3SOF

Hi Eggman,

Very high trading volatility can skew the correlation between the ETF and the underlying item it is tracking. Now I don't know about your specific situation with DXO and oil, but that can explain sometimes when an ETF does not move in the correlated (or inverse) direction / amount you would expect.
Another thing to look at is what exactly is DXO value based on. It uses the DB liquid commodity index and light sweet crude. So when you saw oil up or down whatever it was, were you looking at WTIC light sweet or maybe something else like CBOE oil or another oil tracking index. Just a thought, don't know if it helps.

Quote from: la-onda on October 05, 2008, 12:10:24 AM
interesting chart action Aussie, ready to enter again?

Hey Oliver,

No, not yet, but I am definately watching and interested in the $21 zone.

I am starting to think we 'may' be reaching some sort of tradeable bottom in the market (still with short term outcomes though). Fear is SO high (look at the VIX chart) that perhaps an upward fast and quick bounce is around the corner.

Quote from: AussieTrader on September 24, 2008, 09:06:32 AM
Update:
What a difficult situation.............Based on this thought process I am not comfortable entering at the prices that are appearing in pre market.  I prefer to wait and look for pullback / consolidation following todays reaction to the news.
This may be a bad decision as the market may run up and away past $25 today, we shall see.

This is what the current market is doing to us, if the market weren't so horrible I would have played the entry as a potential breakaway gap up, which indeed it looks like it may turn into. Fantastic day for SQNM, I am hopeful we can perhaps enter in the next consolidation phase, the market can still get involved here and pour cold water on any good move.

The chart I think is self explanatory.

Trade Plan:
On Watch

Update:

Indeed SQNM released more positive results from their clinical trials of the downs syndrome test after hours yesterday. This news has spiked the price in pre market just under $25 (it closed less than $21 so a move of 20%+).

News link : http://www.businesswire.com/portal/site/google/?ndmViewId=news_view&newsId=20080923006573&newsLang=en

What a difficult situation, the way I see it is it has gapped into resistance (52 week high zone) and will perhaps struggle from here to breakout. Basically I see it pulling back into the gap it will create before breaking to new all time highs again (most gaps do fill).
Based on this thought process I am not comfortable entering at the prices that are appearing in pre market.  I prefer to wait and look for pullback / consolidation following todays reaction to the news.
This may be a bad decision as the market may run up and away past $25 today, we shall see.

Trade Plan:

On Watch

Profile:

PowerShares DB Commodity Index Tracking Fund (the Fund) and its subsidiary, DB Commodity Index Tracking Master Fund (the Master Fund), were formed as trusts. The Fund is designed to replicate positions in a commodity index. The PowerShares DB Commodity Index Tracking Fund is based on the Deutsche Bank Liquid Commodity Index - Optimum Yield Excess Return (Index). The Fund is managed by DB Commodity Services LLC

Trade Idea:

DBC tracks light sweet crude, heating oil, aluminium, wheat, corn and gold. The idea behind watching this ETF is that if the huge bailout plan being constructed by the Govt goes through and the negative impact on the budget deficit  being carried by the US is hugely blownout then the US$ will come under extreme downwards pressure. A net result of this would be commodities will benefit.

No trade action yet, DBC is On Watch.

Trade Plan:
On Watch

Profile:

The investment seeks daily investment results, before fees and expenses, which correspond to twice the inverse of the daily performance of the Dow Jones U.S. Consumer Services index. The fund normally invests 80% of assets in financial instruments with economic characteristics that should be inverse to those of the index. It may employ leveraged investment techniques in seeking its investment objective. The fund is nondiversified

Trade Idea:

The plan here is to watch SCC with a view that if the market / economy continues into on-going recessionary ways, then discretionary consumer spending will be pulled in big time and for an extended period. The ETF SCC is inversley based on the Consumer Services index which contains many companies that fall into discretionary consumer spending, so it can be a great proxy`for a broad position taking advantage of weak consumer confidence.

No trading plan yet, SCC is on watch.

Trade Plan:

On Watch

Update:

Although we stopped out of SQNM a few days back amid all the volatility and uncertainty that is happening, I am still keeping it on close watch for potential re-entry on any strength that may materialise.

They have an investors and analysts meeting On Sept 23rd which could well catalyse upside movement.

No trade plan, just watching for now.

Profile:

The investment seeks daily investment results, before fees and expenses, which correspond to twice the daily performance of the Dow Jones U.S. Financials index. The fund normally invests 80% of assets in financial instruments with economic characteristics that should be twice the return of the index. It may employ leveraged investment techniques in seeking its investment objective. The fund is nondiversified

Trade Plan:

Watching UYG specifically to trade long sided outcome in broad based ETF covering financial stocks. THe question being the Govt intervention potentailly has signalled a bottom in the market for us, the short sell ban in financials a specific bottom in this sector (potentially).

Will also be watching the inverse of this fund SKF which gains its outcome on the opposite result i.e. financials going down.

No trade plan yet, currently watching the set up.

Trade Plan:
On Watch

Profile:

Ultra S&P500 ProShares (the Fund) seeks daily investment results that correspond to twice the daily performance of the S&P 500 Index. The S&P 500 Index is a measure of large-cap United States stock market performance. It is a capitalization weighted index of 500 United States operating companies and real estate investment trusts (REITs) selected by an S&P committee through a non-mechanical process that factors criteria, such as liquidity, price, market capitalization, financial viability and public float. Reconstitution occurs both on a quarterly and on an ongoing basis. The Fund takes positions in securities and/or financial instruments that, in combination, should have similar daily return characteristics as 200% of the daily return of the Index

Trade Idea:

I am putting a few broad`index ETFs on watch as we could be seeing the Govt intervention of the past few days signalling a market bottom.

The short sell ban on financials can also give us a tradeable situation`in the financial sector which we can potential cover either with a broad ETF or a specific stock. That said if / when the short sell ban hgets lifted then we need to tread very carefully.

No trade plan yet, but SSO is on watch. Will also be watching the inverse ETF of the S&P500 SDS.

Trade Plan:
On Watch

Short Sellers fight back!!!

British hedge funds to sue over short-sale ban: report
10:05a ET September 21, 2008 (MarketWatch)
NEW YORK (MarketWatch) -- A group of the world's biggest hedge funds are planning to sue the U.K.'s Financial Services Authority for millions of British pounds in losses from the regulator's ban on short-selling, the Sunday Telegraph reported late Saturday, citing unnamed fund managers and lawyers.

The report quoted hedge-fund representatives as saying the British financial watchdog illegitimately extended its powers and caused wide-spread capital destruction.

The FSA announced a ban on the short selling of financial stock Thursday. See full story. The action was followed Friday by a similar move from the U.S. Securities and Exchange Commission. See full story.

The Telegraph said hedge funds felt the move unfairly impacted on their trading business.

"It's too easy to blame hedge funds," the newspaper quoted a fund manager as saying. "The real culprits are the banks which were cavalier in their lending, and the investment banks which were irresponsible in the way they packaged the loans and pumped them round the world. It's also the regulator's fault for not picking it up, not ours."

An attorney for one of the hedge funds said the move would put many funds out of business.

"With one swoop, the regulators have wiped out perfectly legitimate businesses and have cost some funds millions. They have gone for the big political hit without a thought for the damage they are wreaking. There may be unintended consequences but it's outrageous and illegal," the lawyer was quoted as saying.

We have been here before....

In 1907 the failure of the Knickerbocker Trust Company of New York unleashed a perfect storm on financial markets. Complex cross-holdings between banks and inadequate safety margins threatened to bring down the entire financial system. The collapse of two brokerage houses involved in the failed corner of United Copper stock precipitated the crisis. Rumors that Knickerbocker was embroiled in the scheme started a run against the famed trust company, with lines of investors demanding the return of their money. Knickerbocker was forced to close its doors and its president, Charles T. Barney, resigned. He committed suicide shortly afterwards. The panic spread to other banks and trust companies, with depositors queueing to withdraw their savings and banks wary of supporting each other in case of further failures.
The market was saved by the leadership of J.P. Morgan, unofficial head of the New York banking community. There was no Federal Reserve in those days: the panic of 1907 would lead to its formation. Trust companies were particularly vulnerable to a run because they did not enjoy the support of a central clearing house. Morgan conducted a speedy review of the most vulnerable trust companies; his young assistant, Benjamin Strong, at times standing in their vaults counting boxes of securities. They identified which of the trust companies were capable of rescue and those who were beyond redemption. Drawing a line in the sand, Morgan browbeat his fellow bankers into providing a pool of funds to support the Trust Company of America — locking them in his library until they had all agreed to participate. The trust company was saved and the panic abated.
Benjamin Strong later became chairman of the Federal Reserve. If not for his untimely death in October 1928, leaving the Fed without strong leadership, I believe that the worst of the post 1929 banking collapse would have been avoided. More than 10,000 large and small banks eventually failed, precipitating the Great Depression.
What we can learn from 1907 is the need for prompt action to identify the extent of the damage, the courage to make tough "triage" decisions about who should fail and who should be rescued, and strong leadership to force this through. Panic feeds on uncertainty. What the public and banking community need is a clear view of bank exposure to off-balance sheet SIVs — and exposure to counter-party risk in the multi-trillion dollar credit default swaps market. Attempts to sweep this under the carpet are likely to lead to further panics — and unnecessary failures. What we do not need is prevarication from Congress and attempts to postpone any action until after the November election. By then it could be too late.
Immediate steps should include restrictions on short-selling; banning SIVs and forcing banks to sell bad assets at a steep discount into a controlled entity similar to the Resolution Trust Corp., employed to clear up the S&L mess; and forcing all credit default swaps through a central exchange.

Extract from Colin Twiggs diary