TCM Notes : 4/21/09

• Well that comment on "loan to common equity conversion" caused the bid side of the market to dry up yesterday. While it seemed like a distribution day NYSE volume was lower than Friday's session. The Nasdaq as well skirted a distribution day yesterday. How? Volume was clearly higher than Friday's and Nasdaq was off 3.88%, so how does that not qualify. IBD points out you need to remove the excess volume seen in ORCL and JAVA. Once that is adjusted back to average volumes then Nasdaq volume comes in lower than Friday's. Which leads me to.......
• ORCL / JAVA for 7.4b or 9.50 cash. What is Larry doing? Bailing KKR out of a stupid investment? Some may think the candle formed Monday in ORCL is bullish. I beg to differ and if 17.45 is violated a short to 15.25 could be warranted. This deal somewhat explains the double topping action recently seen on a daily at exactly 19.45. Perhaps some folks knew a deal was imminent? Nah. That type of stuff doesn't happen on Wall St.
• The FAS/FAZ featured last Thursday at about $9 each has seen that spread blow out as of today. Equal dollars were deployed and equal amounts of shares were achieved. This one will be interesting to monitor because we will get to see the negative compounding workout on these. Now that FAZ is above 11 and FAS below 7 this could get interesting on 10-30% days. Target is 40 for either one.
• DNDN had a blowout move on provenge news last week. There is still short covering happening at these levels, so those buying up here are in for a rude awakening when that pressure subsides. Analyst fluff could keep it buoyed, but chances are their firm's trading desk is selling upside calls and buying a put spread. They wouldn't! Oh, but they would! 9dma is at 14 stock is at 19.52.....that's a time stretch if ever there was one. And they are aways off until they have trial data. I don't do drug companies because of the headline risk involved. You can get rich or blow up just like that. Perhaps that's a foolish view, but doing this for awhile now I've seen a few of these things. They are literally lottery tickets.
• A new etf focusing on convertible bonds is available now. CWB. Consists of BAA3/BA1 rated bonds. The pitch is it offers the safety of bonds with the potential gains of a stock. The thing is if it saw many defaults, or some other factors the holdings may never convert. Again with these new issues. I like to see some interest develop through increased volumes, then moving average development, and ultimately a chart pattern. Only then can I measure risk/reward on these ideas. As of the moment it's just an idea. Only the market can tell if it's a valid idea.
• Seems my prediction of the IMF becoming the Fed of the world is gaining acceptance everyday. If you'll recall the Fed's balance sheet was 800b going into the crisis. Now it's over 2 Trillion. G20 decided to give the IMF an "allocation" of 750b! Taking their funny money is still seen internationally as extreme weakness since they are the global lender of last resort. Folks don't know about the Fed enough to wrap their heads around it though. Just know their agenda is not aligned with yours. More than likely they will be a seller of gold. http://en.wikipedia.org/wiki/International_Monetary_Fund
• Speak of the devil : http://www.cnbc.com//id/30319965

TCM Notes : 4/20/09

• Slide of hand nationalization is creeping back into the investment mosaic after an unnamed official said they could avoid asking congress for more money by converting the loans into common equity. That's what I call dilution on the horizon, and they may very well tell the "big 19" that they can't give the money back right now. We'll have to see how Mr. Market feels about this.
• Details on stress test this Friday. Results on May 4th.
• Under the radar last Thursday Direxion launched the 3x leveraged Treasury etfs based on the 10 and 30 year bonds. 10yr bull = TYD, 10yr bear = TYO. 30yr bull = TMF, 30yr bear = TMV. The volumes are non existent at this point, but I think that's do to nobody knowing these things launched. Look for the volume to pick up dramatically from this point forward. So far it seems the 30yr bear, TMV, is getting the attention. I suspect this will continue as even the Fed has said it's harder to control the long end of the curve. What's a good price on these? I don't know. I need to see a chart pattern/ base/ or moving average support develop before I can get a feel for risk/reward. This is essential with these types of etfs no matter how worthy the theme may seem.
• Adding to the Treasury theme for me (and perhaps conflicting me somewhat) are my notes from this evening. Supply of Treasuries only matter in a bear market, and the safety of guaranteed money is still functioning as a haven for many; despite the rally we are seeing. Perhaps even more so is the fact that real yields have started to increase due to risk assets performing better these days. Tie into this the 60minutes piece on 401k plans this evening and there may be a new dynamic. We may have lost a generation of risk takers with this most recent meltdown, much like the one that was lost after the depression. Boomers may then seek more lower yield "safe" investments with guarantees attached to them in order to feel better about their financial security. This would provide a continued bid in the market to address this enormous supply coming out of Treasury. And with the Fed monetizing Treasury's debts too it adds yet another factor to the equation. Waiting for velocity of money to kick into gear, and a fed rate hike would be the best scenario for going short treasuries. In my opinion.
• MGM - Apparently Ichan owns 500m of the 7b of non bank debt. He's pushing for a restructuring which to me sounds like a losing proposition for current equity holders.
• Keep an eye on tech. It actually led and confirmed this recent move up. A reversal in tech could cause distribution to emerge in all the indexes. QQQQ
• 20 years of CNBC with a loose Fed at the steering wheel. A study in bubbles as it pertains to behavioral economics in a 24/7 news flow seems in order.
• MELI could be a growth by acquisition play for EBAY.
• 28% move in 6 weeks. If we are going to mimic 1938 in the SP500 the total move then was 62%. All my moving averages continue to move higher. With the 9 and 20 crossing up through the 86dma on the SPY. The target is the 200dma which is up there around 107. Selling too soon and arrogantly prognosticating a top has been my folly the past few weeks. Don't let it be yours. Trade with the intermediate trend, and let the averages take you out of the trade if they are violated to the downside. Easier said than done it seems.
• Saturn Confidence Plan - yet another study in behavioral economics. They will pay your note for 9 months if you lose your job after you buy a car. Somehow they will be able to know your job security? Based on what data I would love to see. As would the rest of the market. I think it has something to do with a certain government backstopped GMAC, and a non existent fed fund rate. But what do I know?
• Dogs of Q1 were the XLE, XLP, XLU, and XLV sectors. That's energy, staples, utilities, and health care. There's various reasons for this from demand destruction, currency losses, supply gluts, and a threat of governmental margin squeezes (think health care.) Out of them all I think XLU probably offers the best risk/reward. The risk in my eyes is the capital expenditures for grid improvements. The reward strangely enough could come from that as well if the government finances it all, and you could get the benefit of increased Industrial Production.....if and when that happens.
• Iron ore swaps are coming soon. This comes at a time when the ore producers may have to cut prices by 50%. Of course this comes on the heels of several years of astronomical prices hikes. I suspect this has been know for a while as the steel stocks have started to improve. While they continue to cut production their input costs are falling faster than their finished product. When demand picks up there will be a lag as supply comes back on. That's when you'll see the margin improvements that will move eps upward. This industry should be troughing soon if not now. Dependent upon autos, commercial RE, as well as industrial production, and oil prices. China can't carry the world.....remember there is no such thing as decoupling.
• Venture capital investments down by 61%. Lowest in 12 years.
• PBS' Frontline had a great piece on the meltdown. If you lived it tick by tick like me it's the best depiction of exactly what happened. Seems that all the ranting I was doing back then was not in vein. My favorite quote from a friend came on Sep. 7th when they took FNM and FRE into conservatorship. "What do you care it's not going to effect you." The inter connectivity of 5T of mortgage debt does effect me and us all when banks and other hold preferred shares as capital on their balance sheets. That became clear when Lehman imploded 8 days later. Honestly I felt like a doomsday sayer back then. Now I'm more optimistic and it seems with all these explanatory pieces out the understanding of the masses has finally developed. And you never want to go with the crowd for any sustained period. They are prone to fads and usually buy the top and sell the bottom....every time! http://www.pbs.org/wgbh/pages/frontline/meltdown/view/
• A paired trade I ran across that could be of interest is shorting emerging markets and getting long the SP500. This could be achieved by either shorting EEM and buying SPY. Or you could buy EEV and buy SPY. My issue with this could be the timing, but then again that may be the brilliance behind it. Hmmmmm.
• Quants got whipsawed in March. Surprise, surprise! So there is two ways to read this. The move up was a huge short squeeze hence all the 90% up days that we saw. Or you could read it as the rally will continue on as the quants are all positioned long and will keep pushing long as pensions and funds put money back to work.

TCM Notes : 4/17/09

• Earnings : C, GE, BBT, FHN, MAT, STU, PRSP, PFBC
• May 4th will be the day we get the results from the bank "stress" test.
• Credit Suisse upgraded steel pointing to Chinese growth as the main catalyst. PKX, MT, and NUE were cited as their choices. The default here would be SLX. Also noted was the utility sector being under weighted by everyone. They want to go long here. XLU is the default. Which was in our pairs trade of XLU / UGA. However, even though gasoline is in a glut at the moment I think it would be prudent to wait for the mid to end of the driving season to put the short on. UGA is in an uptrend at the moment. It could very well run up into the 30s where it should offer a good short.
• Barclays now has a 15% share of the Treasuries market thanks to the assets they scooped up from Lehman.
• RF saw heavy call action at the 5, 6, 7 calls for the April contract expiring today. They also claimed they would be profitable.
• RST saw a very nice launch for their IPO yesterday. The past few IPOs have proven to be well received by the market. There will be more to come, but I think the main beneficiary of this will be the NYX. Couple that with the proliferation of etfs (which most traded on the AMEX now owned by NYX) and I think the volumes will return and continue to grow at the NYX. Never underestimate the Big Board.
• Watched an interview with the ceo of GNK. Apparently cape size ships were 140 at anchor back just a few months ago. That number is now 30. They are still benefiting from contracts in place a few years ago. The main thing that's being shipped is iron ore from Brazil and Australia to China. Since the dollar is down it's cheaper for them to import ore right now. This could pick up more as I just saw some Japanese steel makers are cutting prices. This should pressure the iron ore producers to keep contracts flat to contracting when they sign new deals.
• The Economist had a short piece about a new book on the "bare knuckled capitalist approach" of Cornelius Vanderbilt. The Commodore did have a colorful business life especially the dealings with Drew, Gould, and Fisk. The main thing I pulled from the piece was a Mark Twain quote. Apparently Twain lampooned the Commodore on more than one occasion, but this one pertained to a cartoon of a horse drawn cart running people over. The motto was "no matter I'll pay for them." Twain's take on that parallels the populist outrage being voiced towards Wall Street today. "You are the idol of only a crawling swarm of small souls." I would say this is how the masses perceive Goldman Sachs and a few select others at this point in time. No worries though. If their 401k doubles in the next 5 years they'll forget all about it. Hell, 5 positive weeks sure has changed the tune of many. Funny thing is now all the masses have finally received explanations of what happened dumb enough so that they even understand, so they really don't want in the market now. And low and behold if that's not when Mr. Market goes the other way! He's a consistent joker if nothing else!
• INFS has an offer for a .95 cash takeover outstanding. While far from being finalized this one looks like a done deal. Arb opportunity for those that can grab some .85 -.90. Although I think that this one looks strong to others so the spread is tightening up on this one.

TCM Notes : 4/16/09

• Big names reporting today are JPM and GOOG. Others of note : ITW, HOG, CY, GCI, GPC, IIIN, PPG, ISRG, BIIB, and APH.
• Pivot Points for SSO, UYG, and SPY are: 22.35.....3.47...... and 84.76
• An idea floated to me by Emini Monkey (chief primate at TickerMonkeys.blogspot.com...up 305% ytd!) Now that Direxion's 3x leverage etfs have been out for several months they have both garnered some serious attention. I'm not talking just a bunch of eyes, but actual volumes. Hundreds of millions of shares. The pundits say these things don't work, and they would be right as of the moment as they both have plunged since coming to the market. The idea now goes like this : They are both at 9$. Buy an equal amount of both here, and sit back and let time take over. One should go to 40 and the other to 2. Giving a "risk free" profit of 24k. Could this be so? Are the big money players just selling both of them because they know the product can't last? Do they have "systemic" qualities and should be scaled back? Those are the attacks I've heard about the double / triple shorts. Well if you are going to take those away then you would have to take away the double / triple longs as well.....you know.....to be fair and all. Fairness has no place in these markets these days, so it will be interesting to see how this all plays out. My thinking towards UYG for instance earlier this year was pressure was being applied to them because Citigroup is a counter party to the swaps they use to gain the leverage. So the threat of nationalization at the jump of the year really put the hammer down on these. One thing I will say is that FAS is now above it's 9 and 20dma while FAZ is now underneath them. And oddly enough they both remain underneath their 86dma. I say FAS is the play going forward as I thought the introduction of 3x short products months ago marked a top on the "short" products theme. This has been the case for most of those lately....they all made lower highs as the market made a lower low. A divergence at best perhaps signaling that the worst is over.
• Another data point worth noting is the CDX index tracking CDS on 125 companies. It appears to have double topped as that casino starts to slow it's pace some. And it also has divergence / convergence characteristics as it pertains to the S&P500.
• And while SLV looks like it's setting up in a nice cup with handle pattern I think it could be flawed. You never want to see a correction on the left side of the base of more than 35% for this pattern. It flaws the whole thing, and while it still may work for the pop up out of the handle. It still carries risk due to the flawed base.
• And this just in as I wipe away my eyes. GGP has just filed for bankruptcy. The biggest commercial RE collapse in history! This should put more pressure on other similar situations. Every delay GGP got up until now would bolster others like PLD and even MGM and LVS. Now that they've gone tits up the plot thickens for the others.
• http://dealbook.blogs.nytimes.com/2009/04/16/general-growth-properties-files-for-bankruptcy/

Trade your plan. If Mr. Market tells you you're wrong..........listen.........because he's never been wrong!

TCM Notes : 4/15/09

• Tuesday's session gave us a distribution day for all the major indexes. That gives us 2 for the S&P500 and DOW / 1 for the Nasdaq. IBD says 5 to 6 distribution days tend to give way to a market correction.
• Keeping with Investor's Business Daily founder Bill O'neil has a new book coming out in June that the first 100 pages are charts of the biggest winners. Too many people are still not using the charts. This is why somebody skilled in technicals and fundamentals can gain an edge in the market. 21min interview with O'neil in the IBD TV section of www.investors.com
• Jesse Livermore said there are two emotions in the market : Hope and Fear. "People always hope when they should fear, and they fear when they should hope." This parallels Buffett's "Be fearful when other's are greedy, and become greedy when other's are fearful."
• Once again those secondary education stocks ran counter trend to the market Tuesday. Which really hammers home the fact that these stocks are going to tank when the market truly recovers. Analysts still clanging the pans together for the "recession proof trade." They will prove yet again to be losers for their clients.
• HAPPY 35th to my brother!!! The check is in the mail!!!
• The tax man cometh, and he left his friend Death behind for now. A refund for me!
• RGR and SWHC still near their highs. 60 Minutes had another gun segment recently. Dealers in the interview were noting that some models are up 100% in price YoY. This has reversed earnings from negative to positive in RGR. The market is fast to price it all in, so I wonder if they are moving to far too fast. Both still above the 20dma as the volume / price moves the past 2 months are evidence of big money pushing in. Margins could stay high for these guys as the "fear" of losing guns still makes it way across the masses.
• O'neil also thinks the market is more like 1938 which saw a 62% gain. However, it led straight into WWII. He was not implying that's where this was all going, but rather pointing out that fact. Uh, thanks I guess? Yeeesh.
• Since my notes are IBD centric today.....one more thing. Their research shows that winning stocks seldom get 23% above their 10dma. So keep that in mind when you see something go parabolic.
• DNDN - while it was just provenge data that was better they are still a long way from being FDA approved. They still have another trial. My fault in not flagging this one as the options action on Monday was flagged to the out of the money calls being bought on the ask heavily all day. 137% pop in the equity and some of the options saw 800% moves. Now that's a squeeze! This goes to show that selling out of the money calls to collect "easy money" in an expiration week can prove to be fatal if you are not in the know.

TCM Notes : 4/14/09

• SPY vs. RSP - a market cap vs. equal weight approach. RSP is new to me so it warrants further inspection.
• Copper has broken out at 2.14/lb. And while PCU is "overbought" by some indicators, it has established a new uptrend as it has broken out above it's 200dma. JJC is an etf that tracks copper. It's up 49% year to date. Sponsorship is picking up in this one as the underlying commodity makes an effort to establish an uptrend.
• Goldman's pair trade in steel : Long AKS / Short X. 12$ target on AKS
• SINA rumored to have MSFT looking at them.
• MWW - high volume move on Monday. Could this be signaling a turn in employment....not withstanding the Census jobs that will be created this year.
• Long New Zealand, Australian, and Canadian currencies. Short Yen. This is a Gartman play. Only have found BNZ for New Zealand, but FXA and FXC are the best for Australia and Canada. FXY can be shorted as it comes back up into some resistance. YCS is the double short Yen.
• MGM got reprieve on a debt waiver of 70m for a construction payment on City Center until Friday. Bank doesn't want let them tap a credit line until 800m of equity is contributed. Dubai World is the partner which is suing MGM for mismanagement of the project. ** This is just one of many examples of creditors letting defaults run long in the tooth hoping for credit markets to improve.
• Nancy Pelosi interview with Jon Stewart was a farce. Softball questions from Stewart, and giggley Obama name dropping coupled with a "nothing is my fault" it's the other guy attitude. Typical politician. And making a joke about the ear mark process.
• GE has a 10+% stake or $70m in A123 Systems the lithium-ion battery maker. This will be a high fly er when they finally ipo themselves. Makes me wonder if speculative name CBAK is worth a stab at these levels. It's consolidating on a daily and looking to break out on a weekly.
• If batteries are going to displace gasoline as a power source then XLU may offer a good play on this theme. If you wanted to juice it up you could use UPW the double beta. If you really wanted to maximize the trade you could buy UPW and sell short UGA the gasoline etf. XOM said the other day that gasoline demand had peaked and they saw it going lower into 2030.
• Further exploration of that theme would point us to AEP as they support the smart grid infrastructure.
• AGA vs. DAG. I think this one is starting to tighten up and flip to a positive bias for the double long DAG for agriculture. And is Farmer Mac (AGM) safe? If so it could be a good buy down here, but if farmers can't finance fertilizer then their crops could be in jeopardy, thus compromising them paying their mortgages.
• CGA is a small cap china agriculture play....within the "green" fertilizer space. This is new to my notepad along with meat processor HOGS. Both Chinese so the accounting is communist at best!

Trade what you see and not what you hope to see.

SSO setups

Cashing out at 21.98 and 20.90 was profitable, but proved to be premature. The resistance I was seeing was broken through, but divergences in price and volume are still to be noted. That said, I want to be a buyer for another long trade as it pulls back into moving average support. Most notably the 20dma. The move was so sharp on Thursday that Monday's pivots are a long way from Thursday's pivots. Most notably 20.93. This was the pivot from Thursday. Usually the prior sessions pivot is touched in the next session, but it would take a big move to make this happen as that number resides under S3 in Monday's pivots. This level is close to the 20dma at 20.52 on a daily. So there's a support zone to work with.

Another level of support was the 21.14 to 21.17 level which corresponds to Monday's S3 level of 21.17. This would be a good set up if you see some volume come in at those levels. Other than that assuming we don't make a higher high this week the current retracement from the most recent low to high stands at : 18.50 for a 50% and 19.50 for a 38.2% retrace. These levels occur in a zone where the 50dma currently resides. So as long as the volume does not pick up to distribution levels coming into these zones they can be seen as another area to potentially put on a long trade with the upside target being the last high of 22.90.

Earnings reports start getting more teeth this week as major financials GS, JPM, and C report. So let's stay nimble as bullish sentiment starts to potentially reach a momentum / volume vacuum high. Behavioral economics being what it is today though don't be surprised if the good feelings continue on due to the "confidence spin" showing up in everything. Leading us to the potential of a low volume mark up that sustains itself a little longer despite itself.A close under 19.82 the 50dma would cause a resumption to the major trend down, and would trigger a stop on a 20.93 buy.

20.91 is also the 9dma on a Weekly chart now. Upside target on a weekly would be the 20dma at 24.32.

TCM Notes : 4/13/09

• Trough numbers could be shaping up in GDP, Steel/Scrap, autos, and potentially residential RE. Commercial RE still has a ways to go though.


• Perfectly elastic supply curve / Deflation is still a concern / Velocity is down 18% YoY / Makes the Fed impotent


• Using Theta to sell options as it pertains to the time decay and the value of the option.


• http://http//www.investopedia.com/terms/t/theta.asp


• Individual stocks are the inefficiency in the market as pointed out by Laszlo Birinyi. GE and BAC come to mind as they are up sharply from their lows.


• Gary Gensler in the CFTC.......look for more speculative disruptions within key commodity markets as speculation continues in this new "asset class."


• AIG financial products factoid : 2.7 Trillion of swaps and other positions / 50,000 outstanding trades / 2000 counterparties / 450 employees / 6 offices around the world


• AIG insurance : 375m policies with a face value of 19 Trillion


• A long followed idea that could be ripe going forward : IT for Chinese banks. LFT and YTEC. LFT has just broken a downtrend and is making new 52wk highs. YTEC off it's lows but still near them. Seeing as LFT has broke out a pairs trade of : Short LFT and Long YTEC could prove to be a disaster. Both Chinese companies and you must be skeptical of their accounting. Both offer beta of 1.32. Long both could be the way to play this space. Keep in mind they've rallied sharply off the lows.


• "I liked you better before I got to know you so well."


• Premium to net worth = Goodwill


• Since the VIX is a function of premiums paid could one assert that the VIX remains high due to the low barriers to entry coupled with a speculative fervor in the "poor" man's market? VIX double topped at 80. Sellers of out of the money puts have been the big winners all year.


• Brain Drain on Wall St. continues as some of the highest profile managers have left to start their own boutiques. eg: Byron D. Trott ~ BDT Capital Partners..... he left GS.


• Ipo CYOU continues to move higher on less and less volume. While it's hard to pick the top just know that all new issues pullback and form a base of consolidation at some point.


• EMC investor call on new information storage device 8.30am et. Could be a sell the news event as EMC is extended above key moving averages. While a scalp could be in order keep in mind the daily chart is above all key averages....even though extended.


• AXP broke out above the 86dma, 20dma crossed up through the 50dma. These now become support levels.


• WMZ and ETE touted by Barron's as being good MLP plays.


• TRE is a short off the Barron's piece. I think the Apr 2.50 Puts / Jul 2.50 Puts / and the Oct 2.50 Puts are going to fly today. Of course shorting the stock outright could make sense. Since the head promotor is also the main force in the stock it could be a tough one to trade. Should be interesting. Sounds like a pump and dump stock.


• VIX actually gapped lower on Thursday....a falling window.


• GM "confidence plan" commercials. A study in behavioral economics


• Same can be said for BBY ~ PC vs Mac ads. In house financing, but they show cash buys in the commercials. Does this speak to consumers saving money to buy fairly priced goods?

New Format : TCM Notes

Recognizing that some of the best ideas have been scribbled out on the back of cocktail napkins, I had another "ah ha" moment this weekend. I like many continual thinkers are always having ideas to which we process, write down, and then being our nature move on to the next thought. Sometimes moving on to the next thought or idea can be a tremendous opportunity cost to us as the winning idea was conceptualized already. It was just simply not put into action.

Also, for me the bulk of the time the problem is that I am only one man (monkey depending on which site you are reading!) And the amount of ideas that I generate through my reading / market observations I simply can not implement them all and manage them properly. Wanting to convey these ideas to others in the most intelligent manner sometimes prohibits me from writing detailed commentary, because I'm a bit of a stickler when it comes to delivery, thus the task consumes more time than a free task should.

Well no more. I operate off my notes and so can you. Bullet points on any and everything that my eyes come across. If you know me personally you've seen the pen and paper in action. Now it's time to transfer my synthesized bullet points off the private notepads and into the public domain. Raw and uncut. Sounds intriguing, doesn't it?

Without further ado I give you : TCM Notes.

** Headers will read TCM Notes with that day's date.

Where's The Juice?

Off and running in 2009, but where's the volatility you say? It's still there. You just have to look for it. And the only place I'm looking at the moment is in the 2x and 3x beta ETF products space. Specifically Proshares and Direxion's juiced up rentals. Today we'll go over the "short treasuries" theme, SDS vs. SSO, DXD vs. DDM, URE vs. SRS, and the amazing squeeze/reallocation of funds into PLD.

TLT was a favorite short at the start of 2008 as it would move to the high 90s every time a meltdown occurred. Then we would rally mildly and it would fall to the lower end of it's trading range. Well, as most of you know we had a meltdown. Treasuries ripped to the upside as we had fund managers playing a game of diversifying mattresses. The November 20 panic low corresponded with a gap up in TLT stopping out many long time shorts such as Jim Rogers. Then we get a big equity sell off at the beginning of December 2008 causing TLT to gap up even higher. And then came the FOMC December 16th cut to the 0-.25% range. TLT gapped higher. Was it an exhaustion gap or a continuation gap? For Pete's sake was the Fed going to continue to jam treasuries even higher? That's what most of us were thinking, but then the note that changed the game.....yet again.

The Fed will start buying 500b of MBS paper over the next two quarters. No doubt selling Treasuries to subsidize it's purchases. And voila`....the reversal begins. TBT which is the 2x inverse of TLT, or an Ultra short on 20yr Treasuries as it's name implies gets the nod. TBT starts to reverse back up through it's 9dma and makes a move on filling the gap down from Dec 17th. Then it makes a dash for the 20dma. All the while TLT reverses as the pair implies. Then Barron's finally gets involved in the act. "Get Out Now" they proclaim in an article that lays out this very thesis that so many traders have been eyeing. Short TLT, and get long TBT and PST. And Monday Jan 5th we felt the Barron's bounce.

It's still early on in this reversal, but it bares taking a stab at these levels providing the 9 and 20dma provide support now for TBT and PST. If shorting TLT these should be used as areas to add to an existing position or create a new one. Keeping 120 or as high as 123 as a stop level. TBT could use a stop of 38-39 for new positions. PST could use a stop at 52 with an upside target of 59-62. Volume is still thin on PST as the 9dma has not crossed the 20dma in this issue either. I would rather use TBT because it has more volume and it's pattern is the mirror image of TLT ie: with all those gaps to get filled. My target for TBT is 49 with 54 being my top end target for now. (Could go higher, but since it's new there is no 200dma yet.) TLT target is 106 with my top end target being 96.....with the possibility of a return to 91.

SDS vs. SSO. Sold my SSO last Friday thinking we would break down. SDS suffered a gap in the chart due to distributions, but the NAV could creep higher as folks buy insurance again for the tail events that keep popping up. However, the way Proshares handled their distributions really pissed off many traders, so we'll have to see how fund flows are for them after January. For the moment I feel there is a quick few dollars to be had intra day in SDS, but my bias is towards a panic move up in SSO which would have a weekly chart target of almost 35.

Same thing goes for DXD vs. DDM just with different numbers. Same huge gap down for DXD....same anger over the distribution....same chance for protection buying. However, if we get some panic buying in the market DDM could make a move on the weekly for it's 20dma of 39.75.

For URE vs. SRS I feel that since URE is trading like an option the better bet is there. SRS had a huge blow off move as the REITs finally fell apart. Could it bounce back up to 80? Sure it could, but it seems that traders are fading it on it's up days as money is being reallocated back into the REIT space. URE could move towards 12 in short order if the REIT space can locate adequate financing. Which is tough still in this environment. So keep your eyes on this pair.

Playing to that commercial RE theme is PLD. Actually this is one of the poster childs in the space. Essentially they got hammered as doubts about their debt rippled across trading desks. A management shake up and property fire sales have ensued, and in the past 6 weeks PLD has moved up some 600%. Not bad work if you can get it. I have a target of 20 on this one, but it's starting to get there now. However, as they stave off collapse the prospect of a move to 40 is not out of the question. We would need to see a break above the 20dma on a weekly with a settlement above that level for that to become our next target.

This is the first installment of juiced up etf pairs. There will be more to come.