Saturday, August 29, 2015

8/29/15 Cancel my subscription to a quick resurrection



Monday's spectacular plunge in global indexes notwithstanding, the outlook is 'mixed' at best.

(a) Emerging markets (EM) look best.  Most had already been trending down and near 52-lows.  Despite the probability that a long-term nadir was marked on Monday, it's it's also likely EM indexes will take a long time to recover.

(b) US indexes, on the other hand, are only a few percent off all time highs.  A retest of Monday's lows is likely.  One might argue that back-to-back declines in the DJIA to the 15,6xx level on Tuesday + Wednesday successfully (and sufficiently) tested the lows, a scenario to which I would at best assign 30% odds.

(c) Note that the VVIX (a measure of the expected volatility of volatility itself) reached levels on Monday that exceed those printed during the Lehman Crisis.  Levels remain elevated following the +6% recovery in US indexes later in the week.

Emerging markets represent a long-term buy at current levels, although we may see even better entry points in the next few weeks.  The best scenario for US indexes?  Continued weakness into October in a manner that leads to a washout in sentiment.  Additional steep declines are not necessary (a grinding sideways market will accomplish the same goal), although selling climaxes generally lead to more sustainable recoveries.  

Tuesday, August 25, 2015

8/25/15 Take Me to the Pilot



(a) Never chase.
(b) Size appropriately.
(c) Take hits immediately when wrong.

The point of having trading rules (ideally, ones which suit your personality and have withstood the test of time) is control.  The three above allow me to manage risk and remain in control of each trade.

(a) 'Chasing' almost always (but not invariably) leads to a bad experience as the market will test your conviction.    
(b) There are no trades with zero risk, which is the only time you should be 'all in.'
(c) When you're wrong, admit it and move on to a better set-up.  The better set-up may even be the reverse of your original trade.


Monday, August 24, 2015

8/24/15 Long Time Gone



It's been a long time coming.  And likely to be a long time gone.

Sunday, August 23, 2015

8/23/15 The Night They Drove Down the Renminbi



Momentum is likely to carry global indexes lower next week.  40/40 odds on the following:

(a) Snapback, followed by lower lows.
(b) Lower lows, followed by a snapback.

20% odds we've already seen the low.

Much of the recent decline in the SPX occurred 'overnight.'  Note the number of 'gap down' opens in the past two weeks:   http://finance.yahoo.com/q/hp?s=SPY+Historical+Prices  Note also that the series of gaps down began the night China drove down the renminbi ('by August the tenth, the yuan had fell, it was a time we'll remember oh so well!').  The devaluation met with a low-volume 'so what' the remainder of the week, followed by last week's high-volume second-guessing.

The question now is whether US indexes follow global markets down, or are instead (given positive trends in both employment [up] and household debt [down]) able to keep singing.

Tuesday, August 18, 2015

The Next La-Z-Boy

A BRIC'd-up, copper-framed, gas-powered, gold-plated La-Z-Boy.

Construction began today.  It may take some time to assemble, and of course I enjoy tinkering under the hood long after it rolls off the line.

(a) FEMKX (Fidelity Emerging Markets).  China, Brazil, and India are in no danger of becoming obsolete.  And I don't need the anxiety associated with RYWVX, a leveraged fund that achieves its daily targets using derivatives.

(b) RYVIX (Rydex Energy Services).  Largest holding is French juggernaut Schlumberger.

(c) RYEIX (Rydex Energy).  Think Chevron and Exxon Mobil.

(d) RYPMX (Rydex Precious Metals)/ GDX (majors)/ a range of individual companies.  Miners are down -80% and regarded as road kill.

(e) RSX (Russia).  Next to Greece, the least expensive stock market on the planet.

(f) FCX (Freeport-McMoRan).  With both copper and oil at multi-year lows, if it wasn't for bad luck...

(g) PBR (Petrobras).  Insult to injury.   A victim of plunging oil prices and a corruption scandal.

Consider proper position sizing and/or trading around a core position.  A 'Made in US' La-Z-Boy?  Wait for the Fall/Winter Clearance Sale.

Friday, August 14, 2015

8/14/15 Comment Cleaner

Looks like a sloooow Friday. Nothing trading on my screen well other than TWTR.

Monday, August 10, 2015

8/10/15 It's lonely out in space

A 'gap up' open in US indexes this morning is likely to disallow easy boarding for sidelined investors, and leave last week's weak hands with 'seller's regret.'

(a) DJIA +170 points.
(b) EEM (Emerging Markets) +1.2%. EWZ (Brazil) +1.9%.  FXI (China 'H' shares) +1.9%.  CAF (China 'A' Shares) +3% following last night's +5% rally in the Shanghai Composite.  RSX (Russia) +1.63%.
(c) PBR (Petrobras) +4%.
(d) FCX (Freeport McMoran) plunged to another 52-low at the open, delivering a sucker punch to long-term investors before reversing nicely to print a +5% gain 30 minutes later.
(e) GDX (miners) looking good, +3.85%.
(f) USO (crude) delivered its own sucker punch to set a new low, now rising sharply @ +2%.
(g) OIH (oil services) +2.73%, recovering all of Friday's losses.
(h) CHK (Chesapeake) +5.5% and challenging Friday's highs.