Market Stabilized; Waiting For Sign Of Bottoming

Market oscillates for the week on Greek fear. Although speculating traders and market manipulators continue to weigh down market, selling is eased as oversold stocks are bought up by hot money in the market. Sellers are beginning to run out of stocks. Market manipulators have very limited short position in stocks. Therefore although market seems to have reached the bottom, there is no short covering rally as in last year when market manipulators covered the short positions.

Institutional and individual investors are waiting cautiously for the sign of market bottom. Traders and market manipulators are aware of the possibility of a strong rebound due to surge buying from bargain hunters. As a result, trading volume decreases when market participants are expecting market to show any sign of bottom.

As mentioned in earlier posts, global financial market is flooded with hot money. In developed countries, people still have memory of the 2008 financial meltdown and remain cautious on risky assets. Treasuries and bonds are the safe haven of personal wealth. Market manipulators attempt to make profit from market turbulence. In emerging markets, hot money is finding ways into wealth assets with the exception of equity stocks. It appears that some hot money in developed countries which creates turbulence in equity stock market also expands into emerging markets.



Burned by the Best of Breed: Barry Ritholtz on JP Morgan
It sure made sense at the time. After getting pounded last fall to multi-year lows, the nation's battered banking industry was poised for a pop. By the New Year, the market's hottest sector was turning skeptics into converts by the day, and all that was needed to get in on it was a little nerve and some money.

That's essentially what brought Barry Ritholtz, and countless other profit-seekers like him, back to the banks—and, more specifically, back into shares of JP Morgan. They saw the performance, leadership, and improving earnings, but they also had a long list of names to avoid. They therefore decided that going with the best of breed was a smart way to go.

Don’t Look Now, but Here Comes Housing!
Last decade's housing boom is still inflicting a world of pain on lenders, homeowners and the financial system. Home prices are still falling. But there are growing signs that a sector that had become a massive drag on growth is now becoming a factor that can add to growth. We've written before of the ways in which housing is important for economic growth — it uses lots of local labor and materials, and transactions generate a lot of collateral activity and taxes.

Traders Calm as CBO Warns Fiscal Cliff Will Put Us Back in Recession
Three and a half years after the trough of the financial crisis in 2009 the R-word is once again being thrown around. The latest purveyor of pessimism is none other than the Congressional Budget Office (CBO), who warned in a note this week that our fledgling recovery could slip back into recession as we speed toward the edge of a dangerous "fiscal cliff."

3 Signs You’re Gambling, Not Investing!
Never has there been a time in market history when more people who think of themselves as investors were actually gambling with their money. From Wall Street to Main Street the lines are blurry. Just look at the trials of JP Morgan (JPM), where even the bank itself confused hedging risk with making an enormous bet; and Facebook (FB), whose IPO created a frenzy that has so far lost money for investors that rushed in.

FDIC: Bank profits at highest level since 2007
Bank profits rose in the first quarter of 2012, reaching their highest quarterly levels since the second quarter of 2007, according to the Federal Deposit Insurance Corp.'s quarterly banking report, released Thursday. However, total loan and lease balances on the books of banks declined by $56 billion in the quarter, a situation that FDIC Chairman Martin Gruenberg said was "disappointing" after the industry saw three quarters of growth last year. Bank net income for the first quarter of 2012 was $35.3 billion, up by $6.6 billion from the first quarter of 2011. Meanwhile, revenues -- driven partly by gains on loan sales -- increased for only the second time in the past five quarters. Net operating revenue increased by $5 billion from the year-earlier querter. The FDIC said that once again lower provisions for loan losses contributed to earnings improvement. The number of banks on the FDIC's "problem list" fell to 772 from 813 during the first quarter of 2012, and the assets of problem institutions declined to $292 billion from $319 billion.

U.S. Economy Has Momentum But “Dramatic Seizure” of Capital Markets Is Big Risk: Laura Tyson
"The biggest danger to the world economy is a disruptive, disorderly exit from Greece, which causes a major seizure of credit markets in Europe," Tyson says. "You can't rule out the possibility of some dramatic seizure of capital markets, that's the great risk. It's not the recession itself."

As usual, the stock market grabs the headlines (See: Botched IPO, Facebook's) but the bond market is a better indicator of investors' appetite for risk -- or lack thereof.

In recent days, yields on German, U.S., Swiss, French, Australian and Canadian bonds have traded at or near record lows as global investors seek refuge from the sovereign debts of Europe's PIIGS as well as junk bonds and emerging market debt.

"There is a pulling back from risk going on in the bond market. It's very troubling," says Ed Dempsey, Chief Investment Officer of Pension Partners. "It would seem the bond market is signaling to us there is some sort of event that is imminent [and] it seems most likely that event is coming out of Europe."