Yesterday, we saw a mega sell-off all over markets. The worst thing I've seen. The 9/11 move was more external problem, but yesterday we saw 150 year old hedge fund firm failed, a firm that survived through great depression was sold very cheap and the world's biggest insurance firm was desperately calling a distress signal. Thus, everybody was thinking the choice for the feds was clear! Oil is not at $150 any more, grains came 30% off of its top, so cut the rate!
What a surprise, the feds just announced to keep the rate steady. Remember early this year, when Bear Sterns failed, we saw emergency Sunday night cut, lots of billions of injection etc. Here's what I am thinking. Every 'normal' people I know we're in deep trouble. Yes, we still are and we will for a while, but I think the worst could be finally behind. (Remember, when everybody knows, markets will do the exact opposite? ) When the feds rescued bears and even rescued Fannie and Freddie, there clearly seemed to be more serious coming. And yesterday there it was. Normally, lowering rates mean more liquidity, so markets love them. But we're in a situation where lowering rates mean more trouble to come.
This morning, it looked like markets are going to die (ES at -25 pts-ish), but 45mins after the keeping the rate news, we're rallying +15 pts! I always think that someone somewhere knows about what's going on. Not necessary smart people but they somehow have information about what will happen and we're seeing exactly that.
In terms of technical perspective, ES has a long bottom-tail, which is one of powerful signs of exhaustion. When technical meets fundamental, we see a steady move to one side. In this case, to the upside.
Remember Goldman Sachs said oil will go to $200 by the end of summer? People got scared and putting lots of money onto oil funds or natural resources. Oil is currently around $90! GS said it's supply / demand. Emerging countries' demands are getting higher and higher. I said that was a complete BS. It was all speculations after all. You see all hedge funds are liquidating everything to get chase. I bet Lehman and Meryl sold a lot of grains and oils. (By the way, I still like GS after LEH and MER taken down badly. Goldman Empire from now on???)
Then again, thanks for bad housing markets. My lumbers are down a lot now. It consolidated for a while and took a few more dives in the last few days. I'm trying to sell 1 Nov 210P for $500 ish for cost averaging. Today the price came to 213, but my puts didn't get filled. If futures get so low, there's not much extrinsic value or no volume at all. Besides, Lumber is pit-traded contract, so god knows what pit traders do to screw people like me. I'll leave the order as it is for now.
I'm also trying to sell 70 CL puts. This extreme down move will end soon. If I get one more day of sell-off, I'll get filled, and when it bounces, I'll buy back. Now the problem is if I get one more day of selling or not.
As a 20/20 hindsight, I did exit the soybean-meal spread trade way early. The spread is now around $24K when I exited it was around $27K. An extra $6K (I was holding 2 spreads).... Ok, I'll go to corner and stay there for 10 mins as a punishment.
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