Reversal Day

by Larry Levin

Today was quite a day - opening with a thud after a massive sell-off on the Globex session. The gap open was so low that 100% of the year's gains had evaporated and in fact made a new low for the year. Moreover, this recent drop nearly reached 15% decline off the intra day high of the S&P500 futures.

Further weakness would make it a cyclical bear market tucked inside a secular bear market so the bulls are doing whatever it takes to keep this from happening. I suppose Barney Frank is bullish because it seems to be his late statement that made the market explode into the close. Like the true politician that he is, Mr. Frank doesn't want much of anything to change in the banking sector. He hopes that after some time passes, we idiot electorate will forget what happened.

When asked about a proposal to restrict banks’ use of derivatives, especially SWAPS, Representative Frank said it “goes too far.”

Bloomberg said the following about the early drop and Barney Frank. The whole article can be found here...

http://www.bloomberg.com/apps/news?pid=20601010&sid=aB7VDl5Y_UgU

Mohamed A. El-Erian, co-chief investment officer at Pacific Investment Management Co., said strains evident in Spain’s banking system are intensifying concern that the Greek debt crisis may spread, PBS reported.

“Banks have a way of amplifying shocks in the system,” El-Erian, whose company runs the world’s biggest bond fund, said in an interview with PBS’s Nightly Business Report posted on the U.S. public broadcaster’s website. Banks are “like the oil in your car. They link up so many different parts. The minute you introduce strains in the banking system, there’s always a fear that governments will be behind the curve and that you can get contagion. You can get widespread disruption.”

Representative Frank, who will lead congressional talks to produce a financial-regulation bill, said Senate language that would require commercial banks to wall off their swaps-trading operations “goes too far.” His comments today are the latest indication that the swaps-desk provision may not survive final negotiations over the legislation.

Concerns Intensify.....



Previous Day's Trading Room Results:

Trade Date: 5/25/10

E-Mini S&P Trades*
(before fees and commissions):


1) No "Secrets" trades filled today.

2) Algorithm positions (36)

3) “Reading the Tape” positions (22) combined Secret’s, Algo, & “Reading the Tape” total +25.50



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