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Fun Times Ahead
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Fun Times Ahead

by The MoleNovember 21, 2009

I don’t have much time to inundate you guys with charts this weekend as I’m getting ready to head out to Houston tomorrow afternoon. However, I took some time today to update my SPX/mortgage resets correlation map for my intrepid stainless steel rats:

The first version of this I posted back in August anticipated a top around 1050 – alright, thus far I have been 50 SPX points off – can you find it in your heart to forgive me? Either way there is a lot of fun ahead as after a one year reprieve starting October 2008 the rate of defaults is now again expected to increase steadily and mercilessly. In addition a chronic and growing shortage in consumer credit will negatively affect the X-Mas shopping season and the collective misery of retailers will show up nicely in the next earnings season. Hey, maybe the next ‘lowered expectation’ will be – hey, we weren’t forced to file for chapter 11 – green shoots! 🙂

BTW, here’s the final design of our evil-shirts – click on the image for a larger version. I really like the front/back combo with Mr. Evil on the front riding the swan into the abyss.

Weekend reading assignment: Great article by Robert Prechter:

Perhaps the single greatest reason for the unbridled expansion of credit over the past 50 years is the existence of the Federal Deposit Insurance Corporation, another government-sponsored enterprise created by Congress. The coming rush of bank failures is an outcome made inevitable the very day that Congress created the FDIC. Today, most banks are insolvent, and the FDIC is broke. Read More

Enjoy the remainder of your weekend – I will be back Tuesday morning. In the interim Gmak, Berk, and Michael are in charge of the place.

Cheers,

Mole


About The Author
The Mole
Mole created Evil Speculator amidst the chaos of the financial crisis in early August of 2008. His vision for Evil Speculator is a refuge of reason, hands-on trading knowledge, and inspiration for traders of all ages and stripes. You can follow him and his nefarious schemes at the usual social media waterholes.
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  • Scoops

    Can't wait to get my hands on one or ten of those shirts. What more perfect way to get into a debate with a self serving, front loading, lying, financial adviser or stock broker than by rolling into a pub with one of these. How about some VIX 90 2010 hats? I imagine one would here something like, “Is that a new Beverly Hills show? I think you have the postal code wrong.”

  • Scoops

    Here's another link for you guys. Hope you find it useful.

    http://www.market-harmonics.com/free-charts/sen

  • davosdax

    Mole, the shirts are fantastic. But if I walked down the street here in Manhattan wearing one, I would be lynched by a crazed mob who thought that I worked for either Goldman Sachs or the New York Federal Reserve.

  • http://trading-to-win.blogspot.com/ DavidDT

    let just say – you would never walk across midtown wearing t-short

  • molecool

    Boy, it's dead in here today – don't tell me you guys all have a life now! 😉

  • psycho_puppies

    Fantastic shirt, it will go great with my Prudent Bear hat.

  • http://ewtrendsandcharts.blogspot.com/ Columbia1

    LOL, you are not kidding, the blog'o'spheres are dead tonight. You were the only one to post anything new of interest!!
    I did do a chart dump this morning, and it is getting harder to find anything bullish to say!!
    http://ewtrendsandcharts.blogspot.com/

  • rosocecasita

    What about Red? it would serve well for the blood that will be in the streets.

    so if gold & silver lead the pack up, even moving up with a rising dollar,

    APMEX.com

    or

    ebay.com

    LOL! You'll need physical, and might want some kind of real authentication =)

  • Bear Bear

    Totally ready for this market to correct

  • Publius Federali

    Mole, the shirts are great, you can count me in for one.

    Quick question, where do you come up with this insane hypothesis that people are going to default on their mortgages? That's just crazy talk. Everything is fine, our government is on the case.

    Safe travels.

  • Publius Federali

    Thanks for the chart. It looks like it is turning up again but this is the first time that the reversal to the upside has been a sharp “v”. Do you think that has significance?

  • string01

    No life other than writing code.
    When C ends, you can print this chart side by side with the actual on the shirt.

  • Publius Federali

    I wear the most insulting tee shirts when I am in NYC. Last month I was wearing one with a guy jumping from a window and the caption was “bailout.” I get dirty looks now and again. Every once in a while someone is dumb enough to say something to me. Man do they regret that. What kind of moron would say something to a man wearing a shirt like that?

  • standard_and_poor

    Looking for a few hedged longs with slight bias to downside for Monday which I'll try to adjust if mkt. weakens quickly. Not really expecting more than a 10-12%
    decline when mkt. decides to crater but who the hell really knows.

  • http://ewtrendsandcharts.blogspot.com/ Columbia1

    Almost all bottoms are sharp, and all tops are rounded, if that answers your question 🙂

  • molecool

    What are you writing?

  • davosdax

    Well here people jumping out of windows invokes 9/11. I'm sure you could find something less insulting to wear than that.

  • Publius Federali

    It's a guy with a briefcase and suit and clearly a reference to the bailouts. And by the way NYers behave you would have thought they forgot about 9/11.

  • raised_by_wolves

    Even with all this money I have now, I still have no social life. Unenthusiastically, I'm trying learning to read a balance sheet over at investopedia. The only reason I bother is so that I don't come off as a complete idiot when my brother the finance major drills me this Thanksgiving. Yeah, I'm actually thinking of going “home” this Thanksgiving. When I was on the streets last Thanksgiving, my pride wouldn't let me go “home” to the folks. I only have a thousand miles to hitch hike. Did you know that since the Patriot Act and Homeland Security, truckers aren't allowed to pick up hitch hikers? Potential terrorists, we are.

  • raised_by_wolves

    What's your trading plan?

  • raised_by_wolves

    Please excuse the newb questions. Are monthly mortgage rate resets estimates or knowns? So, we went through a subprime mortgage rate reset spike, and next up is an option adjustable rate mini spike to be followed by two progressively larger spikes down the road?

  • molecool
  • raised_by_wolves

    Thank you sir!

  • http://trading-to-win.blogspot.com/ DavidDT

    You are very deeply mistaken
    I lost too many friends to forget about it
    Please, THINK what you are writing or if you really mean it – wear t-shirt with “ahole” on the back

  • http://oahutrading.blogspot.com/ steveo77

    Chart of Charts 112109 — Slam Down Bearish
    5 and 20 day moving average crossovers say bearish. The market has had it's way with the 10 day for months, so it's bullish call is questionable.

    Puts are going to get incredibly expensive soon….if you want them, get them now.

    Black Swans do not drift in, they are delivered by a cruise missile in the middle of the night or on the weekend.

    You cannot “Conquer the Crash” in a weekend, you need to be planning and acting for months. If you haven't started it may be too late, but still— START!

    http://oahutrading.blogspot.com/2009/11/chart-o

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    problem solving, mrs hamster family…

  • acejimmy1

    Look at the recent short holdings of GS……link…..http/forum.prisonplanet.com/index.php?…Interesting stuff!

  • amokta

    if i buy long-dated puts, is it worth the effort trying to 'trade' them on the swings of the underlying – i.e. close them when in profit, then wait for market to rise and buy the puts again. But someone said puts prices will keep rising in a falling market, so is it possible that if i went back to buy the puts when the price of the underlying was back up to the same level, that the price to buy the put will be higher than the first time to buy the puts

  • clutchshorter

    Here's my theory, banks and financial institutions knew they were in deep shit with sub-prime for a couple of years before the 2008 crash. But they prolonged the inevitable. They played accounting games, trying to hide their problems until it was too late. Banks took enormous risk through increased leverage for many years. Everyone was doing it because they were generating enormous profits. They knew the risks they were taking but it was okay because in the back of their minds, they were making the money. It was okay because someone – the goverment – would come to their rescue. These banks were just too big to fail. Then enters Bear Stearns in March 2008 and Fannie and Freddie in Summer 2008. These were the catalysts that kicked off the initial stages of the crisis and revealed all the problems within the investment banks and financial institutions. One by one – Lehman Brothers, AIG, Citigroup, Merill Lynch, etc.. all started coming out and reporting and writing down losses from sub-prime. It took a financial crisis for these institutions to finally come out and admit they fucked up. Where the fuck were they when they saw these problems coming? Now the same thing will repeat. In 2010, adjustable rate mortgages will be reset. The interest rates for some will decrease but the majority will increase. Homeowners can't afford to pay their current monthly mortgage rate, lent alone an increased rate. With high unemployment and no real job growth, homeowners will not be able to afford to pay their mortgages. This will set off a chain of foreclosures across our nation. Large banks and financial institutions see these problems in their balance sheets but they don't want to bring attention to it. Deep within their mansion-like offices, they are all scratching their fucking heads – “What the fuck can we do to save this”. The government knows about this too and they are doing everything in their power to maintain calm in the nation and in our world. But when shit hits the fan, which side will you be standing on.

  • goldpackers

    Had been calling for a Gann turn on 11-16/17 and down into 12-2/3. The 16th was the high. I expect st low M/T, a bounce for a day or two then down into 12-2/3. PPT will not let this mkt go down hard before EOY. Still can't rule out one more new high from 1060 to 1075 low per EW. Still believe this is a diagonal that is over or needs one more new high after 12-2.

    Eventually looking for 987 but 1060 may be it for 12/3. Below 1060 would be more bearish to 1029.

    Happy T Giving!

  • clutchshorter

    I apologize if this is a naive question, but why do traders use moon cycles to predict stock market movements. How are they related? There is no relationship between the two. Any observed phenomenon between moon cycles and the stock market is purely coincidental. They may be correlated but correlation does not imply causation.

  • goldpackers

    Believe you need core shorts here and just trade longs against it occasionally

  • goldpackers

    Yes, some outcomes are self fulfilling.

  • amokta

    was that reply for me – in any event seems useful advice !

  • http://www.anomalousmaterial.com CastorTroy

    Next week is a holiday shortened week a ton of economic data compressed into Tuesday and Wednesday could make for some volatile trading at least early on. I still think we need to break SPY 108 before we can short more aggressively. http://tinyurl.com/yhek86a

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    black swan sighted

    … and then there were two and the angel broke the first seal

    http://www.facebook.com/photo.php?pid=2840850&o

  • Publius Federali

    Sorry David but you don't have a monopoly on grief. I worked in the buildings so you have no moral high ground in this case. Others are entitled to their opinions regarding the trash that now makes up NYC. The entire country's sympathy went out to NYC and what did we get in return, a looting and raping of the entire country by the banksters. If you want to show moral indignation please direct it to the people responsible for fixing that hole in the ground. Eight years later not a brick has been laid.

    Perhaps you can find some indignation for the people in your city that were the most generous contributors to our current President. A man who insults the memory of those who passed by granting the terrorist who killed them all the legal rights of an American citizen and a trial just blocks away from where his victims lost their lives. Are you going to stand up and do something about that? Of course not. But you will try to play moral superiority with me.

    Talk is cheap my friend. You can blabber all you want about an insensitive tee shirt that only a myopic fool would read the wrong way, or you can actually speak up and do something about the people who truly disrespect those who passed. Maybe you should wise up like me and leave NYC, because when things get bad out there you will be in one of the worst places to live in the country. Is there a date planned for NYC's bankruptcy yet?

  • elliott_surfs

    I'd say if you really broke it down, to believe in lunar cycles you'd have to believe that everything is influenced gravity – chemicals in our brains influenced even at time of birth by the pull of certain heavenly bodies, that dent in your cousins forehead was due to an alignment of some black hole blah blah blah…I mean it sounds kinda kooky right, but technically we're all connected molecularly, so why can't our moods be influenced by heavier and lighter gravity? Who knows, it's cool to think about though.

  • MariAroma

    “Indeed, their comprehensive review of 25 stock exchanges over the past 30 years does show a strong correlation between lunar cycles and stock prices. The chart below illustrates findings for the G-7 nations, where, in every case, the annualized mean daily returns are higher around the new moon than around the full moon.”
    http://business.theatlantic.com/2009/06/do_moon

    And from another study at the U of Mich “We find that global stock returns are significantly lower during the
    full moon periods than the new moon periods. The mean daily return difference between the new moon period and the full moon period is 4.34 basis points for the 15-day window specification and 5.51 basis points for the 7-day window specification.

    “The above numbers translate into annualized return difference of 5.4 percent and 6.9 percent respectively, both significant at the 5 percent level.”
    http://deepblue.lib.umich.edu/bitstream/2027.42

    However, recently the Full Moon Highs and New Moon Lows have been inverted.

  • MariAroma

    Terry Laundry's Sunday update available. He reviews the nominal 8-year cycle from 1966 onward and concludes we had a bottom in the stock market late 2008 to early 2009. He expects the next speculative bubble in the current cycle will be in Gold (in U.S. dollars). Short-term, he expects the bull market to continue and is waiting for confirmation of a breakout.

    Two .pdf files and two MP3 files to download here —
    http://www.ttheory.com/

  • davosdax

    Thanks Maria.

  • kanur

    If you can go home, go home. Unless the thought makes you want to drink yourself into oblivion. Then you might be better off staying where you are and read a book on technical analysis instead. There's hundreds of them in scribd.com

    I don't care for balance sheets either but sometimes boring things like that can help a trader in the process of figuring out if the stock has a future or not. (Oh, yeah, and impress the inlaws over at Kansas City, too.)

  • labdude

    Fats Domino – Kansas City
    http://www.youtube.com/watch?v=IB0oNjb_E4s&feat

    It is nice here today.
    Gonna have to stop reading comments and mow the leaves.

    Sorry I'm a newb here–don't have a good financial comment to offer–but hopefully will in the future.

  • vision_invisible

    I like the shirt, I'd prefer the front is the back, and the smaller graphic of the back is actually right justified on the front….classic t-shirt design. You may not want to take this to a poll, but my thought.

  • elliott_surfs

    Feel the same on the T. The graphic would be great on the back…with a little ES or mini-Evil on the front breast pocket area.Regardless, looking forward to wearing this to combat that Dow10k nonsense. Nonsense I say!

  • http://trading-to-win.blogspot.com/ DavidDT

    You are intentionally misdirecting the issue from victims/families affected by 9/11 (which is the one I CARE about) to all political/financial/monopolistic/corrupt nonsense.

    YOU can talk all you want and I will agree with you on your anger on WHAT is going on with this country,
    but I hope your brother was not the one who jumped out of the window of 93rd floor and he is not the one who you don't give a fuck about by displaying offensive image (even having different meaning in your opinion)

    And, to finish this conversation – during this short exchange you called ME
    1. myopic fool
    2. “dumb”
    3. moron
    etc

    You can talk all you want, but if you cannot make your point (which might and is valid in political/anger aspect) without insulting memory of SIMPLE PEOPLE who died and insulting someone who disagree with you – you are the one who will keep talking when there will be time for actions.
    JMHO

  • JoeK18

    I think $USD, XLE, XLF is the sector to watch for market direction.

    http://www.screencast.com/users/joek18/folders/

    Reset correlation is too wacky and voodooish even for a technician…LOL

  • http://centrifugaldeforest.blogspot.com/ Centrifugal_Deforest

    NEW POST
    NEW POST

  • Macrawn

    Interesting stuff. Never heard of this theory before but if you believe in market cycles which I do, but don't really go for the complexity of elliot wave theory this might be worth paying attention to. I do think that the gold move has just begun but I own as much of it as I care to own right now.

  • tommyt

    so looking at your path ahead, the SPX could be down 50% come this time next year?

  • Publius Federali

    David, I made it quite clear to you that no one could mistake the shirt for anything other than what it is. You clearly don't believe what I say even though you have never seen the tee shirt. The only people who have ever had an issue with the shirt are women on the upper east side and the Hamptons. Not really the “simple people” you mention.

    Once again you want to take the moral high ground because you are a New Yorker. You can't do that with me. I spent the first thirty years of my life staring at those buildings and three years working in them, talking with the PA cops every single day outside Tower 2 on my smoke breaks. I care about those families and victims but my care is in how we respect their memory, and that is in actions, not words. The actions that NY has taken since that horrible day are an embarrassment to me and this country.

    But it is nice to see that you are a superior NYC guy. Those people who died to you are just “simple people.” How nice. You of course are an enlightened person who can create an issue where there is none just to prove how morally superior you are. It's amazing how you can make an issue of a shirt that degrades bankers because you claim it insult the memory of 9/11 but you can turn around and call them “simple people.” You are so nice. You care about the little people. What a great humanitarian you are.

  • centerline

    IMO, this is why the M1 money is swelling – but going no further. Banks are preparing for a nuclear winter. Hoarding cash.

    If someone else want to take a crack at explaining this, please go ahead. I am dying for a good explanation to help balance my perspective… seriously! bring on some good conversation – just like Bob asked a few days ago.

  • Offtimer

    This link does not work.

  • raised_by_wolves

    Thanks for explaining your theory. +1

  • raised_by_wolves

    Thanks for explaining your theory. +1