t get high on your own supply.

Employers cut 11,000 jobs from their payrolls in November, the Labor Department reported Friday morning. It was the smallest number of job losses since the start of the recession in December 2007 and a surprise to economists who were looking for employers to cut 125,000 jobs in the month.

Job losses in September and October were also revised lower by a total of 159,000.

The unemployment rate, generated by a separate survey, fell to 10% from 10.2% in October. It was the biggest one-month decline in more than three years. Economists thought the unemployment rate would hold steady at 10.2%.

The report shows the battered labor market is recovering, yet job growth is not expected to pick up until later next year. In addition, some of the improvement in the unemployment rate in November is attributable to job seekers giving up and dropping out of the market entirely.

The report showed 15.4 million Americans are out of work and seeking jobs. Meanwhile, another 6 million have given up looking and another 9.2 million have only found part-time work when they want full-time work.

The report also showed gun sales were up fifteen thousand percent and ammunition is now more valuable than gold.

Come on sheeple, we’re sure to get a blip up in the dollar here and there. The markets will respond positively to the watered down numbers coming out of the government sanctioned deceit mills. So what? We’re still testing resistance in the markets. Most of the other supposed news is nothing more than static at this point and any close below 1,120 on the S&P 500 is simply noise in the system.

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Scopelabs Insight – Friday, December 4, 2009

On Thursday, December 3, 2009, the Dow closed down -86.53 coming in at 10,366.15 as the S&P 500 gave up -9.32 to close at 1,099.92. It seems the 50% retracement resistance of 1,121 on the S&P remains intact, for now.

As I watch the markets continue to side-slip at what would appear to be a resistance level on both the Dow and S&P 500, I have to wonder where the unemployment numbers factor into this whole smokescreen. If you believe the Bureau of Labor Statistics, jobless claims just fell for the fifth week in a row. That’s great. Oh but wait, the holidays are here and retailers, even in this environment are staffing up (maybe not as much as in the bubble years) for the Christmas spending orgy, which might explain the softer jobless claims. So we’ve got that going for us. On the flip-side if you go to Shadowstats.com and look at real unemployment already over 20% it makes you want to go down to the local Federal Reserve branch and start knocking some heads around. We’re in a bad spot sheeple. And it’s going to get worse. Trust me. I haven’t been wrong so far.

The fact is that unemployment far exceeds what the media and government portray and even THEY admit it’s going to get worse in 2010. Hooray for the jobless recovery though! Maybe we should all go out and buy up as many stocks as we can. Goldman can pay their bonuses. GM can rise from the grave and Ben Bernanke will look like a hero as he exports inflation all around the globe. On the other hand, how about we don’t do any of those things. How about we do the exact opposite and protect our assets from lies and fraud. Taking that one step further it is a safe bet that we WILL in fact get hit to the downside again at some point – we’re just NOT sure when, hence the LONG dated and small bets on the puts suggested in earlier Insights. There is NOT a rule (unless you are being forced to, like they are trying to force you right now with Zero Percent interest rates) that says you HAVE to “play” when the conditions are NOT favorable from risk-reward standpoint. Remember, “this isnt baseball, you dont have to swing at every pitch! You can easily stand with the bat on your shoulder and wait for a fat pitch”

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Scopelabs Insight – Thursday, December 3, 2009

Seeple-1The excuse of the day for the Dow not gaining another 100 points, as the sheeple have come to feel entitled to day-in and day-out, was due to a startling revelation that, get this, LOL LOL LOL LOL, banks may still have, LOL LOL LOL, some PROBLEMS looming out there. Listen, it’s inconceivable that once you stop cooking the books that you simply wake up in the morning and shuffle the numbers like a deck of cards, then deal yourself a hand only to decide you don’t like the look of it so you shuffle again and again and deal until you see a hand you like. That, ladies and gentlemen (please remove all children out of the room as we do not want to teach the next generation to lie cheat and steal) is how the US banking system is run today.

The Dow closed down 18.90 at 10,452, and the S&P 500 slightly up .38 to close at 1109.24. Keep in mind, 1121.80 is still our short term cap. The first level of support comes in at 945.90. Essentially, to be long the market at this point is like hitting 19 at the blackjack table because the dealer is showing a face card. If you make money getting or staying long here, you are lucky. Just like the blackjack player praying for a 2 as he hits 19 – if you loose all your money here going long, you deserve it. Don’t ever forget the stock market’s job has nothing to do with capitalism, or finanicing the country, the primary function of the stock market is to make the absolute largest amount of sheeple look as foolish as possible. It is so true…

Tomorrow – Thursday, December 3, 2009, (see calendar left side) has a plethora of Treasury activity – more begging, borrowing, and shuffling debt around the globe. And for our daily dose of entertainment we have Helicopter Ben and his sidekick Barack doing the old Potomac two-step for the media where they will undoubtedly pat each other on the back for keeping us free from martial law.

Frankly, although I feel it’s my duty to keep as many people informed as possible, in the midst of the obvious I find it sometimes boring to even debrief you, my poor reader. On that note, the only interesting thing that happened today is that Nassim Taleb, author of Fooled by Randomness and The Black Swan went into seclusion. Read this sobering article – Nassim Taleb Bids Farewell

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Scopelabs Insight – Wednesday, December 2, 2009

In last night’s “Insight” I mentioned that the markets often climb a “wall of worry”. So what’s worrisome? A logically minded reasonable person would worry that the job situation in the US (see chart/video below) is in fact worrisome since the consumer purportedly represents 70% of US GDP. That said, even more worrisome is that the poor debt-ridden unemployed people of America might not be so willing to buy such extravagant gifts this cheerful bear-market-rally Christmas season. Ironically, I would not be surprised based on recent logic if our free-spending government doesn’t step up with a “Cash for Christmas Gifts” stimulus where you can return shitty gifts from Christmas Past for brand new iPods, flat-screens, and other shoddily-made Chinese goods.

Sadly, I am semi-serious about my Christmas jingle above. We are being buried in a pile of unserviceable and never to be repaid debt (I mentioned previously that the last two weeks calendars are littered with billions of short-term beggar’s loans). We’re like Wimpy in the Popeye cartoons begging for hamburgers today that we’ll gladly pay for tomorrow. I just keep wondering how long these foreign countries that keep lending us hamburgers will continue do so as we all watch the dollar go down like Paris Hilton at a Frat party.

Climbing the “wall of worry” the market continues to ignore; unemployment, unsustainable and mounting debt, a plummeting dollar, inflationary fears, deflationary fears, escalating fraud and lies originating in our government, the Fed, from the banksters, and all the other Bernie Madoff’s yet to be discovered.

So, with the above cheerful list of observations the market managed to put together a nice rally today. The Dow closed up 126.74 at 10,471.58, the S&P closed up 13.23 at 1,108.86, still below the key level of 1,120 – all of which leaves us in holiday trading no man’s land. Finally, good to my promise I reiterate once again, sell everything, get to all cash or cash equivalents with the exception of buying some of the long-dated puts (or Leaps) I mentioned in my previous Insights.

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Scopelabs Insight – Tuesday, December 1, 2009

As I mentioned in last night’s update the market had largely shrugged off the “Dubai Debacle” and continues to climb the old wall of worry. Another obvious favorable market factor I was remiss to mention in last night’s Insight is that today (11/30/09) was month end, which tends to be bullish with all the “window dressing” fund managers do.

The financials showed some late day strength and pushed the S&P 500 Index (SPX) up 4.13 to close at 1095.63. Other indices were very uneventful. The biggest move of interest was crude oil’s jump from $75.95 to $78 – a greater than $2 dollar move in less than an hour. Thank you Somali pirates! By the way, can anyone put me in touch with those gun toting Somalians so I can get ahead of the market next time they feel like grabbing an oil tanker. Funny thought – I bet someone at Goldman’s oil trading desk has their number and call me cynical, I bet that same Goldman someone has a Somali passport.

As we move into full-fledged holiday season we’ll stay true to our word and suggest getting to cash or cash equivalents, and no, I won’t stop the repetitive redundancy of this suggestion, you have a month to develop a tangible tactical trading campaign for 2010. So get your head clear and trading account flat so you can make a series of good decisions for 2010.

My suggestion of the day is to read over the next month a book or two on tournament poker. I want you to pay attention how logical and reasonable these (gambling) premises are, in addition to far greater due-diligence to protect a $10k buy-in for the world series of poker versus the barbecue that goes on in your brokerage account. Even with this rally of late I can still smell the smoke.

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Scopelabs Insight – Monday, November 30, 2009

Whilst most Americans were prone on the couch in their turkey induced Tryptophan semi-comas drowning their collective economic malaise in various forms of alcoholic lubricants that shining star of finance capitalism in the oil-soaked desert known as Dubai, went belly-up. My guess is that the event was a mere blip amongst the channel surfing masses as they flipped from football game to football game.

As this event relates to the financial markets, especially those here in the US, what are the ramifications? I will answer that question with another question. Does the UAE state of Dubai, an opulent display of excess with indoor ski slopes and eight star hotels built on man-made islands really mean anything in the global scheme of things? My guess is no, it doesn’t. The UAE will bail out their failed state, creditors will be paid one hundred cents on the dollar, the triggering of credit default swaps will be avoided, and the markets will roll on as if very little happened.

With respect to the triggering of credit default swaps I will admit that in the case of Dubai I have no idea who is on the other end of such financial derivatives that may or may not have come into play. But what I do know is it seems default swaps are the common thread found in many central bank interventions across the globe. The banks get paid, disaster is avoided, and general market price levels remain semi-unaffected.

The pricing of markets is the only thing that matters. In that vein, prior to any new makeshift Dubai bailout plan by the UAE, the markets too will reflect the impact of this situation by way of price. As of this writing, 2:00AM, gold remains steady (after being down $50), overseas markets are taking Dubai in stride (notwithstanding the initial “knee-jerk” reaction some markets felt when the Dubai announcement surfaced), and despite the “mushy feel” of the post US bailout-rally the US markets lend themselves to a positive open. Dow futures are up almost 50 points, oil is up 50 cents, while the S&P 500 did sneak below 1,100 at one point during Friday’s shortened session. All in all we’re pretty much no different than we were from our last Insight.

Finally, good to my promise I reiterate once again, sell everything, get to all cash or cash equivalents with the exception of buying some of the long-dated puts (or Leaps) I mentioned in my previous Insights. You can potentially make a ton of money on a small amount of money while knowing the exact dollar risk – assuming the magicians of bailouts can’t find another rabbit to pull out of their empty hat.

Scopelabs Insight – Vacation November 26, 2009 through November 29, 2009

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Scopelabs Insight – Wednesday, November 25, 2009

“Turnaround Tuesday” turned out to be a bust for the bears and flatline for the bulls. The S&P 500 did sell off a whopping .59 cents to close at 1,105.65 down .05%. However, in defense of Turnaround Tuesday, at one point during today’s session the DOW was off close to 90 points and it ended up closing down 17 points on the day.

The Volatility Index (VIX) which measures fear and greed in the markets, or in actuality the cost of insurance in S&P 500 options, is now flirting with becoming a teenager after closing today’s session at 20.47 down 3.6% for the day.

Historically, we are moving into the strongest seasonal period for the markets. With that said, I can almost guarantee that a bevy of analysts will soon be touting the so-called January effect, as in, “So goes January, so goes the year.” Anyone making any kind of long-term prediction in the midst of the greatest distorted market in the history of markets, flea, stock, or otherwise, is not only insane, but should be made a public spectacle due to their utter stupidity.

The only prediction anyone can make with any degree of accuracy at this juncture is that our national debt will be twice what is now in another ten years, if not sooner.

This week is littered with (see Economic calendar in left column) the issuance of billions upon billions of dollars additional government debt (are we ever going to pay this stuff back) and is only more evidence of the never-ending expansion of this debt bubble. Again, as I finish each Insight, I will be redundant and repetitive and beseech anyone holding what will most likely turn into the next form of toxic instrument; i.e., stocks, ETF’s, or any debt-backed paper, to get flat and into cash or cash equivalents then prepare a tangible plan for 2010.

Until tomorrow.

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ScopeLabs Insight – Tuesday, November 24, 2009, 12:30AM

Are you ready for “TURNAROUND Tuesday”?

On Monday the S&P 500 rallied to close up 14.86 at 1106.24.

Last night’s futures lent to a rally today – so the question is, are we gonna get the famous (for you bears, and infamous if you’re a SHEEPLE, whoops, i mean a bull) “TURNAROUND TUESDAY”?

I personally own the puts I mentioned last Thursday at 9.00 and they went out inspite of the rally at 8.55. These puts have 752 days remaining, so i won’t lose too much sleep over the .45 cents and frankly, I might just like the market to rally all the way to 1,120 so i can get a little more pregnant and buy a bunch more – hopefully in the 7′s and really get paid off when the surprise that the economy and global problems are MUCH worse due to the so-called “fixes” they used to “fix” the problem. Let me reiterate my earlier warnings – you don’t repair (or retire) too much debt by adding much more debt. It’s as academic as it is surreal. IF i were to lose on these puts, this remote possibility would have only been caused by having NO more problems surface in the markets between now and December 2011, or 752 days. And in the event these puts went against me I could at least claim, like they say in poker, “I got my money in right”.

RANT – I mention the so-called “fixes” of which there will be more to come in the near future I’m sure (on that note, where are those “green shoots” everyone was talking about and what the hell did that mean anyway? Another thing, does anyone know what color terror alert we’re on now? I can’t keep track of that either!). Nonetheless, evidence of the economy being totally fixed with the “GDP #” coming tomorrow, along with “consumer confidence”, AND we’re peddling the world some more of our lovely debt ALL week long, these auctions of which are running at a fast and furious pace to pay for all the the great ideas like “cash for clunkers” and getting new losers that can’t afford to buy houses government assistance to try and clear that REO inventory and yep, it’s all fixed, it’s a new BULL market that for sure has got plenty of BULLSHIT to spare.

So, once again let me reiterate, SELL everything, buy some puts on the S&P, relax with any money you’ve got left, learn to trade, fire your broker, and punch Ben Bernanke in the gut.

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ScopeLabs Insight – Monday, November 23, 2009, 12:30AM

As we enter the holiday shortened trading week of November 2009 I’m watching my screens as the clock rolls over to midnight in New York, Sunday evening here in Maui, the S&P 500 is up 4 in pre-market hours, Dow futures are up 35, and Oil futures are up >.50 cents – each pointing to a positive open for the US markets.

Gold continues to shatter the previous record highs daily and has traded as high as 1,165 so far today – again, a new record. World currencies which started out the Sunday evening session have rallied well off their lows and are also painting a positive picture at this point.

If you’re clairvoyant, lucky, foolish, or were smart enough to get long the market when the S&P was in the 600′s back in March, or the 700′s, or 800′s, or anywhere along the way, it would certainly behoove you to either be lightening up your exposure or at the VERY LEAST putting in stop losses to protect your good fortune (or just plain old luck). If however you’ve simply been riding the inertia roller-coaster then you should certainly be looking to take some RISK off table at this gift of a 50% retracement. On that note, my recommended strategy is to get one hundred percent flat (unwind ALL stocks, bonds, pretty much anything that’s not nailed down) and develop a REAL plan as to your entire financial architecture for 2010. It’s year end and a perfect time to do it. Aside from getting flat the ONLY reasonable suggestion I have at present is to start buying some (a 1/3 of what risk you would be comfortable with from a dollar standpoint, i.e., a benchmark would be 10 contracts per $100,000 equity) of the S&P puts – which I mentioned in last Thursday’s post. Since it looks like we will have an up market Monday they will probably be trading for <9pts and I feel a very cheap way to play the downside, or IF you must for some reason hold stocks and can’t bear to sell them it would provide decent insurance at a great price!!!

ScopeLabs Insight – Friday, November 20, 2009, Recap

Friday was largely a non-event day and was so unmemorable I can’t come up with anything to say about it barring that the SPX rallied back from its lows to close down just 3.52 at 1091.38.

Scopelabs Insight – Thursday, November 19, 2009

US Markets -

11/19/2009 – The benchmark Standard & Poors (S&P) 500 closed down (14.90) to settle at 1,094.90 (a 1.34% decline).

The 50% retracement of the S&P 500 from its (13-year) low of 676 (set on March 9, 2009) to its all-time high of 1,565 (set October 9, 2007) draws near – see graph. Depending on how one graphs the Fibonacci retracement, the pattern points to (approximately) 1,120 as the 50% mean. Hence, a very logical short-term market top could be in place. If this 50% retracement is significantly breached to the upside, the next and always very important Fibonacci retracement number (of 61.8%) stands at 1,229.

So, from a risk management standpoint the potential upside in the S&P (to 1,229) based on today’s close (of 1,094) is positive 12%.

Conversely, a 50% (negative) retracement from the top of this rally would take the index back down to 893 – which for the bulls should be a logical support target as a buyer. 893 equates to an 18% downside risk from today’s close, not including event driven and/or systemic problems that we at Scopelabs see as a more acute in probability versus March when the market was at its all-time lows.

So, you’re a 3-to-2 dog going long vs. short here (i.e., the S&P is out of gas).

Strategy

In lieu of having a full paid-advisory service intact, today’s strategy recommendation will have to fall under the “educational” umbrella. We’ll call this one a Freebie. I will stick my head on the chopping block and include a picture and an actual trading idea that I feel provides greater than a 4-1 upside potential (a minimum risk-reward ratio by my standards). Please click on the embedded jpg, download it, enlarge it, and take a close look at it. I recommend the outright purchase of Puts on the S&P 500 (with the caveat that this would be a suggested 50% entrance of whatever risk capital/unit you might apply to any given trade or idea).

In tomorrow’s update we will discuss interest rates and the most recent prop trade and one of the rare instances where holding postitions overnight makes sense (like the above S&P puts).

Option insurance play SPY 11-18-09

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