Thursday, October 23, 2014

10/23/14 Running Stops

Like it or not, running stops is legal in the capital markets.  After all, no one forces you to set stops (although highly recommended), and no one forces you to sell (unless you're leveraged, but then the decision to buy on margin [not recommended] is entirely yours).

Today's action in the miners certainly had the feel of stops being run, with prices dropping below recent lows only to rebound strongly into the close.

Brazil?  Here's my take.  I originally intended to buy tomorrow, taking shares away from nervous investors heading into Sunday's elections.  However, there must be a few hundred thousand other traders with the same outlook.  In addition, the midday plunge in EWZ to 39.38 was eerily similar to the stop running pattern in miners.  I'll wager that the Ibovespa gaps up on Friday, frustrating both today's sellers and tomorrow's buyers.  

Tuesday, October 21, 2014

10/21/14 Lying in a Bombay Alley

Two of the BRIC indexes look attractive this morning.  Brazil's Ibovespa off an additional -4% to 52,120.  Opening positions in the extended-hours session> EWZ 41.2x, PBR 12.6x.  RSX (Russia) appears to have found its footing on Monday> opening a position pre-market @ 21.4x.

Even at these levels, both ETFs represent high-risk trades.  For instance, Sunday's runoff election in Brazil is likely to gap its index up or down next Monday.  The ideal entry scenario would be even odds in the polls going into Friday afternoon, as risk-averse investors unload positions ahead of the weekend.

Friday, October 17, 2014

10/17/14 A Life Of Danger

The markets remain treacherous but short-term volatility appears to have blown by, and I plan to open/add to positions in Europe, Emerging Markets (mainly Brazil), Energy (XLE/ RYEIX) and even the SPX (S&P500) on intraday signals. Note also a possible stealth rally in the metals and mining sector. It's occasionally exciting to buy panic and short exuberance, but much safer to play the 'middle' of market swings. I don't anticipate holding positions longer than a week or two. The next 'buy and hold' trade will require more time- December, perhaps.
Opening indications are positive: DJIA +175 (+1.1%), SPX +25 (+1.4%), EEM +1.1%, GDX (miners) +0.5%, XLE (Energy) +1.2%.  I opened a very small position in PBR (Petrobras) yesterday, which is bidding +4.4% pre-market.
'Treacherous' is an apt adjective to pair with the noun 'markets.'  Never lose sight of the fact that markets are comprised of homo sapiens motivated entirely by fear and greed!  Dylan's 'Desolation Row' tells me when to buy, but Johnny Rivers' 'Secret Agent Man' defines the game:

Wednesday, October 15, 2014

10/15/14 Throwback

DJIA/ NDQ futes down -0.93% (-152 points)/ -1.2%.  SPX futes -1.3% (down 'twenty handles').  Euro Stoxx 50 -1.6%.  German DAX off -2.15% to a new 52-wk low.  UK FTSE -1.6%, French CAC -2.3%.  Long bond gapping up an incredible +1.3%.  Gold up $2/oz.

What's it all mean?  I think we're close to a throwback rally.

Friday, October 10, 2014

10/10/14 Don't Stop

(a) GDX (miners) dropped as much as -2% early in the morning session. GDXJ (juniors) dropped as much as -3%. Note, however, that the morning sell-off never approached Wednesday's capitulatory lows. I added positions in GDX and GDXJ.  Following a brutal 2-year bear market, I believe the sector will finally launch. Positions taken today may pay off well.
(b) US indexes are struggling.
(c) Australia closed off -2%. Hong Kong off -1.9%. German DAX -2.4%. Euro Stoxx 50 -1.7%. Brazil's Ibovespa -2.1%.

This is not a healthy market! However, I'm entertaining positions in Emerging Markets and/or Europe at the close for a Monday bounce.

Market declines can be painful, and in my opinion declines in the US have only begun. On the other hand, investors (and hence markets) are inherently 'optimistic' and never stop thinking about tomorrow.

Tuesday, October 7, 2014

10/7/14 Stops

My opinions about market direction can and will change on a dime. Regardless, risk management is paramount. Having stops in place (or at least in mind) is not an option. 

What's a reasonable stop? 10%, in my opinion. I wouldn't want to see my portfolio balance fall more than -10% from its YTD high. Losses beyond that point take an emotional toll. 

Most foreign markets have already corrected over -10%. China, Hong Kong, South Korea, Australia, the UK, and Spain are in correction territory (>-10%). Germany, France, Italy and most of Latin America are nearing a bear market (between -15% and -19%). Brazil has already entered a bear market (>-20%). 

If the total stock market ex-US has corrected, why would the DJIA/SPX/NDQ be spared?

Friday, October 3, 2014

10/3/14 Back in the BRIC House

Hong Kong's Hang Seng printed a beautiful outside day this morning, plummeting -1.6% in the opening moments of the morning session, only to reverse in the afternoon for a +0.57% gain. I noticed other 'near misses' yesterday (EWZ [Brazil], for instance).

Outside reversals do not guarantee a change in direction, but they certainly heighten the odds. Reopening positions in Emerging Markets this morning. Unlike the US indexes, BRICs have effectively experienced significant corrections in the past month (EEM -10%, FXI [China] -11%, RSX [Russia] -12%, and EWZ [Brazil] -22%).