THE DOT - if this turns orange or red be alert

Wednesday, January 19, 2011

part 2

3. The mastermind who created one of the indicators (Tom DeMark) I am using frequently comes up with the same conclusion that a steep correction is imminent.


Tom DeMark: A 11% Drop In The Market Is Imminent

Tyler Durden's picture

Tom DeMark, whose Sequential and Combo indicators are among the most used indicators by professional technicians and chartists on Wall Street, is out with some chilling words overnight. The Market Studies LLC president told Bloomberg that U.S. stocks are within a week of “a significant market top” that is likely to precede a drop of at least 11 percent in the Standard & Poor’s 500 Index. “I’m pretty confident that in one to two weeks, the market will be in a descent,” said DeMark, founder and chief executive officer of Market Studies LLC. “It could be pretty sharp.” And since the Hindenburg Omen in mid-August was prevented from taking its share of scalps only by dint of the Chairman's Woods Hole speech a week later which set off the market on the biggest melt up since... well August of 2009, we wonder if the Fed's Open Market Operations desk will take this warning as a leading indicator to start spreading rumors of another QE expansion. Keep a close eye on those Jon Hilsenrath "leaks."

From Bloomberg:

DeMark’s forecast follows projections from Wall Street strategists that the S&P 500 will climb to 1,384, an annual gain of 10 percent, through the end of the year, according to the average of 12 estimates in a Bloomberg survey. Short selling of companies in the index has fallen to the lowest level in a year, according to Data Explorers, a New York-based research firm.

Steven A. Cohen, founder of Stamford, Connecticut-based SAC Capital Advisors LP, which manages $12 billion, and John H. Burbank, founder of San Francisco-based Passport Capital LLC, which manages $4.2 billion, are partners in Market Studies, DeMark said. The firm has its headquarters near Scottsdale, Arizona.

On a weekly basis, the two indicators signaled on Jan. 14 that a reversal is imminent as the S&P 500 closed at its highest level since August 2008. DeMark expects a decline of at least 11 percent because his work shows that markets move in increments of 5.56 percent, he said. Assuming a drop twice that size is “a conservative estimate,” he said.

The indicators are based on comparisons of the current closing level of the index with closing and intraday levels over previous periods. The reading Jan. 14 was the first signal of a reversal in the S&P 500 since March 2009, when the indicators showed a rebound was imminent, he said. That month the S&P 500 fell to a 12-year low from which it has rebounded more than 90 percent.

All that said in US central planning market, stocks drop you.

3. Goldman kind of disappoints as well after Citi with poor performance in the Prop area but if they traded some of their own recommendations no wonder especially in Forex the really suck. On the other hand Goldman is the front-runner of all insides at they may hide this time some profits as they always have a hidden agenda but the fact they could hide 5 bil of losses in 2008 without any legal consequences is an amazing situation as Obama called Blankfein a decent guy. Try hiding substantial losses like Fuld and all Wallstreet banksters nothing happens although for Enron even that was reason enough for prison since it is frauf.


Goldman Reports Average Employee Comp Of $430,700 As FICC Revenue Collapses

Goldman reported Q4 numbers today and they were ugly. While earnings were in line with expectations (bank EPS has become completely irrelevant as the FASB now affords banks with a practically infinite array of options to game the bottom line), the revenues were more difficult to fudge. And now that the firm finally spreads its revenues in the new method which breaks out Prop (and FICC from Equities as part of client flow), we can see just why prop trading is so critical to the firm. The traditional golden goose for the firm: Fixed Income, Currency and Commodities trading on a flow basis was abysmal, plunging from $2,687 million to $1,636 million sequentially, and from $3,129 million in Q4 2009. As the chart below shows, this number peaked at $6,017 million in Q1 2010. Combined, total revenues by all segments came at a five quarter low with FICC posting the lowest contribution since 2009. Yet the one segment which did post an increase was Prop Trading, also known as Investing and Lending, which increased from $1,797 million to $1,988 million. And as we noted previously, the margins in this group are by far the highest, averaging just under 50%, confirming why as Bloomberg noted earlier, attempts to reintegrate prop into Wall Street trading are ramping up big now that Volcker is gone. But the number everyone is waiting for is comp, which was $2,253 million in Q4 (unlike the negative number posted in Q4 2009 when the outcry against banker bonuses was apparently louder). This was a 26.1% comp margin, and brought the year total to $15,376 or a 39.3% margin on total revenues of $39,161. Based on "total staff at period end" of 35,700 this comes to precisely $430,700 per employee.Surely this is admirable compensation for a Fed-backstopped hedge fund job well done.

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