Monday, August 31, 2009

JNK & LQD update

Worthy of a footnote perhaps? LQD (investment grade corporate debt) has broken to new highs on increasing volume.


While JNK (high yield debt) is still treading water on declining volumes.


Sunday, August 30, 2009

Copper and BHP

I have a vivid memory of pitching a commodity linked currency contract to a large Australian mining company during the Asian crisis in late 1997. They were already bleeding from their swollen AUDUSD hedge book. The deadpan response of the company’s cardigan wearing Treasurer was: “I’m not going to be the one to sell copper at the bottom of the market”…Copper proceeded to plunge and the company was ultimately taken over.

The crux of our pitch was that with World GDP growth expected to fall towards 2%, metals prices were going to take a hit. Following is a chart of GDP and copper prices since 1990 (source: IMF):




See the Asian crisis? It’s easy to miss given the more recent gyrations. It begs the question – how can copper prices (and commodity prices generally) continue to levitate at current levels in the face of such widespread demand destruction?

Now clearly the world has changed a great deal since the Asian crisis. The desperately low copper prices of the late 90’s and early noughties were the catalyst for consolidation and restructuring on the production side of the ledger. Producers now have greater pricing power. On the consumer side, the emergence of China into full throttle industrialisation logically puts a flaw under medium term demand. BHP sees China doubling its annual demand from current levels by 2025.

To get a sense of the demand and supply equation consider the following table:



There are a couple of things that jump out from this breakdown. The first being the absolute dominance of China, the second being that ‘high income’ countries (to use IMF vernacular) in aggregate remain significant to world demand.

Which leads to the obvious question – if there was a surplus in 2008, then what happens in 2009 when world GDP really falls off the edge (annualised Q1 GDP in US down 6.4%, Germany down 6.7%, Japan down 14.2%). Even if GDP has stabilised and (just maybe) begun to recover in the second half, it is now coming from a low base. Think we can reasonably expect the copper surplus to persist this year.

And going forward into 2010, even if China’s physical demand were to level out at a higher level (say 2 million tonnes per annum) if world GDP grows by 1% YOY after dropping 2.5% the year before, then there’s a reasonable chance that there will be a surplus for that calendar year as well.

So it’s a fair probability that for at least the short to medium term, physical demand for copper will be outstripped by supply.

How then can commodity prices be trading at their current levels? It’s not because the cost of production demands it (witness BHP’s current EBIT margins at around 40%, nearly double that of the dark days of the Asia crisis). Or put another way, who has been the marginal buyer pushing up prices beyond the physical demand for the metal. The answer not unexpectedly is China. The following chart of refined copper imports in China illustrates the point. (Source: China Customs Office)




Impressive isn’t it. The fact is China has been sucking in copper above and beyond its current needs. Macquarie estimates as much as 400,000 tonnes have been stockpiled in the first half. While there have been reports that China has bought 235,000 tonnes for its strategic reserves.

So will stockpiling continue?

As with all things China it is hard to get definitive, but a couple of arguments would suggest not.

Firstly, logic would suggest China does not need to chase the price higher. The whole point about building strategic reserves in a very weak market is to facilitate management of supply when demand picks up. With around 40% of their annual import requirements covered by stockpiles, China’s consumers can afford to be a little less hasty in bidding for supplies even if they are for additional reserves.

Secondly, indications are that liquidity is being reined in. Statements about the reclassification of sub-debt in relation to bank reserves and about how the proceeds of loans should be applied suggest anecdotally (if not in substance) that the Party is concerned about liquidity-fuelled speculation. The fall in new lending in July mirrors the decline in copper imports. Early indications are that liquidity and its handmaidens, greed and lust, are on the wane.


To BHP then – what is its valuation looking like with the share price over $37? Consensus forecasts look something like:



The commodity assumptions underlying these earnings are many and varied depending upon the broker. But as a generalisation on a straw poll, they are pretty much extrapolations of current prices continuing to strengthen from here (UBS for example has forecasts for copper of 223 cents per pound for FY2010 and 255 cents in FY011 - compared to a realised price of 224 cents in FY2009).

In short, I’d class the current valuation as pretty rich. While the long term Chindia industrialisation story remains favourable, as with all things, this fundamental outlook should be risk weighted to reflect the many uncertainties in our world. At 15x to 20x earnings, and on the basis that these earnings are calculated using favourable commodity prices, there is not much room for error (or upside).

On the other hand, maybe we are living on the verge of an inflationary world where the USD will plummet, commodity prices will soar, and China will lead us into another era of excess and fine dining. Maybe…

Wednesday, August 26, 2009

Signs of retail capitulation

If retail are capitulating then the odds are shortening on a near term correction in the US equities market. Not that it means it has to be a resumption of the bear, could just as easily be a dip before we push higher.


In addition to the CBOE put/call ratio that is hovering around 0.60, MarketWatch reports that the AAII survey has reached highs not seen since December 07.

And even the brokers are bold enough to speak plainly about it...

From JP Morgan (via TPC)
We see two catalysts for a continuation of the equity rally. First, economic data will likely continue to post positive surprises driven by developed economies. We track economic surprises using our Economic Activity Surprise Index, which remains firmly in the positive territory. Second, retail investors will likely start deploying a greater portion of their excess cash into equities rather than bonds, as slower declines in corporate bond yields will make the capital gains on their bond holdings look less impressive than in the past months.

The question is who is selling?



Reflections of a credit junkie

Let's assume that the rally since March has been a liquidity inspired:
a) squeeze of a very short market from the lows
b) followed by another squeeze of punters trying to pick the top (that would be the H&S that should not be named)
c) followed by underweight equity fund managers being squeezed, and,
d) then followed by retail investors beginning to believe a new bull has arrived (sentiment indicators push to levels not seen since Lehman was alive and well and gambling in every speakeasy this side of the Arctic circle).

And let's also assume that I've been arguing that turning off the liquidity tap will have a disproportionate impact on the market. With the abundance of fundamental factors suggesting the market is now overvalued, gravity will take hold. Hence my bearish trading stance.

What's wrong with the picture then? What's missing?

A mate of mine suggested that the credit implosion in over. Bernanke has put a stop to that - as long as you are happy with US government credit (hmm - think USD), then being long a big US bank at a historically attractive credit spreads and funded at zero rates is a pretty compelling trade. Wells Fargo might have a lot of negative equity home loans on its books, but it will be recapitalised, and as a debt holder you will be fine. Extrapolate that theme to the investment grade universe and you have an anchor for the market to rally around.

I'm trying to brief (perhaps at the expense of clarity but treat this as a French existentialist piece - it's about colour not deconstructionist drivel). What then for a market where the risk of a deleveraging, forced selling, credit implosion has been taken out?

Well, on balance, it might well be that equity investors remain underinvested. Weakness will be bought into. Worse still for an underinvested sod like myself, we might now be at the bottom of the new trading range. The market could bust higher from here in an exuberant capitulation - and then retrace back to today's levels.

To take Marc Faber's point - in a world where interest rates are zero and investment grade keeps crunching in, investors have to push up the risk curve.

And the non-confirmation in the various markets that we are seeing at the moment? Simply, a little profit taking in a thin market for all those banks that have sat through the March lows.

It's a worthy (if broadly painted) argument. For mine, I remain of the view that we are in for a pull back (in tune with the next 6 months of pain in the US mortgage markets). But perhaps a revisit of the lows is out of the question.

Tuesday, August 25, 2009

Marc Faber - extending the liquidity thesis

Click here to listen to an interview with Marc Faber on KingWorldNews. It's long but worth the time if you have it.

A quick synopsis for those that don't...
1) Faber's world view is based on a belief that the Fed and the Oval Office will keep printing money to stave off what they see as disaster. Bernanke's reappointment confirms this.
2) The 3 to 6 month outlook is for a 10% to 20% correction in equities coupled with strength in the USD and bonds as liquidity tightens.
3) He expects that the US will defend the S&P around 850, pumping in more cash in Liquidity Mania Part Two. For this reason he doesn't expect the S&P to make a new nominal low.
4) But the flipside to this is that the Fed will lag the effects of all its monetary stimulus keeping interest rates low to avoid the negative effects of higher interest rates on consumption and the financing of the deficit.
5) For these reasons, he suggests the balance of probabilities is in favour of higher nominal stock prices over time - the market will go up not because of fundamentals but because of money printing. Inflation will follow the deflation we are currently experiencing.
6) In real terms expect the stockmarket to plumb new depths - as the effects of inflation and a weakening USD take their toll
7) As a postscript he observes that the risks of war increase in this environment as governments are inclined to paper over fundamental difficulties with land-grab campaigns.

So, an equities correction in the near term, but with interest rates at zero (effectively forcing people to speculate) and more money from the presses, a higher market over the next 1 to 2 years.

Monday, August 24, 2009

LQD - same non-confirmation

Unbiased Trading explores recent price action in LQD (Investment Grade Corporate Bond Fund ETF). Note that it is showing the same non-confirmation as JNK - ie. it topped in late July.

(We can add this our growing list...Nasdaq, Shanghai. Roll in the sentiment indicators... All we need is some price action to confirm a trend reversal.)

JNK - a leading indicator?

Simple question - is the Lehman junk bond index a leading indicator?


The solid yellow squiggle is the S&P500. At first glance (and second for that matter) looks like they move in lock-step. JNK even marked out a key reversal from the March lows.

It's interesting that the spread to the S&P remains a fair margin wider than around the time Lehman's went to the elephants graveyard. This could reflect the fact that liquidity in the first instance has been flowing to credit - you can see the leap in volume that kicked in around the time the Fed opened the sluices.

Recent price action remains inconclusive. Price could pretty easily push on to the $40 to $42 level from where it broke down last September. On the other hand, zooming in the daily and you could just as easily expect a push back to $33 - $34 (closed at $36.30).

However, one other thing to note - and this might be important - JNK has not broken to new highs with the S&P (JNK peaked on 31Jul at ~$37.25). This is a pretty significant non-confirmation. If the market is being driven by liquidity, and this liquidity is s'posed to be invested in the carry trade (with a trickle down effect to equities), then what the hell is happening here? Hmmm...




Sunday, August 23, 2009

Don't stray too far from the fallout shelter

I've been foolish to try and pick the top in a market that has the tenacity of a drug-enhanced prize-fighter. Closing out some shorts has been the order of the day.

Still, don't confuse price strength in financial assets for a rebound in economic growth. This market has the structural integrity of Chernobyl. That's what comes from a quick build using flimsy materials - and a liquidity driven market is just that.

As Andy Xie puts it..."a pure bubble tied to excess liquidity over financial assets can't last long". The multiplier effects on consumption and production are simply missing. Sprott Asset Management explore a similar theme and come to the same conclusions.

So when will this liquidity deluge come to an end?

The Fed has indicated it will keep spending until October. The fiscal spend is done with tax cuts and transfers already in the system (both in the US and here in Australia). China recently tickled its markets with a move to effectively reign in bank lending (by increasing reserve requirements and requiring new lending to be for productive purposes). Put it all together and it sounds like liquidity could have already have peaked and will tail off through the remainder of the year.

On this basis, it'd be a fair bet that the equities markets will come to understand this before the end of the year. Until then, there is room to boom. This is the happy part of the price cycle where retail merrily piles in and sentiment indicators climb through the roof (have a look at the put/call ratio on the CBOE to see how happy things are getting).



Some indicators that may signal the end is nigh for the liquidity inspired trade:

Credit spreads - See Lehman's junk bond index (an appropriate epitaph to my former roomie). Also, Evil Speculator is tracking Moody's Baa to Treasuries spreads. Both registering tremors on the geiger counter perhaps?


Volume - should see volume tail off as the rally makes new highs if retail is the only buyer.

Chinese and HK markets - have been leading indicators for moves in the US market. XJO should be pretty sensitive to these markets for obvious reasons.

Goldman Sachs - arguably the biggest beneficiary of the US goverment's largesse. Unbiased Trading had an interesting take in recent price action here.


Still, the market is running and it's not going to listen to naysayers. If the XJO breaks its recent high (~4510) then there is nothing to stop it running all the way to 4950 (a 50% retracement of the entire down leg). The 5000 target is what the likes of Macquarie and AMP are calling for by Christmas and the retail market is listening.

The risks of a quick turnaround at any time are real. Friday's move on no news is indicative of the skittish state of the market. On balance, it's cash while awaiting a clear sign of a trend reversal.

Wednesday, August 19, 2009

Conspiracy theory of the day - manufacturing dollar's decline

International bondholders are sweating on a strong USD policy - if you believe the party line out of China (though it has been awhile since officialdom rattled the cages about a devaluation being akin to default - maybe they are just voting with their feet now).

The US admin remains supportive of the strong USD, at least officially, but are we seeing the groundwork being laid for a devaluation?

Consider the public statements from Warren Buffet and Pimco over the last week. These guys move markets. They also have been known to share the sauna with the administration. What are they really saying then?

Compare and contrast with the shrill cry of Peter Schiffer when asked to comment on these 'the USD is going lower' views. Here is a man raging outside the gates (but wanting to get in - he is running for the Senate after all).

I've been a supporter of the contrarian call on the USD - that the short trade is crowded and the bounce that began a week or so ago would kick on for a while. But given these ramblings coming out of the council of elders, I'm now not so sure.

Let's not call it competitive currency devaluation. Maybe it's just a way of getting inflation kicked started. David Rosenberg has some pretty compelling charts (via Traders Narrative) of how deflation has a vice like grip for the moment.

And as Bill Gross states "reflating nominal GDP by inflating asset prices is the fundamental, yet infrequently acknowledged, goal of policymakers". Wonder who else was in the sauna?

A short story

I'm in cash (other than core holdings for some favourite companies - that I need to review in detail post results)...and have been building a short position. Short XJO through December & March puts with strikes from 4300 to 3700.

The reasons are many...(and these were just the posts that came to mind)...
  • Artificial rally - the rally has been built out of an abundance of liquidity, it doesn't have the strength of the consumer behind it (they are too busy paying down debt, defaulting on their mortgage or worrying about their retirement nest-egg). - (see earlier blog or, for views on the US consumer, Mish regularly covers the data points in detail)
  • China's stockmarket, the world's saviour, has turned (see Kevins market blog)
  • Sentiment is at extremes - measures are contrarian bearish reflecting the speed of the rally that we have enjoyed. (see Trader Narrative, the Technical Take, and Humble Student of the Markets)
  • Quality of the rally has been dubious - the periphery has outperformed, it's a carry trade where equities have been bid up on the back of credit spreads (see Zero Hedge and Crossing Wall Street)
  • Smart money is selling - Insiders are selling as quick as they can - the fundamentals don't support the price (see Financial Sense and Crossing Wall Street). And we can expect the hedge fund pack to follow Einhorn's lead (see Market Folly). If private equity are licking their chops on an exit (I hear that Myers is up for sale if you are keen), then the smart money is of the view that current prices are the best they are going to get.
  • Earnings - have rebounded on the back of cost-cutting and inventory rebuild, that doesn't leave much room for improvement from here without the consumer coming to the party.
  • Technicals are turning down (for example have a look at Afraid to Trade)
  • Renewed mortgage stress - prepare for another round of foreclosures and bank failures (have a peek again at Mish and the Evil Speculator has a good take on how this effects the market and finally don't think it's purely a US phenomenom - see a Fistful of Euros)
  • Finally we haven't had a 'revulsion' phase - a debt infused bull market of epic proportions deserves an equally an equally large bear market which ends when the last punter has given up the ghost.
At its simplest its a view on the mess that the US is in - along with Europe and, to a lesser degree, the rest of us.

Don't get me wrong. I'm expecting the Australian market to outperform. I'm a buyer of commodity stocks into the uncertainty. Owning real assets at the right price will hopefully be the antidote for the money printing that will ultimately take its toll on the USD.

To go out on a limb, this is where I see the Australian market trading...4000 by mid-September and 3700 before this move is done. Be interesting to see how the world looks if we get there...






Monday, August 17, 2009

Under the pump - close-out QBE

QBE marked out a trend reversal on Friday, has been treading water between 20.80 and 21.30, and looks to me like the risks are to the downside for a break out of this consolidation. I don't have the time to think about - closed-out the position.

Essential qualities of a speculator

Via the Tischendorf Letter...

Dickson G. Watts was the president of the New York Cotton Exchange from 1878 to 1880. His list of ‘Essential Qualities of the Speculator’ and ‘Laws Absolute” show the timeless value of his insight:

1. Self-Reliance. A man must think for himself, must follow his own convictions. George MacDonald says: “A man cannot have another man’s ideas any more than he can another man’s soul or another man’s body.” Self-trust is the foundation of successful effort.

2. Judgment. That equipoise, that nice adjustment of the faculties one to the other, which is called good judgment, is an essential to the speculator.

3. Courage. That is, confidence to act on the decisions of the mind. In speculation there is value in Mirabeau’s dictum: “Be bold, still be bold; always be bold.”

4. Prudence. The power of measuring the danger, together with a certain alertness and watchfulness, is very important. There should be a balance of these two, Prudence and Courage; Prudence in contemplation, Courage in execution. Lord Bacon says: “In meditation all dangers should be seen; in execution one, unless very formidable.” Connected with these qualities, properly an outgrowth of them, is a third, viz: promptness. The mind convinced, the act should follow. In the words of Macbeth; “Henceforth the very firstlings of my heart shall be the firstlings of my hand.” Think, act, promptly.

5. Pliability. The ability to change an opinion, the power of revision. “He who observes,” says Emerson, “and observes again, is always formidable.” The qualifications named are necessary to the makeup of a speculator, but they must be in well-balanced combination. A deficiency or an overplus of one quality will destroy the effectiveness of all. The possession of such faculties, in a proper adjustment is, of course, uncommon. In speculation, as in life, few succeed, many fail.

These are his ‘Laws Absolute’:

1. Never Overtrade. To take an interest larger than the capital justifies is to invite disaster. With such an interest a fluctuation in the market unnerves the operator, and his judgment becomes worthless.

2. Never “Double Up”; that is, never completely and at once reverse a position. Being “long,” for instance, do not “sell out” and go as much “short.” This may occasionally succeed, but is very hazardous, for should the market begin again to advance, the mind reverts to its original opinion and the speculator “covers up” and “goes long” again. Should this last change be wrong, complete demoralization ensues. The change in the original position should have been made moderately, cautiously, thus keeping the judgment clear and preserving the balance of the mind.

3. “Run Quickly,” or not at all; that is to say, act promptly at the first approach of danger, but failing to do this until others see the danger, hold on or close out part of the “interest.”

4. Another rule is, when doubtful, reduce the amount of the interest; for either the mind is not satisfied with the position taken, or the interest is too large for safety. One man told another that he could not sleep on account of his position in the market; his friend judiciously and laconically replied: “Sell down to a sleeping point.”

Friday, August 14, 2009

How the Fed is feeding the frenzy

I had friends when growing up who would labour on those 10,000 piece jigsaw puzzles for weeks at a time. They would work from the edges in - gradually unveiling the picture that was hidden in the mass of fragments. Feels like this week I have made a little headway on the puzzle that is the market that we are living through (still at the edges though).

The key is the Fed and its printing press.

A mate was in the US recently. Initially, trapsing around the west, he was convinced of the absolute mess the US is in. Negative equity, unemployment, crumbling state finances are all symptoms of the problem. He left that part of the land a confirmed bear.

But landing in New York changed everything. Wall Street is awash with cash. The banks have a seemingly endless supply of cheap money at their beck and call, all they need to do is find an asset to invest it in. It's the simplest of carry trades. With one side of the ledger underwritten by the Fed, they are bidding up any and all of the credit spreads that had moved to stupendously wide margins. No wonder then that the likes of Goldman have been making such extraordinary returns. He left New York convinced that the worst is behind us, and that the risk trade has legs.

To me this speaks of a schizophrenic market. The fundamentals remain poor. But the voices in your head are saying buy. The Fed has manufactured this artificial bid. And it will remain so, until they rein in the liquidity they are providing. At the limit, the Fed can continue until the financiers of its money printing call in the men in the white coats. The indicators to watch here are the USD, credit spreads and the yield curve. There can be no escaping the fact that the lenders will ultimately demand higher returns from the US government for all it debt profligacy.

In Australia, we too are recipients of the Fed's largesse. Credit spreads here that were completely disfunctional six months ago have been cranking in with the trading desks of our very own banks making hay in historical proportions while the sun shines.

As credit spreads have contracted and, as the press reports it, risk appetite has returned, the equity markets have built up a head of steam.

So how long will this continue? The simple answer is until the Fed starts withdrawing the liquidity. If they are committed to printing money until October per the FOMC minutes, this would seem to at least put a floor beneath demand until then. Talking to an equity fund manager, he reported that consensus amongst his fraternity was for a correction in October/November. Seems to fit.

Now does that mean the markets can continue to run? I'm not so sure, but it's certainly possible. When I hear that Macquarie brokers are spruiking 5000 for the All Ordinaries by Christmas - but that its a trading market, buy now with the plan to sell before the top is in - I'm thinking that we are in for a pretty quick correction when it comes. It may run higher, but the higher it goes, the harder it will fall. A market where consensus has punters trading long but ready to run for the exits (and expecting to be the first to the doors) is a fragile one.

Conclusion - this is not a market to buy into. The turn when it comes will be quick. The market can however continue to motor on as long as the Fed continues to prime the presses (and the suspension of disbelief that this requires).

Tuesday, August 11, 2009

CEU traffic update and other buys

CEU had a timely uplift in average daily tolls to 158,882 for the month of July. With the increased average toll of $3.22 (ex GST) - CEU is getting close to cashflow breakeven (somewhere in the 160k's depending on your running cost assumption). I'm (hoping) for some market weakness to jump back in...

In general, remain of the view that the markets are marking out some kind of near term top. On the long side, hoping for opportunities to buy ALZ at $0.40 and IIN at $1.60.

Have sold out of NCM - been trading gold like a dog. The key to near term market direction is the USD - and it looks to me like its found a bottom (supported by the fact that bearish sentiment in the USD is at an extreme).




Sunday, August 9, 2009

Finding time...

Making progress with other projects...just that it gets in the way of what's important (this blog? well maybe not but...)

Any thoughts on choice of logo would be appreciated (have a look here) - sometimes you gotta just stand back and stare at the wonders of modern technology. This is simply a great website.

For the record, I jumped out of half the QBE today and rolled the short XJO up to market (bought vol at 26.5 and sold it at 29.5 - same expiry date...go figure)

Have a couple of unfinished posts that need to get onto before the reporting season deluge hits. Hopefully, get em done...

fundsforum - with a dodgy logo feeling a little nervous about its future

Friday, August 7, 2009

Moving on for greener pastures

Hopped out of CEU and DUE today...they have paid their way but time is marching on

Thursday, August 6, 2009

Wednesday, August 5, 2009

The Tao of PazzoMundo

Been meaning to jot these down for w a while. Think I'll make this a permanent post - add (or subtract) to it as ideas occur to me...

1) Research - never enter a position on a whim.
If you can't point to the exact reasons for a position, then why be in it?

2) Risk - never bet the house.
The 'chip away' strategy is the trader's variation on compound interest. Lotsa small wins will add up - without the pin risk of a single lottery play.

3) Time - time is money.
Know the timeframe before entering a position. Is it a trade or investment? If its a trade - play to that timeframe - be patient, don't rush it - but if it doesn't meet the objective in its allotted time, close it out.

4) Sentiment - bet against the market at extremes.
The simple question should always be 'where are the stops'? If the indicators suggest the market is all one way - then the probabilities lie with the contrary position.

XJO turning down?


Don't want to get ahead of myself here, but the market is looking a little toppy...target 4160.

If you take the conspiracy theorists at face value, the Fed is battling to balance the forces of demand for treasuries (benefits from a lower USD) and a stable market (guess that means that equities heads up). With treasury auctions on the horizon again you have to give at least a little weight to The Evil Speculators observations on POMO activities.

Still I'm game for a pullback. Sentiment is at extremes that suggest stops will fuel a move to the downside (see The Technical Take)

On the postive, QBE is holding the trendline and looking solid for a move higher...



Monday, August 3, 2009

Switched out of WBC and into QBE

The banks have rallied hard on a recovery story that will get picked to pieces...QBE has lagged...

QBE and USD

Wondering whether QBE is about to break-out to the topside? Have a look at the chart...


To me this is partly a question about the USD. QBE's earnings on translation benefit from a stronger USD and stronger GBP. They are winning on the GBP for the moment (Note Kevin's Market Blog here and here has the GBPUSD coming out of a cyclical low). A rebound in the USD would be just the tonic...

UD%201!


In my view the risk trade is now bursting at the seams. Latest indicator - net shorts in the USD on the CME are approaching extremes... It's time to ask where are the stops - they ain't on the topside in equities or in the USD for that matter.

Conclusion: will look to add to QBE position.


A bounce in the USD, a pullback in commodities, a retracement in equities and a bid under US treasuries. At least I'm consistent I guess.

If we don't have a meaningful test of the trend this week, watch for how the treasury auctions impact the market. Just another test of the ability of the Fed to balance the scary market we live in.