S & P and financials - not so bad

We were waiting for the pullback, may be it was more agressive than the one we could desire (especially with the VIX blowing up). Key supports are holding. 

SPY & QQQ: hope this time is different

Sell signal in the 60 and 10 simple moving average system. Should be different this time?

PBR: near 2008

And near the bottom?

?

Back in time

In VIX / out SPY

May be...

This chart talks

History repeats?

Euro / US Dollar -

I am trying to figure out the elliot wave count on this pattern. The news around this pattern today:

Germany May Pay 35 Billion Euros for Euro Rescue, Die Welt Says

Euro Weakens for Second Day After Merkel's Party Defeated; Dollar Advances 

Euro Extends Slide Against Dollar, Yen as Leaders Divided on Bailout Fund

S & P 500: technical patterns

Just some EW counts that I am following. 

Warren Buffet: annual letter to share holders

Available at http://www.berkshirehathaway.com/letters/2010ltr.pdf

Some interesting paragraphs:


"Partially offsetting our anchor of size are several important advantages we have. First, we possess a
cadre of truly skilled managers who have an unusual commitment to their own operations and to Berkshire.
Many of our CEOs are independently wealthy and work only because they love what they do. They are
volunteers, not mercenaries. Because no one can offer them a job they would enjoy more, they can’t be lured
away.
At Berkshire, managers can focus on running their businesses: They are not subjected to meetings at
headquarters nor financing worries nor Wall Street harassment."

"...the directors who represent you think and act like owners. They receive token compensation: no options, no restricted stock and, for that matter, virtually no cash. We do not provide them directors and officers liability insurance, a given at almost every other large public company. If they mess up with your money, they will lose their money as well. Leaving my holdings aside, directors and their families own Berkshire shares worth more than $3 billion. Our directors, therefore, monitor Berkshire’s actions and results with keen interest and an owner’s eye. You and I are lucky to have them as stewards."

PBR - Petrobras Brazil

Rio de Janeiro-based Petroleo Brasileiro S.A. (Petrobras; PBR) is a mixed joint stock corporation controlled by Brazil's federal government. PBR is one of the largest oil and gas companies in the world, and operates in five business segments: Exploration and Production (E&P; 24% of 2009 revenues, 55% of 2009 operating income), Supply (47%, 37%), Distribution (18%, 4%), Gas & Energy (4%,3%), and International (7%, 1%).
Each ADS represents two common shares.
The chart looks tempting. But, I will keep my stop loss at 37,87...there are a lot of problems around the world, and who knows what could happen in the Middle East and how the development of the unrests could affect the energy sector.

Technically speaking, I think PBR is beginging a wave 3. But, be careful and maintain your stops.

C - Citigroup

Regarding citigroup, I think it is time to follow this stock. The US banks looks atractive again, and in citigroup I have noticed some interesting things. In this blog I do not make any fundamental analysis (I reserve it to me), but I can tell you some. For example, it has returned to profitability in 2010, with net income of $10.6 billion, versus a loss of $1.6 billion in 2009. Also, it hasmade good progress in improving credit quality. The U.S. government canceled $1.8 billion of its perpetual preferred shares in conjunction with the end of the loss-sharing agreement, but still holds $5.3 billion of preferred shares, which it is selling off gradually. The EPS is at 0,35 per share, not bad. I think that as a result of capital raising activities in the last two years, this company is better prepared than before to withstand further write-downs of their loan and securities portfolios.
Although all this, it has been downgraded to "neutral" from "buy" by Goldman Sachs.
The charts: in the weekly chart, I am following the 55 weekly exponential moving average. Key support.
It is going to break this pattern. I would bet that upward, but who knows?

JPM - (John Pierpont Morgan) Bank

Time to sell....and wait for a break up.

XLF target: 16,5

If it breaks 15.

Muni bond market

Something is wrong in the municipal bond market. Interesting opinions on this topic:


Warren Buffet: Muni Bond Market May Be Next Phase of Financial Crisis

How to Play the New Muni Market:

Municipal bonds are backed by local or state governments or other public entities. Investors like them because their interest payments are generally exempt from federal income tax, though states often levy taxes on out-of-state bonds.

A freakish confluence of events sparked the selloff. Treasury yields rose, which led to losses on all types of bonds as investors sold older bonds to make room for newer ones. A massive amount of muni-bond supply hit the market—about $34 billion through Nov. 19, the average issuance for an entire month in 2010. And the Republicans' retaking of the House of Representatives on Nov. 2 made it more likely that the Bush-era tax rates will be extended for all taxpayers, reducing the urgency for upper-income earners to hold tax-free munis, and threw into question the future of the Build America Bonds program, in which the federal government subsidizes municipalities that issue taxable bonds.

The problems started when bond insurers, with massive exposures to subprime mortgage debt, fell on hard times. Now they are exiting the muni market in droves. Whereas about half of all newly issued bonds in 2006 carried insurance, that number has fallen to about 7% in 2010.

The financial crisis also drained the muni market of liquidity. Bear Stearns and Lehman Brothers were two major muni-bond dealers before they blew up. Other banks and brokers have been less willing to hold large amounts of muni bonds on their books, while some hedge funds that used "arbitrage" strategies in the municipal-bond market pulled back or disappeared.

The market's fragmentation makes it difficult for investors to gauge whether munis are cheap or expensive.

Back when more of the muni market was insured, the direction of interest rates was the primary driver of yields. Treasurys and municipal bonds typically moved in the same direction, with a fairly predictable ratio between their yields.

The historical average was around 82% for 10-year bonds, because that was the ratio that produced a yield roughly equal to a Treasury once taxes were factored in (the "taxable equivalent yield"). When the ratio moved higher or lower than that, it signaled a buying or selling opportunity to some investors.

Now the direction of interest rates is just one of many drivers of muni yields, and the relationship between Treasurys and munis has weakened, say traders and analysts. The correlation between the two since 2008 is just 1%, versus an historical average of 91%. (A correlation of 100% means two assets move in lock step; a correlation of -100% means they move in complete opposition.) So while the taxable-equivalent yield ratio is now 103%, it doesn't mean munis are cheap.

The recent trading in ETFs and closed-end funds shows how tricky it can be for investors to value a muni portfolio. Muni-bond ETFs, which trade on exchanges like stocks, are generally more liquid than the bonds they hold, so there can be big differences between the two during periods of volatility.

For example, the iShares ETF and the SPDR Nuveen Barclays Capital Municipal Bond ETF on Tuesday traded about 2% below the value of their underlying holdings, according to investment-research firm Morningstar Inc. Before November, both ETFs had generally been trading within 0.5% of their net asset values this year.

Investors should focus on national muni funds rather than their single-state competitors, analysts say. And they shouldn't be too tempted by the higher yields now available—there still is more pain to come, say advisers. "There will be a general decline in credit quality," says Warren Pierson, comanager of the Baird Intermediate Municipal Bond Fund. "I think you'll see more downgrades than upgrades," which would hurt muni-bond prices.

Instead, investors should focus on high-quality short- and intermediate-term funds. Bond prices fall as interest rates rise, and longer-term holdings are more sensitive to these shifts. That is especially important given the uncertainty about the Build America Bond program. If it is allowed to expire at the end of the year, there could be a fresh flood of long-term municipal issues, which could cause long-term muni prices to drop.

Time to cover shorts in the euro

TLT: volatility is coming for some days..

200 daily moving average is the key.

TBT & the 20 year us treasury yield

Buy signal in the 20 year US treasury yield. First resistance: 3,95.

DIA & SPY

Buy signal in the DIA ETF, not confirmed in the SPY.

Alcoa - AA

12.71 critical support. Still above the 200 Moving average. Uptrending.

High frequency trading

An interesting article on HFT. There are new participants in the market and we should understand them very well.

Here I extract the most important paragraphs. To read the complete version, click here. (CBSNEWS.COM)

Just four years ago, high frequency traders accounted for 30 percent of the stock trades in the U.S. Today, estimates range as high as 70 percent. And institutional traders, like Joe Saluzzi of Themis Trading LLC, have come to believe that the game is rigged. 

Today it is still the public façade of Wall Street, and a television backdrop for reporters relaying financial news.  But less than 30 percent of the trading is conducted there now, and the specialists and the noise of the floor is being replaced by the speed and quiet efficiency of computers, and the action has moved elsewhere. 
There are now more than 80 alternative trading systems around the country, plus two brand new electronic stock exchanges which most of you have probably never heard of: BATS and Direct Edge. 
They're owned by the big banks and by high frequency trading firms, and neither of them would give "60 Minutes" an interview or let us inside to film their operations, but they trade more than a billion shares a day at blinding speed, and most of those bets are being made by machines. 
The players range from firms like Goldman Sachs, Barclays, Credit-Suisse and Morgan Stanley to hedge funds and smaller operations like Tradeworx, which is the only high frequency trading firm that would talk to us or let us in. 
It's run by Manoj Narang and a small group of mathematicians and scientists called "quants," which is short for quantitative analysts. Their high speed computers trade 40 million shares every day. 

Actually, high frequency traders are getting the same market information that Saluzzi gets. They are just getting it a little bit sooner - it's only a few fractions of a second sooner, but if you are running supercomputers, Saluzzi says, it can be an eternity. 
"What you're saying is the people with the fastest computers have an advantage? They get the best deals?" Kroft asked. 
"Every time. Absolutely. There's no doubt about it. I mean, if they're spending that kind of money, and they're using that type of infrastructure, they're doing it for a reason. And it is to get a speed advantage, in that respect," Saluzzi replied. 
It's not just the speed of the super computers that's important - it's also their physical location. The closer they are to the stock exchange's server the quicker they will be able to get critical market information. 

"Do these high-frequency trades have anything to do with market fundamentals?" Kroft asked. 
"Valuation is irrelevant. It's all about just moving the price up and down the ladder all day long. Each day is new. Each day starts fresh. So, you have to question the true valuation of the markets now," Saluzzi said.