Wall Street vs. Main Street

Wall Street was disappionted at FED's 25 basis point rate cut and investors started dumping their shares, causing 300 points ups and downs on the Dow. But Main street is looking okay, the newly released holiday sales number is good, 1.2% jump which is the best in 6 month. Lehman Brothers reports record net revenues and earning beats the Wall street expectation. So what went wrong? When we are confused, we should look at how the big guys digest the news and how to put their bets.
My computer contracted some kind of virus and haunted me for a week, and I missed the COT report, which basically indicated that the institutional investors (smart money) increased their holding on S and P -- we can see the result in the pre-FED announcement the market was up; at the same time those guy mysteriously bought a lot of call option contract for VIX index -- which prepared them to dump shares after the FED announcement. The headline showed up in the media was Fed only cut interest rate by 0.25, instead of 0.50 the market expected. Did the Smart Money know this ahead of time or their computer was so good that allowed them to calculate the odds for this to happen and formulated the winning strategy accordingly? I don't have the answer to this and your guess is as good as mine. But the fact is the fact, the clue was there, everything happened just like they follow the script. Amazing, isn't it?
A lot of the volatility was caused by the institutional program trading and day traders following suit, so don't worry about them too much.
Oh, another thing, the Smart Money also reduced their short positions on oil (or bought oil contract), predicting that the cold weather would sweep the Mid-West, which let the Oil price jumped at least $5 to plus $90 per barrel.
If you like the data and graphs, please leave your comments and I will post them later.

Here is the table of Commercial positions published on Dec. 7th of 2007:

Index	Trader Group	12/2/2007	12/7/2007	Difference	Open-int
Dow	Commercials	1197	2421	1224	36127
Nasdaq	Commercials	7471	8359	888	52715
Russ	Commercials	5421	4992	-429	38287
S&P 500	Commercials	29720	46177	16457	657039
Oil	Commercials	-54002	-45283	8719	1382526
VIX	Commercials	3894	12603	8709	59689

Thank you and I am open for discussion on the resutls

Market Swimmer

COT Report and Morning News

One of the unique features of this site is that we follow smart money by checking government's COT report. The delayed report was released on Monday afternoon, I was busy yesterday and I feel the need to make a table and publish the results today. Here is the table:

Index	Trader Group	11/19/2007	11/26/2007	Difference
Dow	Commercials	-69	292	361
Nasdaq	Commercials	10273	6569	-3704
S&P 500	Commercials	45139	33256	-11883
Russ	Commercials	4776	4855	79
VIX	Commercials	4177	4051	-126
Oil	Commercials	-23136	-28584	-5448

These are the net positions of commercial traders (institutions and hedge funds) on various indexes on last Tuesday, they provide a rare opportunity for us to check into the sentiment of the institutional traders, commonly known as the "Smart Money".

Remember, even the smart money can be wrong sometimes and these are the numbers in the past, the market sentiment can change in any moment based on news, earning release and rumors.

Biotech stocks were very strong in Tuesday’s session and could be at a major turning point in the group’s two-month decline.

Chinese Market News Brief

Oil giants upset with Ecuador's tax rise:
President Rafael Correa of Ecuador shocked investors in October by raising the windfall tax from 50 percent to 99 percent, grabbing nearly all the extra oil revenues generated by foreign firms above a set contractual price.

This has had a huge impact on PetroChina, Sinopec and Sinochem; they all have investments in Ecuador. It's reported that PetroChina and Sinopec are preparing to seek help from international arbitration organizations. Sinochem has a US$200 million investment in Ecuador; the company is also preparing to renegotiate their contracts.

According to Xinhua News Agency, Correa arrived in Beijing on Monday for a week long state visit. Senior officials from PetroChina and Sinopec are expected to meet the Oil Minister of Ecuador to discuss the oil tax. However, insiders said that it is not likely that the Ecuadorian side will compromise.

Enjoy,

Market Swimmer

CFTC Delayed Release of COT Report

US Commodity Futures Trading Commission usually releases COT report every Friday at 3:30 PM. But last Friday was a holiday, so the releasing has been delayed till Monday the 26th.



The major indices chopped higher in a narrow range day to end the holiday-shortened week. This quiet action should give way to a major move, higher or lower, by the middle of this week.

After market close on Monday, we should check on the government COT report to peek into the trading actions of big institutions, looking for clues of future market direction.

At the present time, the market seems over-sold, both commercial traders and small individual investors think the market is due for a bounce. We will see if market can hold the gain or not.

Other website development:

I have installed a software piece for "Gravatar" - Global Avatar! Avatar refers to a profile picture a visitor can use when he/she leaves a comment on a post.

What is an Avatar?

A computer avatar is a personalized graphic file or rendering that represents a computer user. There are basically two types of avatars: those used at websites, such as on Web exchange boards, and those used in gaming and virtual worlds.

The simplest type of avatar is a small graphics file used on websites. Websites that offer chat boards often allow members to upload an avatar to represent themselves. The avatar can be a real-life digital photo of the person using it, but is more often an image intended to be a creative alter ego. This might be a game-rendered snapshot of a beast, hero, or heroine; a humorous picture of a pet or cartoonish character; or a design that makes a statement. The avatar appears alongside the user’s comments, easily identifying the author for others at a glance.

You can go to www.kaneva.com to experience the virtual reality, or go to http://www.findavatar.info/ to pick up an Avatar you would like. To create a GLOBAL AVATOR, which means that you can go anywhere and leave your comments with one digital image you prefer, please go to http://site.gravatar.com/signup to create an account by using your email. Remember, Avatar is free and fun, you create one to satisfy your own ego, my responsibility is to make sure it will work on my site. We don't maintain your Avatar in anyway. On the other hand, an Avatar is not required to leave comments on my site.

I encourage all of you to give it a try and leave your comments on this board. To give you an example, I and a new friend "deep blue" a couple of comments on the last post http://marketswimmer.com/?p=147. Please take a look. If you have any problems, please let me know.

Have a terrific holiday season,

Market Swimmer

COT Report

According to the government sources, the commercials changed their net future positions of various indexes as the following:

Index	Trader Group	11/9/2007	11/16/2007	Difference
Dow	Commercials	-1093	-69	1024
Nasdaq	Commercials	6050	10273	4223
S&P 500	Commercials	46398	45139	-1259
Russ	Commercials	4754	4776	22
VIX	Commercials	119	4177	4058

They increased their long positions in NASD slightly, but they were big buyers of VIX index, expecting volatility to increase.

Last week's volatile action is giving a marginally better look to the index charts as we head toward the Thanksgiving holiday but there are still no bottoming signals in place.

Market Swimmer

COT Report, Guru View

Source: U.S. Commodity Futures Trading Commission (WWW.cftc.gov)

Index	Trader Group	11/2/2007	11/9/2007	Difference
Dow	Commercials	-177	-1093	-916
Nasdaq	Commercials	5885	6050	165
S&P 500	Commercials	51694	46398	-5296
Russ	Commercials	3427	4754	1327
VIX	Commercials	-4304	119	4423

In last week, Commercial traders sold off S&P and Dow, but increased holdings on Russell index slightly. They also bought heavily on the VIX - Volatility index, expecting tough time ahead. After testing support for several days, the stock-market indexes finally broke-down below critical support levels.

Monday morning crash talk is in the air, but the market gods have denied that event through every other opportunity in the last 20 years. Of course, anything could happen because this is easily the worst price action since the summer of 2002.

In short term, the market has been severely over-sold, but it's time to exercise caution!

Hope the best for all,

Market Swimmer

COT Report

Source: U.S. Commodity Futures Trading Commission (WWW.cftc.gov)

Commitments of Traders:

The Commitments of Traders (COT) reports provide a breakdown of each Tuesday’s open interest for market reports in which 20 or more traders hold positions equal to or above the reporting levels established by the CFTC.

Index	Trader Group	Friday 10/19/07	Friday 10/26/07	Difference
Dow Jones Index Composite	Commercials	-39	-56	-17
NASDAQ 100	Commercials	2509	3321	812
S&P 500	Commercials	53142	51518	-1624
Russell 2000	Commercials	3717	3283	-434

After the drastic sell-off, NASD is only index the smart money has increased position last week. Look at the VIX (it's not shown here) the smart money bought, betting the volatility will increase.

Enjoy,

Mkt Swimmer