The black box came up with at least five new trading ideas, all shorts, for Wednesday, December 12. If you’d like to receive these daily ideas, just email me to join the list. I will get the picks to you before Wednesday morning’s opening bell, and hopefully much sooner.

A day like today where the major indexes are down two to three percent will make those shorts taken on prior days “look good” (a falling tide sinks all boats), but things can turn on a dime and risk management makes or breaks trades (and traders). Stay sharp.

These probabilities are calculated using Fed Funds options and futures data: 67.8% chance for a move to 4.25; 30.1% chance for a move to 4.00.

Click to enlarge (Source: Bloomberg)

The black box kicked out one idea for tomorrow, another short. If you’d like to receive these daily ideas, just email me to join the list. I’ll probably stop taking new names after 200 or maybe 300 people join, so be quick.

I am doing a very expensive one-month trial of a piece of trading software and thought it best if we look at its ideas together. At the end of the month we should know if it’s worth the money. If anyone makes money off any ideas this month, please throw me a bone to help defray the cost of the trial. Remember that these are just black-box-generated ideas; trade at your own risk!

Short CEPH below 76.25
Protective Stop above 78.05
Target #1: 72.52 to 71.82
Target #2: 70.51 to 71.19
Target #3: 67.36 to 68.01
Target #4: 60.99 to 61.58

Short ORCL below 21.06
Protective Stop above 21.54
Target #1: 18.97 to 18.59
Target #2: 17.44 to 17.80
Target #3: 15.04 to 15.35
Target #4: 11.92 to 12.16

Short HPQ below 51.68
Protective Stop above 52.67
Target #1: 47.79 to 47.19
Target #2: 46.04 to 46.63
Target #3: 43.29 to 43.85
Target #4: 37.70 to 38.18

Short UTX below 77.42
Protective Stop above 78.40
Target #1: 72.14 to 71.16
Target #2: 68.29 to 69.23
Target #3: 62.37 to 63.23
Target #4: 54.57 to 55.32

UPDATE: Found two more ideas. In future these ideas will be emailed directly to you, not posted, so if you’d like to join the list just email me.

Short ROP below 64.77
Protective Stop above 65.83
Target #1: 59.35 to 58.28
Target #2: 54.15 to 55.14
Target #3: 49.05 to 49.95
Target #4: 40.81 to 41.56

Short MAN below 64.10
Protective Stop above 65.13
Target #1: 54.44 to 55.20
Target #2: 51.86 to 52.58
Target #3: 44.22 to 44.83

Checking up on SPY after it recently completed Wave 4 and has begun its Wave 5 decline. It should drop to at least $138 - $139 and may fall all the way to $132 - $133. I’m not an expert on idiot waves, but when I squint at the chart this is what I see.

As of November 30th… the chart is already out of date. :-) Once I figure out how to get this chart on the Bloomberg, I’ll update the post.

Meanwhile, here’s Gary Stern, president of the Minneapolis Federal Reserve Bank, in a November 26 interview:

“‘I’ve not made up my mind what to do yet,’ said Stern, one of the members of the FOMC. ‘Why would I? There’s two weeks to go. We’ll see what we learn.’”

You have to wonder what planet these bureaucrats are living on.

Florida School Fund Rocked by $8 Billion Pullout

“The Florida pool, which was the largest of its kind in the U.S. at $27 billion before the recent spate of withdrawals, has invested $2 billion in SIVs and other subprime-tainted debt, state records show. Connecticut, Maine, Montana and King County, Washington, are among other governments holding similar investments, in smaller quantities.

The Florida pool’s $900 million of defaulted asset-backed commercial paper now amounts to almost 5 percent of its holdings. The paper, which carried top ratings from S&P, Moody’s Investors Service and Fitch Ratings as recently as August, was downgraded after declines in the value of collateral affected by the subprime mortgage slump.”

Wall Street once again able to foist junk on gullible and probably greedy investors … local and state government-run funds must be the easiest “marks.” Does anyone know the definitive article or book written on the Orange County (not Florida, ha!), California debacle? I’d love to read it.

Florida Says Unfreezing Fund Would Spark `Fire Sale’

“‘We’re fiduciaries, we’re investment professionals, we know what we’re doing,’ State Board of Administration executive director Coleman Stipanovich said Nov. 29.”

Hee-haw!

Why is the BBA LIBOR standard important?

Click to enlarge (1-month USD LIBOR)

Just read a report put out last Friday from CSFB on the financial sector… pretty grim reading.

“… current ABX indices are now consistent with potential mark-to-market losses in sub-prime/CDOs of US$240bn. If we very aggressively assume that the US investment banks will take half these losses, then that would justify an equivalent aggregate market-cap loss of US$240bn (assuming a normalized 2-times book multiple). However, their market cap has already declined some US$274bn from peak (and the OECD estimates that all banks globally hold 25% of CDO paper) making the sell-off look excessive. This said, the risk remains that these signs of value could disappear if there were CDO asset fire-sale, perhaps caused by more severe ratings actions. Until we have more clarity on this, it would be premature to strategically build on our position here.”

Speaking of more severe ratings actions…

Paulson Housing Bets Make $2.7 Billion

“Paulson earned an estimated $1.14 billion in performance fees for the nine months ended on Sept. 28. Fees on Paulson’s other eight funds bring his total to $2.69 billion.

Paulson … donated $15 million to the Institute for Foreclosure Legal Assistance, a new nonprofit formed that month by the Center for Responsible Lending, a borrowers’ advocacy organization in Durham, North Carolina.

‘Given the success of our funds, we feel it is important to help those who have suffered the most as a result of predatory subprime lending practices,'’ Paulson wrote to investors after the third quarter.’”

He donated around one half of one percent of this year’s profits, I love it. Is that help or good public relations? You can’t save people from themselves.

MBIA, Ambac Bear Ackman to Donate Profit to Charity

“Ackman said he personally stands to gain about $500 million if MBIA’s holding company failed and that amount would be donated to charity. The fund itself stands to make “multiple billions of dollars'’ if the holding companies of MBIA and Ambac were to fail, he said.”

Good things sometimes come to those who wait and wait and wait and wait.

Click to enlarge (Ambac (ABK), Monthly)