Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

A Sloper’s Roadmap

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Some weeks ago, a reader wrote to me with his roadmap of the market, comparing 2008 with 2011. He just wrote me again, minutes ago, to remind me of the roadmap. Here's a portion of his email:

Sorry to hear you've been dealing with some trolls on your site of late. Anyway, you were kind enough to post my S&P Roadmap a month and a half ago. While I think its obnoxious when people tell you they were right about the market in hindsight, my S&P Roadmap has worked perfectly since its first posting on your site.  I'd love it if you'd post the attached chart as the similarities are breathtaking and I believe we just completed Leg 13 (rally up, corresponds to May 2008).  Perhaps it will add some clarity to a very murky market picture. I just loaded up on Jan 2012 124 Puts.  I have to trade a map that has worked so far!!

I have to admit, it's a really amazing analog. Here's the image; please click on it for a bigger picture with more clarity:

1027-roadmap

Netflix and Fan Lines

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First off, regarding today's mega-rally, I have three things to say:

(a) I'm glad the endless wait on the Euro is finally over;

(b) thank goodness for my longs;

(c) and thank goodness that cash can be a position too!

One specific long possibility is none other than battered-down Netflix (NFLX). I threw down a Fibonacci fan line on its extremes, and lo and behold….

1027-nflx

Looks like a pretty decent basis for support at these levels.

Internet Hedging Update

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Internet hedging update

A couple of things stood out when updating the hedging costs for this basket of Internet stocks. Again, it was still too expensive to hedge LinkedIn (LNKD) and Pandora Media, Inc. (P) against greater-than-25% drops over the next several months. Among the stocks for which there were optimal put option contracts available, Netflix (NFLX) was the most expensive to hedge — no surprise, given the awful numbers it released this week; the surprise to me was that there any optimal contracts for it. The table below shows that, as well as the costs, as of Wednesday's close, of hedging several other leading Internet stocks against greater-than-25% declines over the next several months, using optimal puts.

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Euro Area Bailout Deal (by Springheel Jack)

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Just a quick post today as I have to do a lot of offline stuff, but obviously my doubts about the reversal this week were well founded, and ES has leapt to new highs overnight. The big news overnight of course was that the terms of a Euro area bailout were agreed, and that may kick the Euro area problems a few months down the road. You can see that story on Bloomberg here. The EU has arranged a 50% 'voluntary' writedown of Greek debt, though how that can be effected without triggerng CDSes still seems a bit doubtful. It strikes me that any holders of greek debt who refuse the writedown could make a lot of money here at the expense of other bondholders, and if they are forced to accept the writedown, then the writedown isn't voluntary. It will be interesting to see what happens. It seems likely though that the main bondholders, the banks, will be strongly encouraged to accept the writedown, and that they will probably accept the loss for fear of a formal default and/or loss of official goodwill from their governments, who have been effectively underwriting the banks since 2008.

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