2% Sell-Off

by Larry Levin


The prior day's 1% decline led to another swoon Thursday. This time, however, it was a 2% sell off. Will it reverse Friday or is a 3% drop in the cards? Tune in tomorrow; same Bat time, same Bat channel.

Thursday's drop had a trio of reasons: China, weekly jobless claims, and president Obama.

Nervousness gripped the markets before the open when Liu Mingkang, head of the China Banking Regulatory Commission (CBRC), said in an interview yesterday that several Chinese banks had been asked to restrain their lending after proving to have inadequate capital reserves. Oopsie. Chinese media reports claimed that new bank loans so far in January 2010 have risen to, or is approaching, the massive hike in January 2009. As a result, several major Chinese commercial banks were given oral commands to stop new lending for the rest of the month.

This negatively rippled through the markets because less loans equals less spending, which equals less buying of "stuff." If it slows China's growth even a little, the affects will be pronounced in many areas - like oil. With less Chinese demand for oil believed to be coming, oil was hammered today, thus hurting the markets via Exxon, etc.

On the heels of this was more bad news in the job sector. Was there ever good news? Not unless you actually drink the government kool-aid, you know, like the lame stream media does.

Weekly jobless claims went up again. Sadly the jobs market is getting worse. Initial claims jumped 36,000 to 482,000, marking a third straight increase and the fifth increase in five weeks...not a streak that points to improvement in the labor market. The four-week average, at 448,250, rose 7,000 in the week, while the prior week's data was revised - worse.

But don't worry say the lame stream media: it was a fluke; it will get better next week. Maybe so. Only time will tell.

Finally we have the presidential proposal that slammed Fraud Street. President Obama wants to bring back Glass-Steagall - sort of. So far the way it sounds, he wants major restrictions on banks, like the old Glass-Steagall law, without actually calling it Glass-Steagall. Some are calling it the "Volcker Rules."

Some of the proposed rules are...#1 being the big one that will have the banks apoplectic.

1) Commercial banks and bank holding companies will NOT be allowed to continue "PROP" trading! (Yikes)

2) Commercial banks and bank holding companies will NOT be allowed to invest in private equity funds.

3) Commercial banks and bank holding companies will NOT be allowed to invest in hedge funds.

4) It sounds like all other manner of off-balance sheet bull$#it will also off limits.

5) Commercial banks and bank holding companies will have to fold up their high frequency trading tents.

Surely a lot of this, perhaps all of it, will change a great deal. So far, however, it sounds good to me if you are in favor of ending "too big to fail." Good job president Obama...stick to it all the way to the end."


Previous Day's Trading Room Results:

Trade Date: 1/21/10

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


1) VA sell @ 8:41am at 1137.50 = +1.00 (1 lot)

2) FT sell @ 1:33pm at 1119.00 = +1.00 (1 lot)

3) Algorithm positions (10)

4) "Reading the Tape" positions (10) ...combined Secret's, Algo, & "Reading the Tape" total...+11.25



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