banking index accelerated the recent daily decline
my jeffolie view: the banking index accelerated the recent daily decline because Citibank forecast lower, declining earnings from trading resulting in most the same larger than proportional to the general market decline today, the banks mostly impact the Russell 2000 index and also the DJIA blue chip index ... often the banks have been good leading indicators of the near term market direction ... in today's crony capitalism, banks manipulate every regulation and rule while preferring to pay fines if punished than behaving as good for the public institutions
PHLX/KBW Bank Index SPW: BKX
Last Edit: Sept 23, 2013 11:14:43 GMT -6 by jeffolie
Report of weak Citi trade revenue hits bank stocks
NEW YORK (MarketWatch) — Financial stocks fell on Monday on reports of a possible drop in bank trading revenue ahead of third-quarter earnings.
The prospect of continued low interest rates after last week’s decision by the Federal Reserve to leave the pace of bond buying unchanged continued to pressure stocks as well.
“The (financial stocks) group had run up on the potential of higher interest rates and the potential for improving net interest margin,” said Marty Mosby, analyst at Guggeheim Securities. “Other issues impacting bank stocks are the debt ceiling talks and the potential shutdown on the government which could be a disruption to financial markets and policies being written.”
A report in the Financial Times on a drop in Citi’s trading has an impact on broker dealers and the expectations of what earnings would look like going into 2014, added Mosby.
The Financial Select Sector SPDR Fund XLF -1.44% , which tracks financial stocks in the S&P 500 SPX -0.54% , was down 0.7%, one of the leading losing sectors in the index.
Reuters Citi falls on reports the bank suffered a sharp decline in trading revenue during the third quarter. Citigroup Inc. C -3.24% dropped 3% in midday trading on a report that its third-quarter earnings could take a hit of as much as 10% due to declining trading revenue, according to the FT, citing people familiar with the matter. A spokeswoman for Citigroup declined to comment on the report.
Goldman Sachs Group Inc. the biggest loser on the Dow Jones Industrial Average GS -2.56% shed 1.5%, making it DJIA -0.33% , in its debut on the index. J.P. Morgan Chase & Co. JPM -2.20% fell 1.3%, the second biggest loser in the Dow.
Bank of America Corp. BAC -1.97% fell 1.3%. Morgan Stanley MS -2.67% was down more than 0.8%. Wells Fargo & Co. WFC -1.58% dropped 1.4%.
Citigroup’s business is weighted toward interest rates and foreign exchange, and it has the biggest exposure to emerging markets among the U.S. banks.
Barclays PLC BCS -2.35% UK:BARC -2.60% and Credit Suisse Group AG CS -0.36% -1.14% have made similar statements on possible weaker revenue related to lower fixed-income trading this quarter, and the FT reported that Deutsche Bank AG DB -0.23% DE:DBK -0.68% is preparing a similar announcement.
Here’s the roundup of news on Wall Street:
Twitter is in talks with several investment banks to set up a credit facility as it gets ready to become a public company, according to a report on CNBC.
The startup announced via Twitter this month that it plans to become a public company. Goldman Sachs is the firm’s lead underwriter for the IPO, and Morgan Stanley, J.P. Morgan Chase and Bank of America, will work with the firm on the deal, among others, according to reports.
Hedge funds have the ability to start advertising to the general public starting Monday after the Securities and Exchange Commission lifted a decade-old ban on advertising.
Hedge funds will still be limited in what kind of investors can buy their products: those with a net worth of at least $1 million excluding their primary residence, or annual income of more than $200,000 in the last two years.
ICAP PLC is expected to settle with regulators over charges it was involved in Libor manipulation, according to a report in The Wall Street Journal.
The London-based interdealer broker could pay up to $100 million in civil penalties and would be the fourth settlement in the global investigation on alleged rigging of the London interbank offer rate benchmark used as an interest rate for financial contracts.
Goldman Sachs is revamping its bond-trading network to allow clients more flexibility in trading. The new platform will allow users to have access to more securities and a variety of time slots, after the firm halted the year-old tool in June, according to media reports.
Financials and Citigroup create large bearish wick last week!
The chart below reflects how strong Financials have been over the past year, as XLF is up 80% more than the S&P 500 and Citigroup is even stronger, up over 150% more than SPY.
The chart above reflects that XLF & Citigroup both created rather large bearish wicks last week.
Citigroup is a the top of its sideways channel that it has had a hard time breaking from since the highs it reached back in 2009.
Financials have been a relative strength winner over the past few years, keep an eye on them in the near future, due to the bearish wicks they created last week, because if they happen to head lower, they could impact the S&P 500 going forward!
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jeffolie: One might short a bull ETF to gain the decay but this requires a margin position subject to changes imposed by the exchanges & brokers
Oct 26, 2013 13:26:07 GMT -6
jeffolie: Holding a stop loss in these algo dominated markets almost always means the algos will hit your stops
Oct 26, 2013 13:20:09 GMT -6
jeffolie: Even so, these leveraged ETFs do not create margin calls nor expiration dates thus allowing one to hold indefinitely
Oct 26, 2013 13:17:52 GMT -6
jeffolie: Yes, the ETF features fading/leveraged decay because the futures and/or options used decay plus the administrative costs rise the decay, declining value ... I accept this as a cost and feature of all ETFs that purchase futures/options to maintain price
Oct 26, 2013 13:15:38 GMT -6
mimzy: jeffolie ~ I've been reading/lurking you for a year or three now and was wondering if your could you explain how you overcome quantum fading/leveraged decay in your ETF short position of the DJIA?
Oct 25, 2013 20:46:26 GMT -6