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Thursday Market Expectations from Jeremy Frommer - 10 reasons it is time to buy the market.

HedgeFundLIVE.com — I feel vindicated. The markets behavior is exactly what I have been blogging about for 2 weeks. But what now? Last night I went home long stocks short futures dollar neutral. Today will be a cathartic day. Then the shorts will cover, Middle East issues will stabilize over weekend, oil will start to drop lower as this morning’s gap is short covering from trader who shorted against the 100 level yesterday. Gaddafi will be dead inside of a week. I am still concerned about Bahrain. But as my plan was to see the market test 1300 a couple of times, I expect the bull market to resume by Monday. Keep in mind that In 3 days we have given back the entire month of February and then some. This gives me 2 signals, time to cover shorts, and find the beaten up names that have less impact from the overseas issues. Worst case I see 1287 as a massive support level. I am buying TGT, IMAX, homebuilders and beaten up tech, including AAPL and NFLX. I look for a serious reversal off these lows either today or tomorrow. As Saudi Arabia floods the population with money and Bahrain offers the same thing, I am reminded of our own government’s strategy for fixing problems. Clearly the economic numbers coming out this morning will help stabilize the market. Apple launches Ipad 2 next week. The federal government will figure out how to extend the budget deficit, as Obama has now shown his hand. He will move to the center when left with no alternative. He has to if he wants to be reelected.

So lets review.

  1. Today will be the highs in oil for some time.
  2. While I am worried about Bahrain, I have yet to see something that would force me to change my trading strategy
  3. Qaddafi will be dead soon
  4. All of Februarys gains have been wiped out
  5. Individual stock are down as much as 10%
  6. Economic numbers today will be inline to better
  7. We are through earning season
  8. We are testing 1300
  9. Tech is cheap

10. And the number one reason to buy the market – I have covered all my shorts.



Facebook (and I guess Google) Should Finish What They Started in the Middle East

Are Google and Facebook more responsible for Egypt and Tunisia?

Shimon Peres, Israel’s current President, is for all intents and purposes, to me, a Gever; a term that can be loosely defined as the Modern Hebrew language equivalent of Dude.  The man has seen some stuff.  He joined the Haganah alongside other founding fathers of the Israeli state and played an integral role in securing arms for Israel’s independence war in 1948.  Throughout his political career he has served as Transportation Minister, Defense Minister, Foreign Minister, and Prime Minister.  On the first of a 4-day visit to Spain, Peres spoke to Spanish Parliament.  In his speech he addressed the unrest in Egypt and Libya that continues to spread across the Middle East region.  He mentioned that he sees these uprisings as “opportunities for peace”, and said that “we believe the biggest guarantee of peace is having democratic neighbors…”.

What I found most interesting was Peres’s message to large technology companies.  He alluded to the fact that these companies, e.g. Facebook, Google, Microsoft, have hefty coffers full of cash ready to be deployed.  Peres noted that “these companies have the means and they can help…aid is currently directed mainly at sick people in poorer countries, [but] it’s better to cure the state and let it treat its own ills.”  In the realistic department these comments probably come in at about a 4 on a scale of 1 to 10, but in the idealistic department they’re more like a 9.  Imagine if for-profit companies actually spent their hard-earned money on foreign aid the way leading governments of the world do.  Back when Google IPO’d they made a big hullabaloo about their “Do No Evil” motto – they wanted to ensure that everyone got a fair chance to participate in their stock offering and presumably a fair chance in life as well.  The Founders of Facebook probably feel similarly.  I’m not sure what their motto is, but it’s probably something that evokes thoughts of democracy.  So do these technology giants have a responsibility to the people who use their services?  If Facebook enables a dictator’s demise, should they participate in the process of establishing a fair successor?  These are big questions, but I do like where Shimon Peres was going.  Every once in a while the world needs to be reminded that there is a fairly successful Middle Eastern democracy situated in the middle of all this turmoil; it’s called Israel.

Socratic Trade Reviews…UNH & WLP


WellPoint is said to start paying dividends in the 1st quarter of 2011. The third major U.S. health insurer declared a quarterly dividend of 25 cents per share, which equates to $1.00 per share, per year. And, based on the closing price of WellPoint on Tuesday, this rate equates to a yield of about 1.5 percent. When compared to Aetna’s current yield (1.6%) and United Health’s yield (1.2%),  WellPoint lands in the middle.



According to SeekingAlpha.com, UNH (United Health Group) is amongst 10 Stocks With 10 Years of Revenue Growth for Buy and Hold Investors. UNH- responsible for providing health insurance- has specifically beat earnings expectations for the last 9 quarters.

Check out this Socratic Trade Review from HedgeFundLIVE’s Trader, Jeffrey Tynik, as he goes through 2 successful trades placed (in both UNH & WLP) almost 13 months ago.


Wednesday Market Expectations From Jeremy Frommer - Short into Friday, Flat for the Weekend

"My dear Sarkozy, is it true? Are you deserting me as well, my sweet desert?"

My market expectations depend on a number of events. I understand that I have been unequivocal about my short-term bearish stance, but I also have been specific about the levels I have been looking for on the S&P. I have felt we needed to get down to the 1308 level on the S&P futures. I expected us to pause there and perhaps over a number of weeks test the reality of 1300, as a confirmed psychological barrier that we broke through that should now become support. That would signal to me that my long-term bullish stance is still in place. Given the uncertainty over inflation, the federal budget and our domestic municipality financial crisis, I think we have seen the highs for at least a month, perhaps into May. Though, I am not a believer in sell in May and go away. This has been a year of opposites; perhaps we buy in May, and stay. I expect Gaddafi to be dead or gone by the end of the weekend, problem is we have now learned you cannot be long going into a weekend. My greatest fear for the weekend is Bahrain. People do not realize that this is the one to closely watch, as it is a precursor to potential issues in Saudi Arabia. I am relatively dollar neutral this morning having covered a significant portion of our shorts on yesterdays gap down. I will look for early morning strength, or at least stability. At noon I will begin building back into a larger short position, which I will continue to add to though Friday morning. I look for significant weakness by Friday afternoon, barring an exogenous event such as a bullet in Gaddafi’s head. Names I am long, continue to be potential take out names, I am short stock near their 52-week highs. This is an exogenously driven market; there are significant concerns out there. While I will be making big bets, I will be taking them off rapidly. Holding periods will be no longer than a few days and I expect to be close to flat over the weekend. Our domestic issues take second place to problems abroad, but should not be forgotten.  I will provide an afternoon expectation blog at around 1pm

Tuesday Market Expectations From Jeremy Frommer - 7 Reasons the Stock Market is Suffering From Narcissistic Personality Disorder

The Stock Market is Screwed Up, and So Am I

After writing a number of articles about the market being delusional and then a number of articles about me being a little delusional I finally sat down with my wife to get what always promises to be a dose of reality coupled with simple but incredibly valuable insight. Unfortunately the conversation was precipitated by 3 days of intense yoga followed by 3 days of alcoholic binging that made me wonder if it was time for me to call Betty Ford and look up my old psychiatrist, Dr. Prazin. My wife diagnosed me and in doing so helped me diagnose the entire financial community, and even more specifically the stock market.  She said she had been doing some research and has determined that I suffer from Narcissistic personality disorder. Determined to heal my self and improve my trading, I decided I would try to better understand my disorder and at the same time better understand the market.

Narcissists have an inflated sense of their own importance. Check there for both the market and me.

Behind the mask of ultra confidence lies a fragile self esteem, vulnerable to criticism. Check there for both the market and me.

But that doesn’t mean that the market and I are true Narcissists as defined by the mayo clinic. It may just be that we have healthy confidence in our opinions, high self esteem. I don’t value myself more than I value others, (a key component of narcissism) though I often dream of having zero responsibilities, packing a bag and going off grid for a while…. In truth I look around me, and am blessed to be surrounded by great people who are invaluable to me.

The market though, is another story. The market has been behaving like a certifiable narcissist. The market seems to have little concern for the value of others. It wasn’t always this way.

Lets review 7 symptoms of narcissism.

1. Is the market expecting constant praise and admiration? “The S&P 500, up 4.2 percent so far this month, has doubled in less than two years, the quickest 100 percent jump since the Great Depression.” This headline is all over the net. “I’ve never seen a market like this,” said Paul Mendelsohn, chief investment strategist at Windham Financial Services. A market watcher for 35 years, he is taking profits in every area but commodities.” The market is thriving on these headlines.

2. Is the market exaggerating its achievements? “Slowly, but at least so far surely, bullish sentiment continues to grow. It is now perilously close to dangerously high levels.” Say Mark Hulbert of MarketWatch. In the short term this should be bad news for stocks. But the market just seems to ignore these sentiment indicators.

3. Does the market believe it is special and acting accordingly? “The rest of the world has an interest in the US recovery because of its stimulating policies, Mr. Bernanke argued in prepared remarks he plans to deliver in Paris as finance leaders from the Group of 20 nations gather.” Mr. Bernanke seems to think we are special according to newsystocks.com.

4. Is the market taking advantage of others? Reuters Feb 17th “Energy shares gained alongside

Narcissistic Personality Disorder starts at the top

crude oil prices, which climbed 1.5 percent on fresh tension between Israel and Iran. The tension added to concerns about unrest in the Middle East, which could lead to supply disruptions.” Many energy stocks are hitting multi year highs. But on the flip side “California’s average price for a gallon of regular gasoline hit $3.50 Thursday for the first time since 2008, driven higher by the impact of Middle Eastern turmoil on the oil market. California’s average gas price has jumped 8 cents in the past week and now stands at 35 cents above the national average, according to the AAA automotive service. San Francisco‘s average has reached $3.57, while drivers in San Jose are paying $3.53 per gallon. Not since October 2008 has California’s gas prices been this high. In June of that year, the state’s average set a record of $4.61 before the economic collapse pushed gas prices into a tailspin.” Says David Baker from chronicle news service. I fell taken advantage of when I fill my tank up at the station. Really think about it, do you ever come out of a gas station lately feeling good. The oil companies can poison our waters, get away with it, and the funnel clean up costs through inflated prices masked in middle east tensions.

5. A classic Narcissistic symptom is ones inability to keep healthy relationships. It is months now where individual stocks seem to dominate the indexes but broad stocks don’t seem to participate in the movement of the indexes. No one can tell me what the value of overbought or oversold indicators are, since all the market does is power forward. In fact Goldman Sachs market watcher Noah Weisberger had this to say on the phenomenon, in a recent note.

“Within the U.S. market, where we have the richest set of metrics, we find that both implied average stock correlation and implied average sector correlation have declined sharply so far this year. Mechanically, the decline in this metric is a function of a combination of falling index volatility and rising sector volatility (in the case of implied sector correlation) or rising single stock volatility (in the case of implied stock correlation). These measures reached historic highs during the depths of the 2009 sell off. But in the “post-crisis” era, both stock and sector correlations peaked in mid-2010 (at a whopping 0.9 for average implied sector correlation and 0.7 for average implied stock correlation) and both measures have been falling in fits and starts ever since.”

6.  Narcissists set unrealistic goals. Zacks investment research Steve Reitmeister says in answer to the direction of the market “I strongly believe the answer is that we are due for more gains. Not just because there is no double dip. More importantly, there are sound fundamental reasons for the market to continue its advance.” So do many of his peers. Stock markets to not continue to advance indefinitely without healthy reversals.

7. Arrogance and haughty behavior often accompany a diagnosis of narcissism.

A. Headline MSN money Feb 4th: Ignoring Egypt, markets roar on. The political crises sweeping the Middle East join the risks of unresolved economic issues at home. Yet speculators continue to run wild.

B. Reuters Feb 10th: (Reuters) - Investors are often told not to fight the Fed, but in the U.S. Treasuries market taking the opposite stance to the Fed has been a winning strategy in the past six months.

C. FTMdaily reports: Stocks Ignore Growing Inflation Concerns

Arrogance and Haughtiness are acts of ignoring other’s opinions. to hold their opinions in disdain.

I have felt there was something wrong with the stock market for at lest the last couple of weeks. But I could not put my finger on it. But it is no relief to now know that one thing I had come to rely on for my livelihood, is so very ill.

The Mayo Clinic says, “It’s not known what causes narcissistic personality disorder. As with other mental disorders, the cause is likely complex. Some evidence links the cause to a dysfunctional childhood, such as excessive pampering, extremely high expectations, abuse or neglect.” I could find evidence of all of the in the history of the stock market.

Complications of narcissistic personality disorder, if left untreated, can include depression and even suicidal thoughts. I think the flash crash was the first indication there might be something wrong with the market, but I hope my research help you better understand what is truly going on with today’s stock market. And when the market falls into a brief state of depression, and correction, don’t be surprised. We are dealing with a classic Narcissist and there is no real cure. I expect depression to set in on tuesday, and suicidal thought by friday for the Stock Market. Buyers Beware.

I am at a loss, Both in my P&L as well as the market

I am at a loss, both in my P&L as well as my understanding of the market. Perhaps it is time for me to hang up my trading gear. Hand it over to the next generation who are not set in the ways of the past. I have lost too much money in the last week as a bear. AAPL is down 1.2% and the NASDQ is up 21 basis points. If I don’t see a reversal today in the overall market by the end of the day I will be flat all my positions and stay off the keys for a month. It is very difficult to accept as; I do not believe m bearish perspective is steeped in emotion. My arguments are logical. I am shocked that portfolio managers have not sold into what has been the best opening 45 days of a fiscal year that we have seen in many years. Logic no longer prevails. Greed is the defining emotion. I have tried to stomach through it. Yesterday the firm made $25,000. Today we are down $42,000 at 12:47pm. We are net short. We are on the verge of either making what would be an R3 pivot signal ling a reversal and one would expect the market to move down. We are also 1 handle from making a new high on the futures. I have bet big for my last time this month. On the astrological futures trading forecast, we have very bearish indicators for the remainder of the day. I did not see the upward moves in the futures today as convincing. There was no amplitude. I have not seen a V reversal in a very long time. Tomorrow many managers will be out as they begin a long weekend. There is real geopolitical risk out there. It is only logical that managers would take risk off into the end of the day. So as they say, the stars seem aligned, but every time I have felt that way, nothing has come to fruition. I am exhausted from fighting the tape. I was up significantly in the first 5 days of the month and now find myself down significantly as we are close to the final week. The time has arrived. By the end of this day I will no longer be in this position of uncertainty. I will be out of the market for the foreseeable future, or vindicated.

Trader Rehab Again - I take my book down to zero

Trader Therapy - I got screwed

I was wrong. The market did not pull in and my thesis did not play out as I expected it to. Perhaps the lesson is, a bull can’t morph into a bear. Perhaps the position was too big relative to the risk.  The most difficult rule a trader needs to live by, is never do anything today that jeopardizes your business tomorrow. As such while I have been looking for a pull back in the market for 2 weeks, and was able to maintain a relatively small loss in the face of a strong upward trending market, I could not survive Friday without breaking the aforementioned rule. As I entered the day Friday, it appeared as though all my patience would pay off. I had called right that Mubarak would not back down, and the market was selling off. And then an utter reversal, Mubarak changes his mind less than 24hrs later. This is what I have referred to as a complete exogenous shock. Unfortunately for me, who was quite bearish, this took me by total surprise and to a threshold of pain that I would endure no further. I did what all career traders do under those circumstances; I liquidated all positions and cut down to zero. When you are wrong as a trader and have reached your pain limit, continued misperception that you will be right and further losses are not acceptable, even if the very next day you would have been absolutely correct. While I took a significant trading loss on Friday, my firm remains strong and can begin its battle back to make up for Friday’s trading loss. And while it may take time to make it back as the risk will be paired down significantly, I will find myself in what I refer to as trader rehab. I will step away from the keys for a week or two. When I return, I will trade small as I attempt to regain my confidence.  Hopefully the other traders will rise to the occasion and start our path back toward success. I will focus on the business as a whole. The business on a whole is thriving. Its success far exceeds the trading loss. Trading losses can be recovered relatively quickly. Business success cannot afford to give ground. When you are an entrepreneur like myself, there is an inner force that keeps you moving forward in the face of adversity. You do not look past with regret, you look forward with newfound knowledge. A survivor in this business always rises to the occasion, always suffers setbacks and always rises again. I have suffered through many business and personal losses and celebrated numerous personal, trading and business triumphs. That has been my way for my entire career, my entire life. And probably the balance of what I hope will be a lengthy journey. I would venture to say, you the reader have had similar experiences. What defines us all, is “if and how we move forward”. The best way to see how my journey continues is to tune into hedgefundlive.com

Friday Market Expectations - “I still havent found what i am looking for”

Jeremy Frommer and Bono - I told him i still haven't found what i am looking for

To quote my good friend Bono, “I still haven’t found what I am looking for.” But I feel like I am getting close. Look, the morning seemed to lay out as I expected. Then we got the Mubarak spike. Names are completely disconnected from the indices. Correlations are completely out of whack. It is utterly illogical that the markets continue to maintain these lofty levels with names like CSCO down 14 percent. But it is getting very difficult to fight the tape. Ironically as we have maintained a massive short position and have been squeezed every day, but we have weathered the storm. Tomorrow is D-day. What we saw tonight with Mubarak’s speech was a sham. Nothing has changed; this will lead to further chaos. Instead of telling the people he was going to stay through September, perhaps he should have told them he will restore the internet and give them back their Facebook.

The market is completely misunderstanding the risks at hand. I expect a significant overnight drop in the futures because of the continued blind eye behavior exhibited today by the market. I attach a 2/3 probability to a test of the 1308 low; I certainly expect to see 1311.

The intraday range in the futures today was 12 handles, the average has been running closer to 15 – 18 having been as low as 4 -5 handles a couple of weeks back. The expanding range is an indication of a top.

More importantly, the extreme intraday swing of independent stocks is even more worrisome. Our government has become an embarrassment on the foreign affairs front. Bank of America closed on its lows. Commodity stocks rallied as inflation fears grow. Inflation contracts equity multiples. WYNN reported earnings that crushed expectation and the stock is trading lower. AAPL dropped as much as 8 points on a simple internet story regarding the lines for the

Aunt Beverly asked me "Sweetie do you think I should add to my CSCO position, it looks cheap?". OY VEY

new Verizon iPhone being a little smaller than anticipated.
This has become a bubble, earlier in the week I blogged that I expected a 3 – 4% type pullback. My opinion is shifting. I am now concerned that we will see an actual full blow correction of closer to 10%. This is very disturbing to me, as I believe it will directly impact consumer confidence and sidetrack what seems to be a slow and steady recovery.
Aunt Beverly wants to know if she should add to her CSCO position.

astro view- neptune and uranus and the stock market

well, its almost fri and then the weekend thank god. im sick of this . they go up like a dream-neptune. they just float up. then they have unexpected quick selloffs -uranus. it makes perfect sense.totally logically for an alien like me. i feel sorry for u earthlings,it must be hard for u given your belief systems.

at 219 am(2/11) there is a 1/4 moon and that will probably create a change in tone—-im note forecasting up or down but a change in tone or the style of the market.please check video


I Give Up….for P&L

Instead of fighting the good fight, I surrendered.  Since last week, I watched as they squeezed my short names from 3:00pm til 4:00.  Every day losing a chunk of P&L.  I decided today that it was time to be on the right side of that trade.  I took $2mm in short futures and flipped…now long $2mm.  I took $1mm of equities short position and covered.  All for the sake of some quick P&L, and some sanity.  And just like the sun will rise in the east tomorrow, they reversed names, and spiked the futures after the cash close.  As my partner Dean says, Kaching!

I admit to giving in,  being weak.  Who knew that it felt so good?