Saturday, September 25, 2010

9/26/10 The Blackest Box

Were I to design one, it would hinge on psychological warfare, the blackest of covert ops.

What used to work hasn't been working- at least two professional traders I know are adamant on that point.

It wouldn't be that difficult to design a black box that utilizes popular technical analysis patterns to confuse and trap traders. For all we know, developers use blogs to their advantage- there's a wealth of data in cyberspace.

If we're trading against a box that is able to intelligently predict our behavior given (historically reliable) trading setups, the box has the upper hand- especially if it's supported by vast amounts of trading capital that can be gambled as if it's OPM.

Is it possible that trading algorithms have simply become more sophisticated- while most of us are relying on outdated tools or outdated strategies? Worse, outdated concepts? 'What used to work isn't working.'

Just putting it out there for discussion.

202 comments:

  1. Re: The Blackest Box
    Submitted by gforce (318 comments) on Sat, 09/25/2010 - 19:28 #70075 (in reply to #70074)
    In my mind humans create and technology of the algorithmic type can only react in scripted or some derivative fashion...maybe I am outdated or just scared of the rise of the machines.

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    Re: The Blackest Box newSubmitted by 2nd_ave (4636 comments) on Sat, 09/25/2010 - 19:37 #70076 (in reply to #70075)
    "In my mind humans create and technology of the algorithmic type can only react in scripted or some derivative fashion.."

    gforce- Exactly. Why is it then that so often traders themselves react in scripted fashion? If they all agree on technical entry/exit points, the smart trade would be to fade those points- and black boxes would be a great way to do that. Furthermore, if time-honored trading strategies are not working well, shouldn't traders be willing to discard them (at least temporarily) and look outside the box for one that works?

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  2. Could'a fooled me. Maybe their algorithms get old, and once they are in books and websites, they don't work because too many people are trying to use them. Not everyone can win. Unless someone puts more money in a market, for every winning share, by definition, there must be a losing one.

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  3. Re: The Blackest Box newSubmitted by 2nd_ave (4637 comments) on Sat, 09/25/2010 - 19:50 #70078 (in reply to #70076)
    As a corollary, let me add that one reason I believe Vad's system works so well is that it is in itself a black box- it's designed to detect and fade highly reliable patterns of human behavior.

    Another corollary- human beings are known both for certain strengths (eg, the ability to create), as well as distinctive weaknesses- the greatest of which is emotional. It takes enormous willpower not to react instinctively/reflexively to certain situations.

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  4. PS: ever hear of "froth at the top"?

    Its when things get too high and become unstable. Its all based on the expectation that the Fed will be pumping oodles of new money in, forcing everything way higher.

    Do you really believe they will do that unless they see a catastrophe coming down the pipe?

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  5. Re: The Blackest Box
    Submitted by gforce (319 comments) on Sat, 09/25/2010 - 19:49 #70079 (in reply to #70076)
    gforce- Exactly. Why is it then that so often traders themselves react in scripted fashion? If they all agree on technical entry/exit points, the smart trade would be to fade those points- and black boxes would be a great way to do that. Furthermore, if time-honored trading strategies are not working well, shouldn't traders be willing to discard them (at least temporarily) and look outside the box for one that works?

    Great question and/or questions; wish I had the best answer or answers. My initial thought is people fear the unknown to such an extent it paralyzes their reasoning capabilities and makes what seems like an easy solution very complex and difficult in application...for what its worth. What are your thoughts on this?

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    Re: The Blackest Box newSubmitted by 2nd_ave (4638 comments) on Sat, 09/25/2010 - 19:57 #70080 (in reply to #70079)
    I think it comes down to the Achilles heel of traders- emotions. When it comes to emotional control, a black box wins hands down. When was the last time a black box broke down thinking about a dying relative, or traded out of character thinking about last night's date?

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  6. cb- Absolutely- that's why I'm holding cash right now. I will jump all-in for short periods if I'm fairly confident of short-term market direction. But I'm not foolish enough to think I can game it for longer than a day or two- sometimes not even for longer than a minute or two...

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  7. Re: The Blackest Box
    Submitted by gforce (320 comments) on Sat, 09/25/2010 - 20:10 #70082 (in reply to #70080)
    Interesting, to become totally emotionally unattached from trading. Thats a concept that will be hard to bring to fruition...and perhaps needed at times. I assume that is what Bill Cara and others were referencing when they all said the markets character has changed.
    I have noticed a general coldness to what used to be a humanly compassionate market role of raising money for an entrepreneurial purpose. Value discovery too.

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    Re: The Blackest Box newSubmitted by 2nd_ave (4639 comments) on Sat, 09/25/2010 - 20:27 #70083 (in reply to #70082)
    Detachment is necessary. After all, the goal is to profit at someone else's expense. The camaraderie that derives from David trading against Goliath- well, it works to a degree, but the tone changes when I decide to change direction. It's reminiscent of bonding with players at the table when betting with the shooter- at some point, I may decide to bet against him, at which point my mental climate darkens...

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  8. Re: The Blackest Box newSubmitted by Vadym Graifer (1430 comments) on Sat, 09/25/2010 - 21:46 #70085 (in reply to #70074)
    "What used to work hasn't been working- at least two professional traders I know are adamant on that point."

    That immediately tells me that what they did was not based on sound strategies - it was based on some of tricks that now and then appear in trading, live for a brief time and dissolve. I've seen a lot of those: SOES bandits, ECN arbitrage, rebate scalping...

    Real strategies work. Always did. Always will, as long as human emotions haven't changed - because real strategies are based on reading and utilizing those emotions. I was happy to hear from a trader with whom I shared the podium this time (very knowledgeable trader with huge experience): "I do the same thing I did 20 years ago. It works today just as it did back then." When I said that my trading approach is based on tape reading, that same that was formulated as method of reading the market about 100 years ago, he grinned with this "high-five" look.

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  9. Re: The Blackest Box
    Submitted by Vadym Graifer (1430 comments) on Sat, 09/25/2010 - 21:46 #70085 (in reply to #70074)
    "What used to work hasn't been working- at least two professional traders I know are adamant on that point."

    That immediately tells me that what they did was not based on sound strategies - it was based on some of tricks that now and then appear in trading, live for a brief time and dissolve. I've seen a lot of those: SOES bandits, ECN arbitrage, rebate scalping...

    Real strategies work. Always did. Always will, as long as human emotions haven't changed - because real strategies are based on reading and utilizing those emotions. I was happy to hear from a trader with whom I shared the podium this time (very knowledgeable trader with huge experience): "I do the same thing I did 20 years ago. It works today just as it did back then." When I said that my trading approach is based on tape reading, that same that was formulated as method of reading the market about 100 years ago, he grinned with this "high-five" look.

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  10. Re: The Blackest Box newSubmitted by 2nd_ave (4640 comments) on Sun, 09/26/2010 - 01:45 #70088 (in reply to #70085)
    'Real strategies work. Always did. Always will, as long as human emotions haven't changed - because real strategies are based on reading and utilizing those emotions.'

    Vad- I agree that human nature has not changed. I just think they've come up with more sophisticated ways of playing with traders' emotions- and one obvious way of getting played would be an opponent using the very tools we rely on for pattern recognition against us. Or maybe I'm just overthinking the entire issue.

    It is (IMO) one reason instinct can often be more reliable than technical analyis when 'reading' the market.

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  11. Re: The Blackest Box
    Submitted by DavidV (19 comments) on Sun, 09/26/2010 - 03:08 #70089 (in reply to #70088)

    "Furthermore, if time-honored trading strategies are not working well, shouldn't traders be willing to discard them (at least temporarily) and look outside the box for one that works?"

    Good point, 2nd_ave. However, I don't think the proper trading strategy has changed. You wrote about it long time ago and it is still true now: split the mind in two parts, use one part to make a prediction about the market direction based on everything we hear and then fade that decision with the other part. It is just damn difficult to have that split-brain view...

    So I interpret your post as a reminder to us that we should keep trying to fade our emotional feeling about the market direction. On Thursday it looked "obvious" that the break out in S&P above 1130 has not worked, and the smart traders faded that feeling (you went "all in" early in pre-market trading on Friday).

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  12. Pushing on a String
    Submitted by DavidV (20 comments) on Sun, 09/26/2010 - 03:59 #70090

    John Mauldin has just released his weekly newsletter, and it is a very interesting one. It is called "Pushing on a String": http://tinyurl.com/2ffbzpb

    He is suggesting that in the next few months we should look carefully at the economic data, and bad data will probably prompt Bernanke to enact QE2. I would add that we should look closely to how the market *responds* to economic data:

    1. If we get poor economic reports (as John Hussman is expecting) and they are bought, then the market *wants* QE2, and hence it will keep going up until QE2 actually takes place and then a some more until it actually *verifies* that QE2 is not effective. At that point, all hell will break loose.
    2. If we get so-so (but not bad) economic reports and they are sold, then the market will probably not have much upside (as the market is currently pricing in growth that is much better than so-so), and a big drop might happen to force Bernanke into QE2.

    What does everyone else think?

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  13. Re: The Blackest Box newSubmitted by 2nd_ave (4641 comments) on Sun, 09/26/2010 - 10:11 #70101 (in reply to #70089)
    DavidV- Well, of course the 'even smarter' move would have been 'all-in' the night before- but I would consider that more of an inside job, or 'fly-on-the-wall.' Note also that 2 hours later I was 'all-out.' My whopping take on the move amounted to +0.7% in the trading half, or just +0.35% for the entire portfolio (between eating breakfast and driving to work, I ended up with less than 15 minutes to decide on positions, and I ended up overweighting some of the [early] deadbeats, like BAC). But I'll take it.

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  14. Re: Pushing on a String new
    Submitted by DavidV (21 comments) on Sun, 09/26/2010 - 14:10 #70109 (in reply to #70091)

    Les, another reason why I think QE2 will not help the economy is that it will squeeze profit margins (which are all-time-high now and are vulnerable to a pull back already) lead to stagflation. Copper already broke out to a 2-year high, aluminum is on the way to surpassing its April 2010 peak and also breaking out to a 2-year high. As soon as oil joins the metals, the death sentence for the economy will be written down -- rising raw material prices in the environment where corporations have NO pricing power at all. Such stagflation kept the market flat for 10 years in the 70's.

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  15. OK, just got back. Hope everyone had a great weekend.

    Soccer recap....Team played great, Kendra played great.

    One neat pic.....This was on a corner kick. Angle is strange. Kendra was about 20 yards out and this kick was off the corner. Never dropped an inch in elevation for a goal. Nice.

    http://www.screencast.com/t/ZjEzZDQz

    OK, back to work. Any updates as I've been gone for the entire weekend?

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  16. DJIA futes +41. If I were one of the Knights around the bear table, I might be scaring the dog myself right now. How much longer can TK hold out? What's the point?

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  17. Well, OK. The above comment probably means we're in for a massive sell-off tomorrow, giving him one of his best days ever...

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  18. Mark- Last week the little guy's team shut out the other one. This week his team was shut out by the same score, 5-0.

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  19. 2nd- Is he having fun and gaining confidence? That's all it's about at their age. They play 8 on 8 right?

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  20. Looks like the Republicans are bringing back Voo-Doo economics. They've got the perfect mascot in Christine O'Donnell, she's already well versed in witchcraft!

    Status update for Obama's stance on the Bush tax cut expiration, he wants to extend only for those folks making less than $250k.

    I say don't pick on small businesses. Lots of people have small businesses, just ask Mark!

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  21. 早晨好

    jetblu up 10 percent pre market

    barrons article

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  22. REE - really likin' this one

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  23. Landry-

    Random Thoughts:

    The market obviously turned right back up with vigor.

    This action puts us back in breakout mode.

    As usual, follow through will be key.

    The sector action has improved. Gold and Internet are hitting new highs as is selected technology. Retail is beginning to wake up.
    And, as one would expect, many other areas are peeping out of their ranges-like the market itself. If it all holds, I'll spend a lot of time on the sectors on Thursday.

    If the market continues to follow through, we should see a plethora of setups on the next pullback.

    And if it don't, we'll go back to sitting on our hands.

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  24. Guys,

    To bring to your attention:

    DRYS which looks to be getting good when and if this market goes up.

    nice daily gap-up.

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  25. I'm taking a trading holiday. Don't know about you, but I'm totally lost without a WIR.

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  26. Condensed WIR: Prices went up.

    Probably this week there will be consolidation, weakness will eventually be bought.

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  27. Positive trial results for SGEN.

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  28. cp - Actually I think you nailed it cp. They had a couple guys on cnbc saying that a pullback needs to occur to establish the 'new' bottom-of-range & test it some (perhaps 1100? or so).

    Thanks for the great WIR....:^)

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  29. 2nd...I hope you said that with more than a healthy doppop or irony...although I see no :) after your comment.

    I haven't read a Goddamn WIR since that asshole broke bad with me for the final time...and I'm no worse for it.

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  30. Hopped back into RAS at $1.52. Added to my BYD long at $6.88.

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  31. "Dollop of irony" is the expression I was trying to express.

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  32. Now I have a pretty heavy position in BYD. Looking at the valuation of this company, I'd have to imagine that one of the larger players like LVS/WYNN would be interested in diversifying their assets by buying a company like BYD, who has a presence in many areas around the country, particularly the Borgata in AC which is actually doing pretty well from what I've read.

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  33. Do you guys think Obama looks down on people who have small businesses?

    I say it's not the size of your business that counts, it's what you do with your business.

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  34. SPY dancing around it's PP here.

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  35. I've heard that casino's are ghost towns, not sure if it's true or not...

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  36. Casinos --- from cc ---

    Atlantic City getting killed
    Submitted by papadynamite (187 comments) on Sat, 09/25/2010 - 22:13 #70086

    I was in Atlantic City this week from Monday-Wednesday. I arrived in the morning and stopped in at Caesar's which is a very large casino there. On the main floor, every table was shut down, poker, craps, roulette, etc. On a side portion they only had 2 craps tables and 2 blackjack tables open, everything else closed. The slot machines, for the most part, were idle, no customers. A huge casino like Caesar's may not even survive! Incredible.
    I get free rooms at Borgata offered to me every week even though I hadn't been there since April. I spend most of my time playing $2-$4 limit poker. They certainly don't make any money off me but yet continue to offer beautiful rooms and great buffet. I don't understand how these places stay in business. This past year Pennsylvania has allowed table games in the previous all slot casinos and that has damaged Atlantic City significantly. The daytrippers are staying in their own state.
    The economy is certainly hurting everyone.

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  37. CADC - We should receive the earnings report this week.

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  38. Will NG *EVER* be worth anything again?

    Seems like its destined to go to zero

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  39. Imagine that, even organized crime syndicates are suffering the slings and arrows...

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  40. NG - How's that supply/demand curve looking? That's where I'd expect to find an answer to a question along those lines.

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  41. NG - I would definitely have bought some UNG to hold in my port at some point, but I didn't want to get caught in the futures contract rollover decay.

    I'm not sure if that really makes any sense or not, it's just my perception.

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  42. drys....loookiter go...now did ol billy boy tell you about that one?



    HEEEEEEEELLLLLLL no:)

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  43. DRYS - Somebody mentioned it earlier this morning... I read about it on a blog called TT.

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  44. Kyle/CP - I wonder how many casinos are ever busy from a Monday to Wed. Also, BYD is still making a profit while the jobs market has yet to pick up at all and they will (in my opinion) easily be able to extend the maturities on their debts just like the rest of the industry has for a while, buying time and earning profits along the way. At least thats what I'm thinking.

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  45. Somehow I've got this impression large caps are going to take a breather and wait for small caps to catch up?

    Probably a misconception...

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  46. DRYS - it was on Nasdaq Pre-Mkt most active too..

    http://dynamic.nasdaq.com/dynamic/premarketma.stm

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  47. DougKass
    I expanded my short exposure this morning based on the very poor market breadth $$

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  48. All right, bidding UNG @ 6.14.

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  49. Casinos - I can barely remember the last time I was in one, it's been over a decade. I'm not much of a gamer, video or otherwise (aside from chess/checkers perhaps). ;)

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  50. no, i didnt know shit about the drys upgrade

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  51. And my port is up nearly 2% this morning as well, that's got to be near a two month high as well...

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  52. I doubled up on UNG at 6.19.

    Its cold here in the midwest already. I can't see how usage gets much worse.

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  53. the tv touting of drys was one selling oppty

    chicken gmo needs to rise more before it gets interesting. it needs to hold 3.40 or the high 3.30's:)

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  54. Nobody here claimed you knew about the drys upgrade b/c if you had you woulda mentioned it when making the case for going long.

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  55. I read Canada is experiencing NG production declines, not sure if it's true...

    Anybody know? Speak up.

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  56. Sharkie - GMO - Thanks for the enlightenment, I'm just hanging onto it b/c I'm anticipating $6 or more prior to EOY.

    Ditto for CADC

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  57. yes I would have and I get no wire service or nothin anyway.

    Chicken, I will say this for GMO....fire up a weekly chart and notice the stock trying to cross the 20 WEEK moving average. See also the apparant higher low now being formed, the previous one being around dec of 09 at around the two bucks level. Interesting. How are their legislative and zoning issues working out, oh king of research?

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  58. thing today is, the indexes want to sell off so any long ideas are basically just ideas. I got out of DRYS didn't make much. And no I don't post every buy and sell, it's too much done for the purpose of aggrandizing my own ego. OR, it places unreasonable expectations of the trade.

    Looks like the indexes want to sell off.

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  59. FYI - I have noticed a 67k share bid on NLS for most of the morning. I'm long at about $1.36 from Friday as I liked the news of signing a deal with GE Capital that will allow them to offer financing to their customers, which they didn't have before and which was killing their sales. I think its worth a stab at in the event they grow sales from this agreement because the upside for NLS is multiples higher than the current price. It's a risky investment but I believe it's a good one to take.

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  60. in fairness i tried to re-buy drys but no one would sell it to me:)

    now i gotta wait for a frigging pullback.

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  61. having see these types of moves play out before, I suspect that CREE has one more washout move lower probably to the low to mid 40's, at which point a long position should be established.

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  62. GMO - You may remember - Closing of the Hanlong financing deal was delayed by 2 months, extended to October end.

    The permitting process has been moving in the right direction, BLM has provided preliminary draft environmental impact statement and GMO management bought off the farmer's coop that was opposing water rights for the project.

    I think the impact statement will progress to the next step (drop the preliminary nomenclature) in about another 30 days.

    My impression is the regulatory authorities appear to be helpful at moving the project forward on their side, the primary hurdles were the farmer's coop and financing.

    Tensions with China could come into play but I discount that almost completely.

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  63. GMO...looking more interesting thinking of going long.

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  64. REE - working on a 9 break

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  65. REE=overbought

    GMO= I just went long BABBBBBYYYYYY!


    with a freaking bullet this chart looks quite convincing.

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  66. this is gonna be a several day to several week hold.

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  67. in my old band we used to say "No rubbers!"

    now I say "No Stops BABBBBYYYYYYYY!

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  68. RBY - FYI from cc...

    RBY- Let the fun begin!
    Submitted by papadynamite (188 comments) on Mon, 09/27/2010 - 12:02 #70154

    Rob got out because he wasn't interested in doing a deal with Goldcorp. The animosity runs deep.
    From Goldcorp's perspective, they don't want anyone running a mine that is abutting to their Red Lake property and mine.
    From the officers and Board's point of view, they can't wait to cash in their load of stock options at a significant profit without ever investing a single cent in the mine.
    So what's next? After October 5, Goldcorp can buy a nice portion of Rob's former stock, reach agreement with the Board on a takeover price, buy it, make everyone rich, and Goldcorp has a nice addition to its reserves.
    The price? Speculation has it in the $6 range. Not bad, I would be happy because of my large position at $4., but a sharp breakout of the gold price could certainly boost this north of $7.00.
    Stay tuned!!
    In the meantime UXG keeps releasing drill reports on, steady but not spectacular. Maybe a little better than watching paint dry. I have no position.
    SLW seems overextended on its RSI. However, remember, an RSI can remain overextended for some time on a powerful move which appears to be the case. Trailing stops are warranted for this stock. I do have a position well below the current price.
    Well enough already! Good luck!

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  69. Sold RAS at $1.71 that I bought at $1.52 this morning.

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  70. Chicken: Thank you for bringing GMO to my attention today.

    Kyle: Thank you for you excellent update on the RBY/UXG situations:)

    Today reminds me of the good old days when we took over Bill's blog and used it to actually make money:)

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  71. VIX is still staying stubbornly high...I would think a move from 1,050 to 1,150 would have moved the VIX lower than 22 from 26.

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  72. Out of respect for the animal spirits in the market, which woke up recently with the smell of QE2, I placed a buy to cover stop limit for my IWM short just above yesterday's closing price, at $67.10/$67.15.

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  73. As for NG, the November futures chart looks pretty bad now -- a clear break of support took place today, and so NG might continue down for a while. I'll wait a few days before buying in.

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  74. David - I read on Optionmonster.com that there was a big buyer of nat gas today.

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  75. That big buyer will most likely be screwed over the short term. :)

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  76. BYD- OK, in at 7.00. Let's see if it can finally break the 10ma or will it get rejected again.

    RAS- You lucky Fing dog! ;)

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  77. dudes - check out the volume in NLS...its probably just a short term trade for me (if it goes up to $2 or so on a pop) but it's a good sign its up on good volume.

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  78. As soon as I placed my buy to cover stop order on IWM, the market raced toward it and hit it. Amazing...

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  79. I am placing a sell short stop limit order on the same 300 shares of IWM just below today's low, at $66.50/66.45.

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  80. Looks like the excitement of a good 2Y auction is waning.

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  81. UNG/Gas plays. Most of the gas play's are doing nicely in the face of the spot price. XCO cleared a nice hurdle today.

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  82. Nice move in PWR also. Cleared the 50. Tying to fill the 21.00 gap?

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  83. Still no interest in hedging/going short despite being up 100 pts on S&P. I think we go higher eventually because too many people are bearish.

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  84. TOF, since today's pullback was bought, it would make sense to assume that Friday's rally was not a fluke and that the market is destined to go higher. That's why I covered my partial hedge today in the form of IWM short and left only put options, whose effect will keep diminishing if the market keeps moving higher.

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  85. DO/RIG??? Running on the PBR news?

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  86. There have to be absolutely huge short positions in NG by now

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  87. Since this is so boring, I'll delight you with one of Kenra's goal's this weekend. Tough angle and in the upper corner.


    http://www.screencast.com/t/MTIwZTIyYzgt

    http://www.screencast.com/t/ZDMyMjZm

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  88. That EW idiot is coming up on CNBC.

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  89. cheapy, NG futures have broken through the support level only today after being flat for a month. The November futures closed yesterday exactly where they were in late August. So they are definitely not oversold now and another leg down to $3.50 can easily take place.

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  90. Mixed bag on the imbalances.

    BUY C/GS/NKE
    SEEL MS/JPM/CHK/AA

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  91. Interesting post/link over at cc re. PPT proping up mkt in Sept...

    http://caracommunity.com/content/trading-desk-blog-sept-27-2010

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  92. Casinos - discussion from earlier in the day.

    Here are some of Vad's comments from the conference he attended in Vegas..

    [09:11] {Threei} couple quick impressions from this visit:
    [09:12] {Threei} 1. vegas is hit very very hard... beyond anything I imagined
    [09:13] {Threei} 2. the segment between Monte Carlo and Belagio, where they erected new hotels/casino/boutiques, became completely pedestrian- unfriendly
    [09:13] {Threei} 3. audience is very different from what I used to see on seminars:
    [09:14] {Threei} much older, no one under 30, very few under 40, a lot above 60
    [09:14] {Threei} and when asked how many intend to day trade - about 90% raise their hand

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  93. "when asked how many intend to day trade - about 90% raise their hand"

    Go Vad!

    I totally predicted this....that when America realized it was unemployable, it would try it's hand in the markets.......

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  94. Looks to me like habitual gain-takers came to action this afternoon.

    Anybody got a take on that, something to be concerned with?

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  95. precursor to QE2
    Submitted by DavidV (22 comments) on Mon, 09/27/2010 - 17:13 #70199

    If the market responded so favorably to the POMOs, imagine its response to QE2! However, given the widespread criticism of QE2, the bankers will have to engineer a scary drop in the market in order to justify QE2 and make Bernanke look like a savior. Otherwise, I doubt that the Fed will have a reason for QE2 if the market keeps going up.

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  96. So the "old farts" believe they've identified a new potential source of income? Wonder how many were trapped by the previous top in April?

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  97. cp - here's the video link that korvus referenced in the cc blog post today. May explain what might be coming...

    http://www.cnbc.com/id/15840232?video=1601032652&play=1

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  98. "I doubt that the Fed will have a reason for QE2 if the market keeps going up."

    What happens if/when Ben claims enough's been done to stem the red tide, will confidence return with buyers arriving on his "good to go" signal?

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  99. CP- Just saw this. CADC reports tomorrow.

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  100. Kyle, my throughput out here in the boonies doesn't currently accommodate internet video but thanks anyway.

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  101. CADC - Excellent, doesn't seem to be moving AH. I'm strapping in, taking a sip of cognac, and counting on a blowout tomorrow.

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  102. CADC after the close tomorrow.

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  103. gap up tomorrow?
    Submitted by DavidV (23 comments) on Mon, 09/27/2010 - 17:53 #70202

    2nd_ave has observed that the market recently had a tendency of gapping up after a scary late day reversal. Let's see if this is going to be the case tomorrow once again...

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  104. WSJ report on Fed's plan on buying T's.

    http://www.streetinsider.com/General+News/Fed+Looking+At+Smaller-Scale,+Open-Ended+Treasury+Purchases/5999920.html

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  105. The US Treasury may opt to offer a secondary share offering of its 17% stake in Citigroup (C) in order to make good on its promise to divest its entire stake in Citi by year end. The US Treasury may choose this option as its sale of Citi shares stalled in July and August as a result of slowed market sales volume.

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  106. GMO - Sharkie, are you selling GMO AH @ $3.55?

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  107. Re: gap up tomorrow? newSubmitted by 2nd_ave (4652 comments) on Mon, 09/27/2010 - 21:13 #70209 (in reply to #70202)
    David- There's a metaphysical law that states the probability of someone being right is inversely related to [(the number of times he's been right recently) + (the number of times he's congratulated for having been right)^2].

    So I doubt we gap up tomorrow. If we do, I would probably short the open.

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  108. I'm going to keep this post going until I come up with a take on market direction.

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  109. Mark,

    Very interesting soccer shots. The second one shows how horrified the defender was. She was about the only one paying attention in either photo. The soccer moms were not! Glad you were.

    My 4th grader grandson ended his season this evening with a close loss in the second game of the elimination tourny. Sixth grade granddaughter lost out in her first game.

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  110. Illini- Thanks!....I'm sure other people think I'm crazy posting soccer pics, but I love photography (used to have my own dark room) and really like any great picture.

    Sounds like your lucky enough to live close to your grandkids!

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  111. Gap up tomorrow? I suspect the party is over for a few days unless you have access to Paris Hilton's purse.

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  112. Mark,

    I followed them 4 years ago to Peoria, IL from St. Louis, MO where my son was born and raised and I had lived for 43 years. The story is that he married a girl from Peoria, a nurse living in STL, and she wanted to get back to Peoria. Nobody regrets it. I am from central Illinois originally and am an Illini alum.

    Here I live so close to them and the soccer fields that it is almost surreal.

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  113. CP- Normally we are pretty much on the same page, but I'm not so sure here. Most of the stuff I follow had really large green volume bars at the close. I mostly follow 3Min. charts.

    Feels like a shake out to me. Maybe not tomorrow, but soon.

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  114. Illini- Bet your enjoying the hell out of it!!! That's just great. Life's short.

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  115. Illini- What's your system saying here?

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  116. Just a random thought...Inflation? We've had limit up's in lumber and cotton over the past few days.

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  117. INO.com is showing the futures up only modestly after hours. A bigger change in direction sometimes occurs later in the evening maybe pre-London opening, if at all. That's way past my bedtime.

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  118. My subscription "system" says top of the scale bull here except.....another top spotter occurred on SPX today. That is the second one in a few days. The first one was taken out ever so slightly and has been replaced with todays high at 1149.92.

    These spotters do not occur so frequently usually but seem to have some gravitas as an early counter trend indicator.

    I am long only GLD and CYB (Yuan) and a utility plus another minor position in a CEF, symbol BCF. I am pretty conservative and not too successful in this market.

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  119. Thanks Illini.

    FWIW...Cal sucks :(. Hanging on to the Giants into the close!!!

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  120. Mark - I suppose I should qualify, or expand on my previous remark... I'm anticipating further upside yes, but I think it won't necessarily be in large caps.

    We'll see.

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  121. Inflation? Yes, I think so. Prices of nearly everything have been going up aside from chicken and real estate from my observations. The latter will turn around (probably former too) and watch out after that, fellas, boys and girls!

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  122. Illini - I second what Mark was saying earlier. Having grandkids nearby (and family in general) must be awesome. My closest relative is in Colorado, a 2 hr flight away. My brother just moved his family (2 young boys and a third kid on the way) to the Boston area after living a mile from my dad for the past 5 years. I know my dad is bummed.

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  123. I am probably setting myself up for another fake out, but I decided to widen the interval for my sell short stop limit order on IWM, to $66.5/$66. There is still a chance that the recent breakout above 1130 on S&P was a fake...

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  124. from the sharp lady at perplexed investor: CLDA

    i like the chart on this one, plus a piece of their biz is testing which makes it a solid takeover target imo.

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  125. Chicken I held the GMO overnight.

    All systems go?

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  126. sold the UNG for a $860 gain in PM

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  127. Something must have just happened.

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  128. Chicken I admit I sold the GMO at 3.49 based on the shitty looking indexes.

    Of course I took a fair profit but of course, I will be proven wrong:)

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  129. I have an opening print of AAPL 10 bucks lower than the price now.

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  130. Where is everyone? Do I have to post more pictures :) ?

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  131. DRYS - so they're into drilling too...

    8:01AM DryShips subsidiary has received a Letter of Award from an American exploration company for a four well contract; value is approx $135 mln (DRYS) 4.46 : Co announced today that its fully-owned subsidiary Ocean Rig UDW has received a Letter of Award from an American exploration company for a four well contract for exploration drilling offshore West Africa for a period of about 300 days, commencing in the first or second quarter of 2011. The contract value is ~$135 mln

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  132. David - are you buying back into MON? That would be a great round trip trade.

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  133. Bears really dropped the ball today so far.

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  134. DRYS: Kyle is this company vulnerable based on Greek debt and their debt and the idea that the two may be one and the same?

    Dumbest trade of the week was a winner...Selling drys yesterdat and I knew it was a mistake last night.

    The market is a crazy place. Worst consumer confidence since....Hey it's time for a rally:)

    Fucking lunatics. btw and this is a bit esoteric, why does the market behave in the above-described way? Because that's the ONLY way it can work. The "smart money", er, I mean stock manipulators know that the only time the stocks can move unfettered is when no one in their right mind would take the trade. THAT'S when they move.

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  135. shark - It is totally crazy man. Just don't know.

    Am looking at IVAN, NPD, BWEN as flyers...

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  136. Let me run this by you guys and comment if you would.

    I know someone with several millions of dollars who is thinking of a lot of his net worth into house for all the wrong reasons
    (thinks renting is a waste of money, seeks pride in ownership, is emotionally dependent blah blah blah.) Ok. This guy pays fairly low rent, well under 5k per month, and the cost to buy an equivalent is somewhere north of a million and a half, perhaps half his net worth. Oh, and he is a professional stock analyst. Ok.

    Question is, I told him if you want to participate in housing economically WHEN AND AS IF (as you-know-who says) it rises in value buy housing stocks not a house for the following reaaons...

    Yeah, I know you cant live in stocks, but as far as being able to time the trade, size it right, kill it if it doesn't work as well as sell it right when and if it does, I says to my friend I says investing in housing stocks has it all over buying a house.

    In addition I says, I says that the average Schmamerican has far too much of his money tied up in actual houses. In essence, most of the poepl who actually own houses really can't afford them.

    How do yous guys feel about this idea?

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  137. Heck, the pre-tax income required just to pay the property tax on his 50k a year rental equivalent is something like 30 k....Housing has to rip to the upside in order to make sense economically, right?

    Plus, factor in the committment, the possibility you may never be able to sell at all, plaus upkeep and the potential for higher property taxes, and I says we should both move to a 2nd story walkup on Ludlowe street and fuggettaboutit:)

    BTW we have retail stores closing all around Westport again.....It feels very much like a double dip to me.

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  138. Lost $30 on TBT and made $180 on TZA, up about $1000 so far for the day, net

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  139. Once the capital is in the housing market, you can't trade it, and don't have it to fall back on if you get into a losing streak.

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  140. The Contrarian in me.....

    To answer Shark's query.
    Drove by 'Beckman realty group' last night in town. The sign says: "The recession is over".

    I say rent and look into REITs with decent divs.
    Homes 'used' to be a currency and store of value, now gold, food, ag co's and basic materials are.

    USD getting killed again today.

    I liked TFO's MON call. Also GDXJ on this AM's turnaround. Couldn't help it, it nearly jumped in my boat.

    FF

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  141. If I were interested in housing stocks, I'd probably be looking into trading HD and LOWE or REIT's maybe, like PAL.

    After being up all night reading a bunch of junk, got a late start.

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  142. Wow. This bounce back today has to absolutely demoralize bears.

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  143. I meant RAS of course, not talking about living underground. LOL!

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  144. I have to say....I don't mind where I sold the GMO

    What I mind is, it was so hard getting back in during the down-80 drop.

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  145. Or I don't mind WHEN is what I really mean.

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  146. played TZA again, now at $1410 for the day

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  147. GMO - I'm still convinced the mine will happen and that it's currently being fast-tracked. If I'm right, that puts the share price considerably higher from here.

    A solid base seems to exist around $3, which will stick in my mind.

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  148. CADC - So now I know whomever trades this one waits until the day before earnings to start buying?

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  149. played TZA again from 27.60's to 27.80's, now up $2120 on the day.

    Using a new chart system I came up with last weekend, seems to be helping, basically monitoring 3 different buy/sell indicators plus my oscillators, and using a 1 min chart instead of 5 min. My win percentage isn't any better, but I'm getting more trades that I'm confident to take, I think.

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  150. Anon - I'm getting sick watching REDF.

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  151. One prob with more indicators is its slowing the pc. Running it on laptop, which is slowest machine because I'm working on the tower it would usually run on to beef it up to handle the additional load. Order entry is real slow, so it bid/ask movement. And I'm not even trying to display time and sales data, which I usually do.

    Any thoughts on tomorrow with relation to the anti China vote in congress?

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  152. As I had expected, I did get faked out on IWM. My sell short stop order was triggered at $66.50 and I have just covered it at $66.94, for a loss of another $140. It is really tough to make money on the short side -- either you start trading in and out and constantly get faked out, or you take a stubborn stance and then the market will just zoom linearly higher (as it happened in Feb-April) and you lose A LOT of money. Well, at least I am now losing only small amounts of money that don't really affect my portfolio, unlike the temporary losses I took in February-April...

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  153. Thanks, TOF, for bringing MON to my attention! I posted last week that after looking at its chart, I had a feeling that it will drop to $50, which is where I wanted to buy it. Well, now I have an even better entry. I'll probably sell some puts on MON now.

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  154. team

    redf is back under 6.00 - maybe a chance to start scaling in-

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  155. Just sold one MON November $50 put for $3.75 -- if I can pocket $375 on this trade, it will be good enough for me.

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  156. Chicken....I am ready willing and able to re-buy GMO on either

    A) a move toward and through todays highs...
    The very long lower shadow does portend a bigger upmove.

    B) a nice drop to the 3.30 level. Odds are...we get both:) Only on different days:)

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  157. Hell I'd re-load gmo at 3.50 actually.

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  158. Interesting bounce in UNG today. I guess the large buyer of NG futures yesterday actually made a lot of money -- why did I even doubt "a large" buy who stepped in seemingly at the "wrong time"?

    Well, I am ready to forego the great buying opportunity of UNG yesterday if it starts a REAL rally now, as I bought a lot of HNUZF at $3.87 two days ago and now it is back to that price alreday, so any further appreciation in NG will actually turn into a profit for me.

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  159. I tried placing yet another sell short stop order on IWM so as to catch it if it drops down at the end of the day today (I'll have to go to a meeting at work at 11pst and won't be able to look at the market after that). OptionsHouse, however, said that they don't have anymore shares of IWM to short. Is it a sign of an impending collapse? Well, instead I placed a buy stop order on 600 shares of TWM at $18.15.

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  160. Anon - I'm going to hold off on REDF and wait for the inevitable 40 to 50% crash, which may happen from the $10 level but at that point it will shake out enough people to allow me to enter when sentiment is low.

    For now, I'm pretty heavily invested in BYD, which I would have to imagine has to be VERY attractive to WYNN/LVS/Harrahs. They can easily assume the debt and get some really good properties that will diversify their asset base in the US.

    In the past 4 quarters, BYD has managed to earn operating profits of about $165 Million; however, interest expenses were about $130 Million. A company with deeper pockets or a high priced stock (that would enable them to do a capital raise and pay off BYD's debt) would get a company that has operating margins of about 10 to 12% during downtimes, a widely diversified asset base, and significant upside should the economy rebound (operating margins were close to 20% during the previous boom period).

    With a short interest of 30% and high odds of them being able to move the maturity dates back on their debt, even if BYD doesn't get bought out I think they are pretty undervalued. Their P/Book is less than 0.5 whereas MGM is 1.9, WYNN is 3.6 and LVS is 4.1.

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  161. played TZA from 26.70's to 26.80's again, now at $2260 for the day

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  162. Okay Sharkie, I'm gonna hang in there a while and see where it goes.

    Trying to enjoy the tail-end of summer this year.

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  163. That's nice Chicken. We're getting frigging tornadoes here for the 3rd time this summer.

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  164. The technical action in SWN is positive lately. I just sold 3 November $32 puts on SWN for $1.40 each.

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  165. Did you even consciously notice that upticks are denoted in green and downticks in red on the timestamp, inducing, perhaps, people to be encouraged to "go at the green" or buy and, conversely, to pause or stop outright at the red.

    Thought experiment = What if upmoves were stamped in red and downmoves in green? Would there be a few more shortists out there as well as those willing to buy dips?

    2nd are you teaching your children to trade? I should buy you Vad's new book:

    suggested title:

    "Scalp Your Way to Riches"

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  166. I have 114.80 as R2 for SPY. Clearly rejected right at that price so far.

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  167. played TZA from 26.40 to high 26.40's, now at $2400 on the day.

    LOL, looks like TZA is going down today

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  168. ODP off @ 4.67. 5.25%....Not really interested in holding this one.

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  169. BWEN up 23% today on no apparent news. No position.

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  170. and as soon as I say that, it zooms without me

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  171. XCO off @ 14.53...11.64%....Seems to be having a hard time @ this price over the last few days. I also have plenty of exposure to natty with SWN.

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  172. PWR off @ 19.20...3.84%....Good enough on that one.

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  173. Maybe the problem lies with financials?

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  174. Natty players just shot up...??

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  175. Mark - You listening to M. Whitney interview on cnbc now???

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  176. Go Meradith!!!! The only thing she said she's buy was V.

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  177. So they're hoping the low bonus @ EOY will encourage people to leave before the layoffs in early 11... FAZ and V short OTM puts...

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  178. Kyle- Can you explain your trade further? Later is OK.

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  179. SPY making a 4th quarter run at it. 1150 or bust.

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  180. Mark - am sure cnbc will post the video interview later, but what I heard is that MW felt the financials could dodge the RE for this qtr but not the 4th. So come Jan the RE deterioration would severely impact their books more. Would expect V to pullback as well if that happens & that would be the time to scale into V or (for me) with this higher-priced stock to go short the puts...

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  181. $ES_F #futures imbalance Summary: $113,842,736 x $15,277,416 net 98 mil to buy

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  182. Asking 4.00 AH in CADC in case anything silly happens.

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  183. I suppose you mean in case something silly good happens.

    I haven't been having that kind of luck but wouldn't look that gift horse in the mouth.

    Then again, maybe I would...

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  184. One more play of TZA closed for profit in AM for total of $2860 for the day, after doubling and tripling qtys as TZA was slammed

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  185. MW interview ..Vad's summary is better than mine..

    [15:36] {Threei} (US) Banking analyst Meredith Whitney: Fiscal challenges facing US states are a major risk to the economy - CNBC
    [15:36] {Threei} - Job cuts at state level present major economic headwinds.
    [15:36] {Threei} - States lack transparency in a way similar to banks ahead of the 2008 financial crisis.
    [15:36] {Threei} - sees low sigle digit ROE's in upcoming earnings season for the banks with equity trading profits down 25% q/q
    [15:36] {Threei} - Would "absolutely sell" the regional banks due to issues with state budgets.
    [15:36] {Threei} - Sees a "tough Q4" for the banks, expects as many as 80K job cuts in industry starting in Q1
    [15:36] {Threei} - There is "no way" to make money on banks.
    [15:36] {Threei} - Favors Visa and Mastercard among financial companies, as they have excellent business models.

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  186. Kyle - Thanks for that post.

    Banks - Wondering what the FED uses to buy T's and if they're doing it without printing why wouldn't banks be capable of same?

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