Topic: Record High Margin Debt With Most Traders Betting Against This Market - page 2. (Read 6417 times)

This Hulbert guy is an idiot. When bullishness is at an all time high this is a sure sign that a major correction is near. You don´t begin talking about bear markets after they´ve started you talk about them when you start anticipating them. It´s called being ahead of the curve.

""""We should all be asking: What were Wall Street’s latter-day bears saying last June, when the market was at an all-time high?

The answer is that bears were few and far between. On the contrary, bullishness was at close to extreme levels.""""

 

Opinion: A bear market in stocks will be over before you know it

Published: Jan 15, 2016 5:12 a.m. ET

http://www.marketwatch.com/story/a-bear-market-in-stocks-will-be-over-before-you-know-it-2016-01-15?siteid=rss&rss=1

It is at those bottoms now. Seems weak, doubt that it´ll hold. The Russell 2000 is already in bear market the big guys should follow soon.

It seems pretty much confirmed; the crash of 2016 has started. It´ll probably take all year to bottom.

The breadth is absolutely awful. Yesterday, although the DOW was up over 200 points, 20% of the entire stock market hit a new 52-week low.

Wow, crude oil keeps tanking, now at 33 dollars. It looks seriously oversold so I wonder if there could be a little short covering coming up (before the next leg down).

...

CHINA halted trading a little while ago (tonight, Weds, night USA).  Their Shanghai stock index down a little over 7% (after losing 7% a couple or so days ago).  Yikes!

Dow futures down some 160 last I looked.

Big problems coming?  Zero Hedge is all lit up...

It seems likely to retest those bottoms of last Aug. and Oct. Major support around 2000 in the S&P has been breaking down since November. Then again it could make yet another try for a new high. But I doubt it. The breadth isn´t good. The big dogs and fantasy stocks mask it. If you look at the small ones in the Russel 2000 they´re almost in bear market territory already.





These charts update here so you need to to shift the chart to the left so it fits what was posted if you read this later 

galdur has displayed the most interesting dangerous looking chart of the day.  Those big interest rate spreads breaking an apparent correlation with the S&P.

My guess is that the End Result of all of this is not go to be pretty.

*   *   *

Related: I saw "The Big Short" (movie) yesterday about the Mortgage Backed Securities (MBS) and related subprime sleaze of 2006 - 2008.  Highly recommended.  But you will NOT leave with a smile...

Banksters...

Here´s another very interesting chart. The mismatch between the risk-on stocks and risk-off fixed interest sector.
Something´s going to give for sure.

Note that the Dollar started its big run back there in the summer of 2014.

Margin debt has come off the peak back there in April-May but is still very high. If it´s getting ready to correct then the stock market should quickly follow



I think cash levels at mutual funds are very low presently. Should be another danger sign. And then there´s always the epic battle between the FED´s money printing and collapsing commodities prices. It´s going to be interesting.

If what OP says is true, then yeah it's bad and it's coming.  It was kinda the same thing back in 1929, where everyone was overleveraged.  It was also true of Long Term Capital Management in 1998, which could have bankrupted most of the financial institutions in the US. 

I don't necessarily look forward to a crash, but it sure would be nice to be able to buy some cheap stocks.  And if you're the owner of any real estate, you're smart.  I wish I had cash flow to buy some.  I do have a bit of silver but not a whole lot.

it reminds me of this:

...

Well, we're down BIG TIME in the stock market today (Dow down 300 points as of now, 3:05 PM US ET).

I also follow the Baltic Dry Index, although our company in Peru buys by the "less-than-containerload", but marine freight rates for even our small business have come down (Busan and Shanghai to Callao, Peru).

FXStreet (Mumbai) – The sentiment around the oil markets was hit badly this Wednesday, and the prices resumed the broader downtrend amid persisting supply glut worries ahead of the weekly EIA report

Brent hits 11-yr low, WTI falls to 2-week low

Currently, WTI drops -1.29% to 35.50, while the Brent oil plunges nearly 2% to 35.75 levels, retreating slightly from fresh 11-year low struck at $ 35.53. Oil prices wiped-out corrective gains and fell back in the negative territory as rising supply worries overshadow the ongoing tensions between Saudi Arabia and Iran.

According to a Reuters poll of eight analysts, in the United States, concerns over mounting stock levels were ongoing, with crude inventories likely to have risen by 439,000 barrels last week.

Moreover, strengthening greenback across the board ahead of the FOMC minutes, adds further to the downside in the oil prices. The US dollar trades near one-month highs at 99.60, up 0.12% on the day.

http://www.fxstreet.com/news/forex-news/article.aspx?storyid=66dcc6ee-3c74-4bc4-9bd7-8c59af2ebe6a

Saudi-Iran tensions can’t stop the oil price crash as Brent reaches fresh 11-year low

Brent crude falls below $35 as Iran says oversupply, rather than a new Middle East war, is the biggest threat to prices

http://www.telegraph.co.uk/finance/oilprices/12084237/saudi-arabia-iran-tensions-brent-crude-oil-hits-11-year-low.html

Dow set for triple-digit loss as China roils markets again

U.S. stock futures pointed to sharp losses at the open on Wednesday, after weak Chinese services data cemented fears of an economic slowdown in the world’s second largest economy.

Futures for the Dow Jones Industrial Average YMH6, -1.38%  slid 161 points, or 1%, to 16,920, while those for the S&P 500 index ESH6, -1.48%  dropped 21.20 points, or 1.1%, to 1,990.50. Futures for the Nasdaq 100 index NQH6, -1.61%  lost 48.25 points, or 1.1%, to 4,435.00.

“The dismal start to 2016 appears to have only intensified this Wednesday, with disappointing Chinese services data (sending the yuan to a 5-year low against the dollar even if the Shanghai Composite managed some counter-intuitive growth), a fresh 11-year low for Brent Crude and reports of a fourth nuclear test from North Korea,” said Connor Campbell, financial analyst at Spreadex, in a note.

The purchasing managers index for China’s services sector dropped to a 17-month low in December, further indicating growth in the world’s second-largest economy is slowing down. Markets in Asia mainly fell in reaction, with the Hang Seng IndexHSI, -0.98%  down 1%, but the Shanghai Composite Index SHCOMP, +2.25% bucked the trend with a rise of 2.3%.

The services data come after a disappointing reading on China’s manufacturing sector on Monday, which triggered a market rout globally.

http://www.marketwatch.com/story/dow-set-for-triple-digit-loss-as-china-roils-markets-again-2016-01-06?dist=beforebell

A “Perfect Storm Is Coming” Deutsche Warns As Baltic Dry Falls To New Record Low

At 468, The Baltic Dry Index is now at a new record low…



Which leads Deutsche Bank to warn of…A Perfect Storm Brewing

 The improvement in dry bulk rates we expected into year-end has not materialized. And based on conversations we’ve had with several industry contacts, we believe a number of dry bulk companies are contemplating asset sales to raise liquidity, lower daily cash burn, and reduce capital commitments. The glut of “for sale” tonnage has negative implications for asset and equity values. More critically, it can easily lead to breaches in loan-to-value covenants at many dry bulk companies, shortening the cash runway and likely necessitating additional dilutive actions.

 

Dry bulk companies generally have enough cash for the next 1yr or so, but most are not well positioned for another leg down in asset values

 

The majority of publically listed dry bulk companies have already taken painful measures to adapt to the market- some have filed Chapter 11, others have issued equity at deep discounts, and most have tried to delay/defer/cancel newbuilding deliveries.

 

The additional cushion, however, is likely not enough if asset values take another leg down; especially given the majority of publically listed dry bulk companies are already near max allowable LTV levels.

 

The move to sell assets in unison can lead to a downward spiral, where the decline in values leads to an immediate need for additional equity to cure LTV breaches.

Source: Deutsche Bank

 

http://www.zerohedge.com/news/2016-01-05/perfect-storm-coming-deutsche-warns-baltic-dry-falls-new-record-low

China stocks seesaw, turbulent trading for oil and an elementary discovery

Agenda - The World Economic Forum  by FirstFT 11:04 am

The daily briefing “FirstFT” from the Financial Times.

This article is published in collaboration with The Financial Times.

Chinese stock markets, fresh from sparking a global rout on Monday, began Tuesday with wild swings — swiftly turning steep declines at the open into positive territory before falling again, all within the space of 10 minutes.

Chinese markets were dented on the first trading day of the new year by fresh concerns over the health of the domestic economy, sending global equities down by the most in more than four months. (FT)

In the news

Turbulent trading for oil Crude oil prices swung in a wide range on Monday as traders weighed increased geopolitical risks in the Middle East against weakening data from China, a major commodities consumer. US crude oil rose as much as 3.6 per cent, and fell as much as 1.9 per cent during the volatile session on Monday, according to Bloomberg data. (FT)

Mideast discord deepens Bahrain and Sudan on Monday followed the lead of their Sunni ally Saudi Arabia and severed relations with Iran, as the political crisis deepened over the execution of Nimr al-Nimr, the dissident Shia cleric. (FT)

World’s largest blue star sapphire found Gemmologists in Sri Lanka claim that the largest blue star sapphire yet has been discovered in a mine in the country. The gemmology institute in the capital Colombo has certified that the gem weighs 1,404.49 carats and say they have not certified anything larger. (BBC)

US files suit against VW The US government filed a civil complaint against Volkswagen for allegedly allowing nearly 600,000 vehicles with diesel engines to “emit excessive air pollution across the country, harming our health and cheating consumers”. The allegations, which are the latest step in the US government’s case against the big German automaker, carry penalties that could stretch into the billions of dollars. (FT)

Obama takes action on gun violence The White House has revealed plans to make it harder to buy firearms as President Barack Obama seeks to curb the “scourge” of gun violence in his final year in office. Fulfilling a pledge to bypass Congress, the White House announced measures to expand background checks on gun buyers and step up the enforcement of gun laws. (FT)

It’s a big day for

Venezuela, where the new year heralds a power struggle as an opposition-led legislature is sworn in. (FT)

Food for thought

Predicting the future An increasing number of banks and fund managers are making very long-term forecasts, arguing they are easier to do than shorter-term predictions. But do they really tell anyone anything? (FT)

China’s new religion Scarcely a decade ago, Chinese marathon organisers struggled to fill their starting blocks. Now, in the big cities, runners have to win a lottery to enter. “Running is the new religion of the Chinese middle class,” said one enthusiast, who believes the nation has moved beyond the days when its national sport was, well, shopping. (FT)

The man with 1,500 credit cards They are all valid and offer a total credit line of $1.7m. The collection started with a bet in the 1960s and culminated with a title in the Guinness Book of World Records and a wallet that stretches 250 feet. (ABC)

Elementary discovery Four new elements have been added to the periodic table, finally completing the table’s seventh row and rendering science textbooks around the world instantly out of date. The elements, discovered by scientists in Japan, Russia and the US, are the first to be added to the table since 2011, when elements 114 and 116 were included. (The Guardian)

Top destinations for 2016 From South Africa to the Andes, a select panel of travel industry leaders offers an insiders’ guide to the top destinations of 2016. (FT)

A new year bump John Authers analyses a hectic start to 2016, as Chinese stocks sell off, an impending leadership change in the US, and European manufacturers appear to gear for growth. (FT)

Publication does not imply endorsement of views by the World Economic Forum.

To keep up with the Agenda subscribe to our weekly newsletter.

Author: FirstFT is the Financial Times’ editors curated free daily email of the top global stories from the FT and the best of the rest of the web.

https://agenda.weforum.org/2016/01/china-stocks-seesaw-turbulent-trading-for-oil-and-an-elementary-discovery/

The Chinese stock market dropped 7% today. Most shares dropped to the 10% limit. The world economy is not in good shape.

Asian markets tumbled Monday on the first day of trading in 2016, with declines so steep in mainland China that authorities halted trading there for the rest of the day.

Analysts said China’s weak manufacturing data and a rapidly weakening Chinese yuan helped push the Shanghai Composite Index SHCOMP, -6.86%  down 6.9%, its biggest decline on record for the first trading day of the year. The smaller Shenzhen Composite 399106, -8.22%  fell 8.2%.

Japan’s Nikkei Stock Average NIK, -3.06% was down 3%, Hong Kong’s Hang Seng Index HSI, -2.68% fell 2.7% and South Korea’s Kospi SEU, -2.17%   was down 2.1%. Australia’s S&P/ASX 200 XJO, -0.48%  fell 0.5%.


The CSI 300 000300, -7.02%  , a benchmark of the largest 300 stocks listed in Shanghai and Shenzhen, fell 7% just after 1:30 p.m. local time triggering a new circuit-break system, which took effect Monday. Chinese authorities said in December that they would halt trading for 15 minutes if the CSI 300 moves up or down by 5% or more 15 minutes before their local 3 p.m. close, in an attempt to stabilize a volatile market that plunged more than 40% during the summer.

A daily movement of at least 7% triggers a trading freeze for the rest of the day.

“The circuit breaker system actually creates a downward spiral” as more investors get nervous about trying to get out before others, said Hao Hong, managing director at Bank of Communications Co. “Having this so-called system in place is actually making the selling worse.”

Chinese markets led the regional benchmarks lower after a private reading of factory-floor conditions showed activity contracted for the 10th-straight month in December, the latest signal that China’s economy is stalling. The Caixin China manufacturing purchasing managers index fell to 48.2 in December from 48.6 the previous month. A figure under 50 indicates contraction.

Earlier Monday, China’s central bank guided the currency weaker, setting the daily fix for the onshore yuan at 6.5032, its weakest level since 2011, compared with 6.4936 on Dec. 31. The currency can trade 2% above or below the fix.

The offshore and onshore yuan traded at their weakest levels since April 2011, with the onshore yuan as weak as weak as 6.5140 to one U.S. dollar early Monday. Many investors expected the onshore yuan to end 2015 at 6.5, and traders say they are broadly maintaining their outlook that the yuan will to continue to weaken.

Benchmark yields, which move inversely to prices, on five-year and 10-year Chinese government bonds rose after hitting multiyear lows in 2015.

Currencies in Asia slid across the board against the U.S. dollar with South Korea’s won down over 1.04% and the Taiwanese dollar down 0.94%, as fears that the Chinese yuan’s accelerating slide would drag down these economies.

http://www.marketwatch.com/story/asian-markets-slide-on-fears-of-stalling-chinese-economy-2016-01-03?siteid=rss&rss=1

Now; that is one big dog. Apple has lost $150 billion of its market cap. And that is more than the total market cap of 475 of the S&P 500 from Pepsico at $147 bn down to #500!

Explaining Today's "Massive Stop Loss" Quad-Witching Market Waterfall: Why 2000 Must Be Defended At All Costs

Submitted by Tyler Durden on 12/18/2015 08:43 -0500

Citadel Reuters

One week ago, and again last night, we previewed today's main event: an immensely important quad-witching expiration, the year's last, one which as JPM's head quant calculated will be the "largest option expiry in many years. There are $1.1 trillion of S&P 500 options expiring on Friday morning. $670Bn of these are puts, of which $215Bn are struck relatively close below the market level, between 1900 and 2050."

What is most important, is that the "pin risk", or price toward which underlying prices may gravitate if HFTs are unleashed to trigger option stop hunts, is well below current S&P levels: as JPM notes, "clients are net long these puts and will likely hold onto them through the event and until expiry. At the time of the Fed announcement, these put options will essentially look like a massive stop loss order under the market."

What does this mean? Considering that the bulk of the puts have been layered by the program traders themselves, including CTA trend-followers and various momentum strategist (which work in up markets as well as down), and since the vol surface of today's market is well-known to everyone in advance, there is a very high probability the implied "stop loss" level will be triggered.

Not helping matters will be the dramatic lack of market depth (thank you HFTs and regulators) and overall lack of liquidity, which means even small orders can snowball into dramatic market moves. "While equity volumes look robust, market depth has declined by more than 60% over the last 2 years. With market depth so low, the market does not have capacity to absorb large shocks. This was best illustrated during the August 24th crash."

That's the qualitative explanation. What about the quantitative? According to Thomson Reuters data, between SPX 2050 and 1900 levels there are currently about 1.1 mln put contracts open vs 739,000 call contracts. As Reuters unnecessarily observes, "unless there is a substantial move in either direction that is sharply greater than the standard deviation, large SPX options positions should have limited impact on the market."

Well of course: the problem is that since over the past 7 years, the entire market has become one giant stop hunt, the very algos which "provide liquidity" will do everything they can to inflict the biggest pain possible to option holders - recall that for every put (or call) buyer, there is also a seller. As such, illiquid markets plus algo liquidity providers makes for an explosive cocktail at a time when the Fed is already worried whether the Fed may have engaged in "policy error."

So what does this mean in simple English? As Reuters again points out, levels to watch are the large imbalances in favor of puts in Dec SPX put contracts at 2050, 2000, 1950, 1900 strikes

It further writes that "as SPX moves below these levels market makers who are short these puts would be forced to sell spot futures to hedge, which could exacerbate a market selloff."

In other words, selling which begets even more selling, which begets even more selling.

The Fed's trading desk, and its Citadel "market supportive" joint venture, will be busy.

http://www.zerohedge.com/news/2015-12-18/explaining-todays-massive-stop-loss-quad-witching-market-waterfall-why-2000-must-be-