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Re: Open Letter To Quant Funds

RobotTrader — Sat, 18 Apr 2009 01:55:03 -0000

Everywhere I look, more people are trying to short these stocks that are running up the hardest. No wonder the market is rallying. I think the rally is due to large institutions which have given up position trading or value investing, and are now resorting to "daytrading" whichever stocks are moving the fastest and strongest. Way too many managers got killed last year, and they are desperate to catch up. Every day, there is some junk stock that went up 30% - 40% in one day on huge volume (DRYS today, an example). And every day that happens, that manager and all other managers scratch their heads and wonder why they didn't pile on an outsized long position on that stock, they could have "made their year" in one trade.

Meanwhile, in a an era of TA on the shortest of timeframes, with thousands of robot trading platforms scanning thousands of stocks, looking for squeeze plays, is it a wonder why these robots pile on at the first sign of a short covering? (Example: Revlon today)

Furthermore, Wall St. has a herd mentality like never before. Most robots are programmed to look over their shoulder to see what the other robots are gaming. Would not surprise me to see that the entire program trading complex is somewhat linked together, to run like a giant herd of wildebeasts.

Now, more than ever, markets are interconnected. Currencies, commodities, stocks, all trading tick for tick, lockstepped like Nazi soldiers. There are no more hedges anywhere to smooth out volatility. In fact, the only "hedge" that works today is to short AAA-rated companies which produce record cash flows year in, year out (XOM), and go long a junk stock on the verge of bankruptcy (LVS).

My guess is that the robots have now cleared the 50-day on all indexes, the DJIA and DJTA have confirmed upside breakouts with no divergences, and the 200-day is the next target.

So don't even think about shorting until we get to the 200-day.

Re: Suiciding The Market

RobotTrader — Sat, 18 Apr 2009 09:49:34 -0000

The Quant Collapse probably won't start until 1) The majority of all near-bankrupt NYSE stocks have rallied up the 200-day, 2) U.S. Dollar breaks out to new highs, 3) Gold experiences a shocking selloff, 4)Unprecedented currency volatility requires G-20 intervention on a grand scale.

With so many computers looking at the same "fundamentals", going long or short based on what all the other computers are doing, it would not surprise me to see some type of fantastic market dislocation that makes absolutely no sense at all to occur which will bankrupt many of these quant funds using leveraged trading strategies.

I think it will also climax with a major player getting totally liquidated at the worst possible time, which is what usually happens during times like these.

The market must turn down ASAP, otherwise, the SPY is going to make a beeline to the 200-day and take a lot of beaten down junker stocks with it on some shocking runs.

Re: The Citi Market Barometer

RobotTrader — Sat, 18 Apr 2009 18:53:19 -0000

I think the two key "bellweather" stocks other than Citigroup to watch are Regions (RF) and BB&T (BBT)

Using the Investor's Business Daily method, both stocks came off consolidations on 2x - 4x normal volume.

http://bigcharts.marketwatc...

In the past rallies, the financials were very weak and were dragged up reluctantly with the broad market. This time, you are seeing very large volume moves off the lows on many of these stocks.

This time, things feel different. I think we have a combination of large short positions put on by CDO "bagholders" attempting to hedge off their exposures, and opportunistic "hit and run" hedge fund traders who are trying to scalp off a quick 20% - 40% gain by squeezing the shorts. And you have mutual fund managers who lost their shirts last year, and if they are to keep their jobs this year, they need to score some quick wins by gunning these small priced stocks. No manager is going to "make his year" by buying and holding JNJ, PG, XOM, etc. and waiting for the SPY to reach the 200-day.

Quite simply, there are way too many guys underwater in performance, and they need to catch up fast.

Right now, the longs have huge momentum in their favor, and I see no divergences or signs of market weakness. When financials and retail are leading the charge, it is very dangerous for shorts to try to pick tops. The momentum seems to be feeding on itself, more and more are going to jump in if they think they are missing the party.

Interestingly, the short sellers would actually be better off by targeting sectors which have the strongest fundamentals, but are now out of favor or two slow moving to make any difference to a manager trying to "catch up". That is why gold stocks, biotechs, pharmas, etc. are getting sold. Money is quickly leaving these groups to go chase the sectors which are getting the most action.

Re: Suiciding The Market

RobotTrader — Sun, 19 Apr 2009 10:40:31 -0000

I remember trading the 2000-2002 bear market by using these "overbought" and "oversold indicators", specifically, I would short heavily when the % of stocks over the 50-day reached the top end of the range. Worked great to play the rallies and then short the next leg down.

However, during the 2003 rally off the lows, I remember shorting when the market was overbought and I got killed repeatedly. The % of stocks over the 50-day stayed pinned for months on end and never backed off. Some stocks like JBLU and SBUX went up at a perfect 45 degree angle for nearly 6-mo. with no correction whatsoever.

http://bigcharts.marketwatc...

Re: Zero Hedge Loves Cars

RobotTrader — Sun, 19 Apr 2009 13:02:11 -0000

Baltic Dry Index may be ready to turn back up.

DRYS up on big volume on Friday, clean break above the 50-day.

http://bigcharts.marketwatc...

Re: Equity Rally Reaches Escape Velocity

RobotTrader — Sun, 19 Apr 2009 23:02:26 -0000

Not so sure that this has been a straight line or parabolic move.

Its been pretty orderly to me. Broke out over the 50-day, then down 3 days to touch the 50-day again, then takes off again.

We are not really overextended over the 50-day yet.

Best case for the bulls would be to see some sideways or down for a few days to let the market reset.

Best case for the bears would be to see futures higher and we take off again for another two days, reaching a "flameout".

Again, I think the key is the bank stocks. During the last two corrections on this leg, the banks held up pretty well while the SPY pulled back. And on the days the market was up big, the banks were leading for the most part.

In prior bear rallies heading into the March 2009 lows, the market acted very strong, but the banks were lagging badly.

We'll know when the market is ready to roll over when the banks start showing underperformance, but as of yet, that hasn't happened yet.

Re: Overallotment: April 19

RobotTrader — Mon, 20 Apr 2009 00:35:01 -0000

Tyler, you are working 24/7 digging up all this stuff

I think its great, but don't burn yourself out........

Re: Equity Rally Reaches Escape Velocity

RobotTrader — Mon, 20 Apr 2009 00:46:14 -0000

Another view: Possibly 3 drives to a top??

http://clearstation.etrade....

Re: Some More Quant Introspection

RobotTrader — Tue, 21 Apr 2009 23:27:33 -0000

Lot of people trying to rationalize an "irrational" market.

I think it is quite simple.

Its the big money players who have all but given up longer term investing, and now have resorted to swing trading, or sometimes even daytrading huge positions. Aggressive players gaming the 3x ETF's are wreaking havoc on everybody, so the momentum gunners are buying anything and everything that is moving up, and shorting everything else.

Its all about how fast they can scalp a trade, doing their hit and runs. Losses are cut immediately if a trade goes bad. And instead of stepping aside, they reverse the position to try to "catch up" from their losses by taking the other side of the trade.

Just think of all these momentum junkies at CalPers, TIAA-CREF, Harvard Endowment, playing the game using 15-minute charts, employing TA on the shortest of timeframes, buying and selling huge blocks without laddering in or building positions.

How else can you explain State Street (STT) opening down huge today, then getting Heatmapped up to a 17% gain at the end of the day? Millions must have shorted in the morning, and when they found out they were wrong, they immediately switched the shorts to longs.

Viola!! A 20% intraday ramp job!!!!

Re: Overallotment: April 21

RobotTrader — Tue, 21 Apr 2009 23:58:34 -0000

Faster processors for Quants?

No wonder these guys are losing money. The programs are worthless in this environment.

What the Quants are up against are "Fast Money" hedge funds who employ 17-year old Sony PS3 and XBox gaming champs with ultra-fast reflexes.

Just juice them up in the morning with some Red Bull and Monster Energy, put them in front of a 6 monitor trading platform, and simply give them a gaming console and tell them to "follow the price" like instructing a greyhound to follow a meatball.

Its really gotten down to that. Huge block trades going off using the shortest of timeframes. Losses to be cut immediately if a trade goes bad. Margined positions to be loaded as fast as possible when a trend is in place where shorts are being run out of a stock.

Re: NYSE 2,300 Up/Downtick Margins

RobotTrader — Thu, 23 Apr 2009 00:01:57 -0000

Just another day of spastic trading.

As mentioned earlier, the big institutions are now daytrading.

Its all about what is moving the fastest. No wonder these huge behemoth funds are HeatMapping up the likes of PF Chang's, Lowe's, Coach, etc. What is working is bought en masse. What ever is not working is being dumped immediatley to go chase whatever is working.

Any wonder why many of the dividend paying Dow Dogs like XOM, CVX, WMT, VZ, T, etc. are getting ground into the dust?

Its because nobody can "make their year' by daytrading those huge stocks.

Much faster money made by gunning some crap stock like KKD or CROX. Make a bigger gain in 2 hours on those stocks than investing in WMT or XOM.

Its all turned into a giant casino.

After horrific losses in 2008, every single trade is being micromanaged.

Either it performs, or its gone in a half hour.

Thousands of managers have multiple screens up, scanning beaten down issues and looking for the Biggest Percentage Gainers, and buying them irrespective of that company's prospects or how the company's debt is trading.

Total Riverboat Gambling, that's all.....

Re: What Are Credit Markets Implying For The Equity Rally

RobotTrader — Thu, 23 Apr 2009 08:40:28 -0000

More pain for the quant funds who are short the wrong sectors.

Looks like AAPL is going to get HeatMapped bigtime today Also, huge pre-market gaps on FITB and HBAN. Momentum junkies are going to be piling on these screamers again today.

Any other stock that isn't going to go up by 20% or more today is going to get sold in order to raise cash to buy the crap stocks again.

Probably end the day with even more consumer discretionary stocks making new highs for the move, even through jobless claims were simply horrific.

Re: Frontrunning: April 23

RobotTrader — Thu, 23 Apr 2009 08:57:57 -0000

Roubini, Schiff, Meredith Whitney, et al

They had their day in the sun, now the market is turning them into fools.

If this was a bear market rally, it would have turned down already with banks showing relative underperformance.

Instead, HBAN, FITB are rocketing up pre-market, and GOOG, AMZN, AAPL are gapping up yet again.

How many more Quants have to go broke?

I guess a lot more, because the market keeps rocketing higher towards the 200-day.

Re: Frontrunning: April 23

RobotTrader — Thu, 23 Apr 2009 09:02:38 -0000

If crude oil turns the corner and XOM, CVX, COP catch a bid, then the SPY could be up another 30 points, easy.

Another interesting twist today is that gold and silver are holding, not backing down like it did last week during the equity rally.

Any material move up in the commodity sector is likely to produce additional acceleration in the broad indexes.

Re: Frontrunning: April 23

RobotTrader — Thu, 23 Apr 2009 09:40:45 -0000

Hey, Tyler does a great job with this blog, lets keep personal attacks to a minimum, OK?

Re: Equity Market Recap

RobotTrader — Thu, 23 Apr 2009 18:54:44 -0000

More consumer stocks skying today.

BRCM was HeatMapped up again, arb funds who shorted on the ELX takeover have gotten killed.

COF was PowerJammed in the last 45 minutes, no doubt, Goldman's Prop Desk news of the AXP layoffs was leaked early.

HANS took off huge after too many short sellers tried to pick a top. Goldman's Prop Desk traders and the newly hired, 19-yr. old, 15-minute candle chasers at the big institutional funds are obviously huge consumers of Monster Energy drinks.

EBAY gapped away and broke out of a huge base, now that so many unemployeds have been sucked into these "work at home" scams where you can sell crap on Ebay without ever having to handle any goods at all.

CAKE is blasting off the same way PFCB did yesterday. Plenty of people feeling sorry for themselves due to their utterly poor financial condition, so why not go out to dinner and drinks and share the pain?

AXP up 6% in the After-Life, now that they are chopping jobs as well as chopping credit line limits.

JNPR skying up 6% in the After-Life, no doubt many Fortune 500 companies have had a sudden urge to upgrade their routers in the midst of the Great Depression II.

MSFT is the next monster Goldman Sach is going to push up to drive the major indexes up for more squeezing.

Funny how they are saving WMT and XOM for later, no doubt those behemoths will be PowerJammed at the absolute worst possible time for the shorts, probably next time the SPY is sitting right under a major moving average or something.

Just another day of Robot Trading which has run totally amok.

Re: Goldman Sachs Principal Transactions Update: 1 Billion Shares!

RobotTrader — Thu, 23 Apr 2009 19:11:15 -0000

Goldman must obviously see the books of the major hedge funds which are their major Prime Brokerage clients.

They must see the massive short positions in specific stocks, therefore they are trading against their own customers by gunning overshorted consumer stocks and initiating hell squeezes.

Funny how these guys rip the faces off their own clients just to fatten up their own coffers in preparation for The Hamptons weekends coming up this summer.

I can hear it now:

"Hey Jonathan, did you see that 14% short position in Cheesecake Factory held by Greenwich Capital Partners?"

"Yeah, we knew they were bearish on restaurants, so we unleashed a torrent of call buying in the futures pits and set off a huge squeeze"

"How much did you make?"

"We made plenty, enough to lock up the best digs in The Hamptons for the rest of the spring and summer, with enough change left over to buy a custom convertible AMG 65 to use this summer"

"What happened to that hedge fund? Did they take a big hit?"

"Yeah, we heard that they suffered a huge drawdown. They later attempted to make up the loss by shorting HBAN and FITB, but ended up getting squeezed on that two. Last I heard, they were in full liquidation."

"Ah, too bad, I guess we won't be seeing those guys at The Hamptons this summer..."

Re: Frontrunning: April 24

RobotTrader — Fri, 24 Apr 2009 09:06:01 -0000

Wow, Interactive Brokers is getting killed pre-market, down 14%.

And the Prop Desk traders at Goldman are HeatMapping CAKE up big, yet another quant fund being executed for having an outsized short position in a single consumer discretionary stock.

Insane volatility as usual....

Re: Frontrunning: April 24

RobotTrader — Fri, 24 Apr 2009 09:46:48 -0000

XLE is on the move.....

If XOM, CVX, COP start running, look out..............

Re: GM Liquidates Two Employee Benefit Plans

RobotTrader — Fri, 24 Apr 2009 22:19:57 -0000

Insane action today.

The globe apparently has experienced a sudden shortage of carpeting and flooring for residential property.

Mohawk up 20% on 3x normal volume.

Wanna bet that IBD adds this to the Top 100 this weekend?

http://bigcharts.marketwatc...

How about all those unemployed carpenters? They must be in the market for some new tools to build more houses?

Stanley Works up 12% on 2x normal volume. Surely, this stock will be mentioned by Jonah Keri in IBD's market comment section, so by Monday morning, thousands of hedge fund managers will be jumping on these screamer.

http://bigcharts.marketwatc...

How about all those unemployeds maxed out on VISA and Mastercard, getting their credit lines cut back by Bank of America, Citibank, and Chase?

No problem. They simply move over to American Express, where there are no credit limits whatsoever.

AXP up a stunning 21% on above average volume.

http://bigcharts.marketwatc...

Need a cellphone? My girlfriend buys a new one every 3 months. She likes the new ones with the pretty colored covers. She changes cellphones like she changes shoes.

1999 Superhooker PMC-Sierra was one of the cellphone chip queens back in the day. After the SOX was getting "Hacky Sacked' for most of the week, this one broke out and advanced another 19% after making a shocking run off the lows already.

http://bigcharts.marketwatc...

Wonder how the M & A Arb firms are doing these days?

How many shorted BRCM on the ELX hostile bid? Apparently too many. BRCM u-turned and is now bottlerocketing up and causing shorts to scream bloody murder.

http://bigcharts.marketwatc...

Re: GM Liquidates Two Employee Benefit Plans

RobotTrader — Fri, 24 Apr 2009 22:48:12 -0000

Since the Goldman Prop Desk has successfully hoovered up the NY Composite above the 50 day, and they have shorts on the run in specific stocks, there are high odds that this tape is going to get jammed further up to the 200-day.

http://bigcharts.marketwatc...

All they have to do is to upgrade WMT, XOM, PG, KO, etc. to get these big cappers moving.

Re: Renaissance Underperforms S&P by 17% In April

RobotTrader — Sat, 25 Apr 2009 00:47:38 -0000

Let me guess:

Renaissance was probably:

Short CAKE, LOW, PFCB, and assorted other discretionary retailers.

Short SPG, VNO

Long UNG

Long WMT, KO, PG, and other so-called "Blue Chips" which have done nothing in this rally.

All positions hedged off with various options strategies which have been rendered useless due to Goldman's antics with whipping the indexes around like a kid holding a loose garden hose on full blast.

Re: The Stress Test Cliff Notes

RobotTrader — Sat, 25 Apr 2009 09:56:17 -0000

It really doesn't matter what the stress test says.

All that matters is momentum, and how much money can be made in a short period of time by squeezing bank stocks.

With thousands of hedge funds, institutions, mutual fund managers, etc. adopting a "hit and run" trading methodology now, they are all eyeballing which bank stock is ripe for a squeeze.

Look at Wilmington Trust. Up 31% in one day. Somebody "made their year" just on one trade.

http://bigcharts.marketwatc...

What happens if Pandit is fired on Sunday?

No doubt, there is a possibility of Citibank stock moving 40% the next day. Most "hit and run" players will be taking advantage.

Where else can you make a huge gain in 48 hours in such a short period of time?

Part of the reason for the quant failures is due to the fact that there are so many "enterprising speculators" now trolling for squeeze plays. They will continue to do so until it stops working.

Imagine running a fund, and you only make 40 big trades a year. Lets say half of those trades end up being cut short due to losses, but lets say 6 trades result in gains of 25% - 50% in just a couple of days. And another 6 trades result in a quick gain of 15% or so.

Thats good enough to beat the S & P by a wide margin, and you can sit out the periods where there is low volatility and play golf, chase Russian hookers out at the Hamptons, or cruise around in your brand new Mercedes SLK.

Meanwhile, the Quant funds are busy programming in economic fundamentals showing massive deterioration, and those managers are spending all their free time listening to Peter Schiff, Nouriel Roubini, Meredith Whitney, et al, convinced that the consumer is going to crash.

No wonder they are all eating buckets of Maalox when they see these banks, homebuilders, REITS, and consumers stocks rocketing daily.

Pretty soon, the losses of the Quants will become so severe, those managers will have no choice but to re-program and try to adopt the same "hit and run" squeeze plays like everyone else. When all those guys get on the same side of the boat as everyone else, then the market could really crash.

My guess that will occur when the SPY reaches the 200-day.

Re: The Stress Test Cliff Notes

RobotTrader — Sat, 25 Apr 2009 10:56:08 -0000

From today's NYT:

"On Friday, the Federal Reserve reported that the banks whose books it had analyzed recently had enough capital to offset a raft of new losses, reinforcing the belief that the government would support the largest banks even if their financial health eroded, and buoying the stock market.

But the agency warned that banks would need a new cushion of financing on top of the current minimum levels as a buffer against higher losses if the economy worsened. That guideline, analysts say, could force at least a handful of banks, including several regional lenders, to sell large amounts of common stock to the government or private investors.

While Citigroup and Bank of America remain troubled, regional banks subject to the government’s tests — including Regions Financial of Alabama, SunTrust Banks of Georgia and KeyCorp and Fifth Third of Ohio — are girding for huge losses. They are among the hardest hit by the housing bust, and are saddled with a pile of commercial real estate and corporate loans expected to sour further this year. Regions Financial, for example, added just $35 million to its reserves for future loan losses in the first quarter, an amount analysts say may not be enough to cover a surge in its nonperforming loans. "

KeyCorp, Regions Bank, SunTrust next up for the Big Squeeze?

http://bigcharts.marketwatc...

Re: The Stress Test Cliff Notes

RobotTrader — Sat, 25 Apr 2009 11:35:24 -0000

Here's a real shocker.

Anyone need a new car? How about a used car?

From what I hear, there is no financing available except for those who have pristine credit.

Why the eff is AutoNation up 300%?

http://bigcharts.marketwatc...