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Jesse Felder
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Jesse Felder began his career in investment management at Bear, Stearns & Co. and later co-founded what is today a multi-billion-dollar hedge fund firm headquartered in Santa Monica, California. In 2000, he founded Felder & Company with a clear vision of creating an ‘extended family... More
My company:
Felder & Company
My blog:
The Felder Report
My book:
FIRE Wall Street
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  • Breakdown Or Shakedown?
     

     

    So the support/neckline at 1042 that every trader in the world is watchingright now broke down today. As I wrote last week, the pattern projects a decline to roughly 865.

     

    However, we are now approaching the 38.2% retracement of the rally that began a little over a year ago. Volume and MACD (green lines on the chart) are also failing to confirm the new lows currently being made.

     

    This leads me to believe that there is a decent chance that this will prove to be a false breakdown (aka, shakedown). Patterns like these usually work best when they go relatively unnoticed or there is some skepticism about them.

     

    Sentiment is pretty negative right now and there are just too many eyes on this chart for a contrarian like me to give it much credence.


    Disclosure: none
    Tags: SPY, stocks, trading, technical analysis, head and shoulders top
    Jun 30 8:44 PM | Link | Comment!
  • Are You Panicking Or Welcoming The Sell-Off?
    I posted these two juxtaposed stories yesterday:

    "Confidence In Stocks Is Sinking to Record Lows in the Options Market"

    "A Vote of Confidence: Insiders Are Clearly Bullish"

     

    Visually, it's easy to see that equity option investors are feeling panicky as stocks have sold off over the past few weeks:

     

     

    This is the equity-only put to call ratio. Put buyers are dominating trading in the options market lately even as the VIX trades near a 1-year high (meaning options are expensive). In other words, traders are scrambling to buy downside protection regardless of the cost.

     

    On the other hand, company insiders are taking advantage of the sell-off to add to their personal stakes:

     

     

     

    This chart shows the Insiders' sell-to-buy ratio year-to-date. Insiders are buying nearly as many shares as they are selling currently. Typically sellers outnumber buyers by a significant margin (much of their compensation is in stock so selling is simply the way they monetize that compensation). So it is fairly rare to see this degree of buying by insiders.

     

    Put another way, the smart money (perhaps the smartest) is buying right now as the dumb money is scrambling to sell (or purchase the right to sell). Which side would you rather trade with? 

    Disclosure: none
    Tags: VXX, options, insiders, stocks, trading
    Jun 08 11:46 AM | Link | Comment!
  • The Muni Bond Time Bomb
     
    Warren Buffett sounded the alarm bell on the internet bubble, the real estate bubble and the rapid growth of derivatives that contributed to the severity of the financial crisis of 2008. Yesterday, he added the municipal bond market to that notorious list. The LA Times reports:

     

    ...at the end of his testimony, Buffett was asked by FCIC Chairman Phil Angelides (who was treasurer of California from 1999 to 2007) what other bombs may lurk behind the credit grades the ratings companies dish out.

    Angelides: “In the same way you said there were risks from derivatives, do you see extant risks, current risk, from the model essentially being unchanged from where it was when the mistakes, the [mortgage] disaster ... happened?”

    Buffett: “Well, the huge question ... if I were running a rating agency now, how would I rate states and major municipalities? I mean, if the federal government will step in to help them, they're triple-A. If the federal government won't step in to help them, who knows what they are? If you are looking now at something where you could look back later on and say, these ratings were crazy, that would be the area.

    “I don't think Moody’s or Standard & Poor’s or I can come up with anything terribly insightful about the question of state and municipal finance five or 10 years from now except for the fact there will be a terrible problem and then the question becomes will the federal government [help]?”
    I imagine that the Feds will be forced to step in to bailout local governments just as they did for the banking system a little over a year ago. I just have a hard time imagining President Obama justifying leaving the states out to dry after giving Wall Street so many billions. BUT... I'm not willing to bet on that outcome. Munis are basically a crap shoot right now and investors aren't being paid nearly enough to compensate for the increasing risk of default. 

    Disclosure: none
    Tags: TFI, Municipal Bond, Bailout, Buffett
    Jun 03 11:58 AM | Link | Comment!
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