Thursday, October 14, 2010

10/14/10 Bull Trap/ Urban Cowboy

The rally is into its seventh week, and they're lined up outside Gilley's (or Schwab) waiting to take a shot at it. At this level, it's a little late to be opening longs, as one is likely to get thrown off. On the other hand, it's also no time to be short- you would simply be gaming the mirror image of movements in the bull. And if you're playing with leveraged inverse ETFs- by now we all have a mental recording of Sponge Bob wishing us 'Good luck with that,' right?

My recent experience with INTC was a timely reminder of the unpredictable nature of potential turning points- actually, it was also a timely reminder that I'm getting too old for this shit. The correct play right now is probably to wait for the crowd to tire of the mechanical bull, and then pick up where I left off on the long side (I'm still bullish overall). I don't mind paying higher prices at that point.

Of course, I don't rule out intraday forays into TZA should I sense the bull about to slam Travolta on his ass.

137 comments:

  1. BAC bidding 13.04. SMH bidding 28.20. Yesterday the premarket bids were 13.71 and 28.90.

    That, more than anything else, tells me something's wrong with the bull picture.

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  2. What's wrong with this picture? newSubmitted by 2nd_ave (4742 comments) on Thu, 10/14/2010 - 09:14 #71580
    BAC/SMH (two positions on my watchlist) were bidding 13.71/28.90 yesterday morning. This morning, with DIA still bidding the equivalent of 70 points higher on the DJIA, BAC/SMH are bidding 13.03/28.20. That, more than anything else, keeps me on the sidelines right now.

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  3. I did the unthinkable: i bought DZZ at $8.55 and DGZ at $15.69. So I'm not short gold. Like a lot of other things, the move in gold looks parabolic to me. I recommend completely ignoring my post.

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  4. CP- Let's hope the early action in CADC was the MM trying to create some selling. The ASK right now is all over the place.

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  5. WFC was off 6% a second ago. -3% now.

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  6. Sorry, meant to say so i'm "now" short gold. Not that I'm not short it. I'm definitely short it now.

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  7. guys - just saw that the 30 yr mortgage rate hit 4.19%. getting close to the high 3's...craziness.

    by the way, look at the banks today...yeesh. i would have hated to be a buyer of JPM or WFC after JPMs earnings yesterday morning. pretty much straight down.

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  8. Damn...JB is doing well with BTIM.

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  9. Very nice bounce off R2 for PXP.

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  10. Natty lotto spin coming up!!!!

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  11. hey Mark - BTIM is going well, been adding some along the way but my ave is still low.....waz up w/you?

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  12. damn, just missed my sell limit on IFF, now it's fading away.

    I need to start adding as numerous sell limits have been hit over the past few days.

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  13. Hey bro- Besides playing with fire (UNG), I have 900 shares of V, 1,000 shares of PXP opened this morning, 1,000 shares of SSO and the wild card, 5,000 shares of CADC.

    Work is flat, just enough to keep me out of trouble. Tons of soccer for the girls. Harlan is just a pain in the ass :)

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  14. PXP- Damn, huge volume came in on the natty report. Let's see if it can get above it's PP @ 28.52 and hold.

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  15. good luck on UNG, been a "widow maker" for me!

    enjoy the soccer, those days go by fast.

    damn, you got big lots of SSO/V, good luck!!

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  16. JB- You still trying to trade the ES in Persons room?

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  17. Crap, crap, crap...Look @ HEK...Oh well.

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  18. Hey hey hey!

    Who saw the debate last night 'tween Christine O'Donnell and Chris Coons?

    I tuned in sensing the even could contain a lot of entertainment value..and I wasn't disappointed.

    She didn't know of even one Supreme Court decision with which she disagreed.

    She couldn't say if she thought evolution is a myth.

    The one thing all did agree upon was that she is a total freaking anti-mastrubatory right-wing witch.

    Given her position on masturbation, I wonder how she feels about giving head?:):)

    In all seriousness and I don't mean to offend, how on EARTH do we have people like this running for public office? She looked like she was running for president of the 11th grade....

    She came off as a total joke, and her opponent seemed like Mr. Responsibility in comparison.

    I found myself shocked by the realization that some hapless twats could, under the wrong circumstances, destroy medicare and Social Security remove minimum wage etc if only enough wacko's vote the wrong way.

    On a similar note, did anyone watch the 3 day series called God in America on PBS?

    Outstanding stuff.

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  19. You know guys, at some point, we HAVE to get long the big banks and close our eyes.

    Got to run. GL!!

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  20. Funny, I went from 100% long to now about 95% short in the span of 24 hours. Although, being short gold is not really being short the market. But nonetheless I have a short SPY position at $118 from yesterday, November SPY $121 puts from yesterday, DGZ and DZZ. I feel like Doug Kass, only with a better entry point.

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  21. Mark: RE: HEK

    If it acts anything like UNG you will have lower and lower and lower entry points to choose from.

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  22. Beats Travolta getting slammed IN his ass, for a change:)

    C biting the dust.

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  23. I hate days like this when my port has a loser... Can't go straight up, right?

    Well, U$D is at a nice low here so it might make sense to buy dollars...

    CADC - That's three days in a row, but I'll keep it anyway b/c it could/should snap back after whomever wants out finally has their cash.

    HEK - Somebody gonna buy? I bet it comes back down but I did read somewhere that bottled water is a big seller in China.

    BAC back to a $12 handle?

    Market down, UNG up back in play?

    Oh crappy day!

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  24. I liquidated yesterday and haven't gone long today.

    I KNOW what happenz thursday mornings:)

    JOBS!!!!!!!!!! ARRRRGH

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  25. Gonna buy PAL though when it recoverz

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  26. Bought a little PAL in the mid-4.50's set a close stop fuggettaboutit.

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  27. HEK - I say buy some if it pierces $4 and you believe it represents good value going forward.

    CADC - Can it recapture yesterday's low? Maybe yes, if the fool who keeps selling can wait a bit.

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  28. http://www.minyanville.com/businessmarkets/articles/gold-gold-stocks-precious-metals-contrarian/10/14/2010/id/30548

    I kinda agree with this article. My short GOLD trade is a short term one. In the grand scheme of things, though, these giant bull markets in an asset class tend to run for much longer than anyone thinks and we're not yet in the position where everyone is long gold. i suspect that will ultimately happen over the next few years. And if its anything like the S&P bull market from 1982 to 2000, it has a lot longer and higher up to go. having said that, i think the short term sentiment is too bullish. and the chart of the price of gold looks a little parabolic.

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  29. Kyle - TGB, along with SCCO... Copper is good.

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  30. one other thing - i've noticed a sizable volume spike in the ultra short gold etfs and that tends to correlate with short term tops.

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  31. TOF - I think the FED is serious about a lower dollar and the market seems to be challenging them.

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  32. Shark and Chicken: These companies keep coming up on my technical screeners UEC URG. Do you guys know anything about these companies or the uranium space. I ask because both of you seem to follow the small cap non gold junior mining space. Of coarse anyone else could answer also.
    RB

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  33. SMH - Holding up well, XLF is bow-wow #1

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  34. been snooping around this a.m. and I bought YHOO back at 15.77....hearing that the AOL+PE deal could be real, just anecdotal stuff but enough for me to get back in.

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  35. RB - I can't answer that, not because I don't want to, but b/c I don't consider myself qualified to comment aside from giving nuclear the thumbs-up if they ever discover how to decompose the waste to inert/useful byproducts.

    Like everything else, developing countries will probably capture the leadership edge while our bureaucracy concentrates their efforts on stifling innovation.

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  36. jb - Good work yesterday on C, I still have my 10 shares of YHOO tucked away if AOL wants them for ~2x yesterday's price.

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  37. excellent CP!

    did you ever check into BTIM, PIP or EXAS...I'm building a nice little basket in those names, BTIM is my largest holding.

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  38. if the market breaks 1,170 i think today has the markings of a serious pull back.

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  39. XLF - US banks suck in about every aspect, don't they? They will only loan money freely at the wrong times like at bubble tops and their fee schedule is just bizarre...

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  40. jb - Sure, although PIP is better than BTIM or EXAS, LOL!

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  41. GMO - Thanks to this one, I may just close green today.

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  42. WFC @ 24.45 newSubmitted by 2nd_ave (4745 comments) on Thu, 10/14/2010 - 13:10 #71617
    Why? I like the company, as you all know, and it's dropped almost 6% from my exit point yesterday. I don't think it drops much further.

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  43. Should we think about shorting oil here?

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  44. Stop on PXP @ 28.50. It's out preforming it's peers today and I'm happy to walk away with the 600 bucks.

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  45. looks like they have drawn the line in the sand at 1,170. they're dropping the banks but not enough for the rest of the market to care. i see all of the banks at their intraday lows but the S&P ain't breaking. getting close to covering my shorts here...

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  46. Morning, All! :)

    I just did a bunch of things to reduce the risk in my portfolio and then one silly thing to counteract them. :)

    First, I decided not to wait until my limit at $18 for CEF will be hit and sold 1/2 of my remaining CEF at $17.91. Then, I sold 2 $75 November puts on FCX (which will most likely expire at this point) and also one $90 November put on FCX (I probably won't make much money on this put, as FCX might pull back slightly below $90 only briefly), and instead bought 1 $100 November put on FCX, which would give me some real protection at this point. Similarly, I raised the strike price on my November IWM puts by selling a $65 put I had and buying a $70 put.

    Finally, I realized that scaling into ultrashorts in expectations of a pullback is not the right strategy to use, as this "hedge" will keep decaying away due to simple market fluctuations. That is, if the market goes up from here and then comes back to the current level, my hedge in ultrashorts will be worth less! Isn't it better to just scale into a regular short position? Thinking further, scaling into a short position is called fighting against the trend. A better strategy, as it occurred to me last night, is to keep some put options and keep raising the strike price on them, as I have been doing with FCX. I saw that when FCX moved from $90 to $100, my $90 put lost only a couple of dollars, while an outright short position of 100 shares would lose 1K! So a put option gives me the same protection as an equivalent short position in the event of a market collapse, while being much cheaper to "carry" with me as the market keeps moving up.

    With this realization, I sold at $16.09 the 300 shares of TWM I purchased in two bunches at $16.44 and $15.79, and instead purchased one January $70 put on IWM.

    These were all good things to do, as they made my portfolio more market neutral and increased the level of protection for my outsized gains on the long side during this rally. The "silly" thing I did was to buy 5 March 2011 $2.50 calls on HEK at $1.70. Or maybe it wasn't a silly thing to do: it is just a leveraged play on HEK at this point where I paid only 10c in options premium (HEK was trading at $4.10 when I bought these calls)!

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  47. maybe i spoke to soon? JPM isn't finding any support yet. the big gray cloud hanging over this foreclosure mess has to cause some of the average investors to sell no? well, i guess i'll keep my shorts for a little while longer. gold ain't co-operating yet.

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  48. JPM/BAC/WFC just broke to the downside again.

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  49. TOF- We had a crappy bid to cover in today's auction. That will only add fuel to the fire. GL.

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  50. MGM giving us another chance? 200sma is 11.63.

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  51. To see some signs of overbullish sentiment now, you just need to take a look at any of today's articles. For example:

    "Expectations of a second round of asset-buying, or quantitative easing, implemented by the Federal Reserve are nothing but good news for the stock market, Simon Maughan, co-head of European equities at MF Global, told CNBC.

    Investors shouldn't be concerned about trading near technical highs because "quantitative easing will take them through those," he added."

    OR

    "Commodity prices on a tear" from CNN money:

    How long can the rally last? "As long as we have the fear of quantitative easing," said Flynn.

    "We might see a little unwinding of positions and prices go down here and there, but the fact that the Fed is coming out and saying it's opening the door to printing more money, you're going to have speculators and funds keep coming out and buying commodities," he added.

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  52. Man, CREE has had a nice move off the bottom.

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  53. i did another unthinkable just now. bought a whopping 3 x GOOG $500 Puts at $1.4. If they miss earnings this could drop $50. so it's a lottery ticket and I know full well this could be worthless tomorrow.

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  54. David,
    On your 3x comments. I believe I have been getting around the decay problem by doing the opposite of their intended purpose. Example If I think financial sector is going down I will short FAS instead of going long FAZ. At some point I am going to short both sides and hopefully collect a decay premium. I tried backtesting to see the viability of this strategy, but since they reverse split a lot I could not get a reliable read.
    Bob

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  55. Adding BAC @ 12.51/ SMH @ 28.15 newSubmitted by 2nd_ave (4746 comments) on Thu, 10/14/2010 - 14:52 #71633
    (a) Not seeing panic in the banking sector- betting on at least a ST bounce.
    (b) I think GOOG rekindles the short squeeze in the technology sector.

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  56. Feels kinda like a shakeout prior to the next leg up in a rally, doesn't it?

    I hate saying and thinking this way, I should stick to trading what I see and not what I think might happen...

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  57. alrighty...sold my SPY $121 puts at $5 that I bought yesterday. I also covered my short in SPY at $116.98 that I entered yesterday at $118. I also added 3 more GOOG Nov $500 Calls at $1.4. I now have 6 of these and consider them to be 100% lottery tickets. Now I will just wait sinisterly for a miss after the close.

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  58. Shoring 3X ETFs is a great idea, Bob, but you need to do it carefully and in small quantities.

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  59. I just tried shorting some TNA but there were no shares available. I suppose people have figured out this trade a while ago...

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  60. SPY dipped below S2, but has recovered just above it.

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  61. guys - i know you're looking at MGM...they had several upgrades from S&P and Fitch regarding their credit profile. here is Fitch's take:

    "Fitch Ratings raised its outlook on MGM Resorts International (MGM) to positive, citing an ongoing stock sale and the bid it received for its stake in an Atlantic City, N.J., casino. The Las Vegas-based resort owner has struggled as steep drops in tourism and consumer spending have hammered Sin City. That had put further pressure on the debt-laden company, which borrowed heavily to fund expansion efforts. But MGM's liquidity is likely to improve in the wake of the stock sale, which will generate some $500 million of proceeds to the company. Further cash could come from the New Jersey-mandated sale of MGM's 50% stake in the Borgata Hotel Casino & Spa. The nearly $250 million bid gives the property a valuation toward the higher end of Fitch's estimates. The capital-raising efforts have "better positioned the company to survive its liquidity crunch and create a more sustainable capital structure," Fitch said. The rating agency has MGM at CCC, two notches into highly speculative territory. MGM continues to face risk from its exposure in Las Vegas and reliance on a favorable refinancing and improved capital markets environment, Fitch said. Shares were down 1.7% at $11.90 in recent trading. The stock is up 31% this year. "

    One thing to note from a technical perspective is that it is clearly forming an island reversal pattern, which, in all of the instances I have seen, tends to be very powerful.

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  62. JB- Wake up! How many lotto tickets did you buy in YHOO?

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  63. Green Close? newSubmitted by 2nd_ave (4747 comments) on Thu, 10/14/2010 - 15:06 #71640
    Just putting it out there. Probably zero chance.

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  64. I need to be anesthetized prior to receiving my walletectomy.

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  65. BAC over 400m shares trading hands newSubmitted by 2nd_ave (4748 comments) on Thu, 10/14/2010 - 15:10 #71647
    Unreal.

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  66. CADC - I've got a price target today of $3.88, else it fails to impress in the short term.

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  67. Just FWIW...

    http://www.kirkreport.com/10/work.jpg

    from the post

    http://www.kirkreport.com/2010/10/13/lifes-not-fair-get-over-it/

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  68. BAC - Are they selling into weakness or strength? Successful trades involve selling into strength, right?

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  69. FAS - a little buying here

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  70. Re: BAC over 400m shares trading hands newSubmitted by 2nd_ave (4749 comments) on Thu, 10/14/2010 - 15:25 #71653 (in reply to #71647)
    To be honest, with that kind of volume, I'm inclined to think today's low will remain the low print for a long, long time...

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  71. Re: BAC over 400m shares trading hands newSubmitted by 2nd_ave (4749 comments) on Thu, 10/14/2010 - 15:26 #71653 (in reply to #71647)
    To be honest, with that kind of volume, I'm inclined to think today's low will remain the low print for a long, long time...

    I may even end up holding the shares purchased today for longer than a few days ;)

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  72. When was the last time we experienced selling all day only to have buyers show up at the last minute? It's been a while, hasn't it?

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  73. Long MGM Jan 11 $10 Calls at $2.3. I'm not willing to take too much risk right now given the huge run (and my lack of take on everything) so any exposure right now will be with in the money calls on overreactions in stocks that are otherwise trading bullishly.

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  74. Imbalances...

    BUY-FCX

    SELL- C/WFC/JPM.

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  75. Hey Robear,

    Sorry I was out all day.

    The names you mentioned have been great. Obviously.

    I will give them further study.

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  76. Call it wishful but with palladium at a many year high and probably going higher, I have high hopes for the PAL I bought today.

    Waiting for a pullback in ANO to re-buy more.

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  77. Coming damn close to 2nds green close

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  78. TGB - looks like something happened at 2:20 or so...

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  79. well it looks like i threw some money away on GOOG

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  80. David,
    I have an IB account and had shares of tna available. As a little experiment I sold short 10 shares of TNA and and sold short 23 shares of TZA. Cost Basis:
    TNA, 525.15
    TZA 528.19
    Am I correct in assuming I will need a choppy market to get full effect of decay. One day TNA up next day TZA up. ect.

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  81. Palladium - The Chevy volt has an average battery range of 39 miles before the backup gasoline engine takes over...

    Yes, it saves gasoline, but at what expense?

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  82. TGB - Yea, something happened, it fell off a cliff!

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  83. Bob, with such small position sizes, I am sure you'll be able to hold out during any temporary spikes in TNA or TZA and will eventually make money on both of them. The question is: what your annualized percentage return is going to be on this trade...

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  84. TGB - Went all the way from over $7 to a low of $4.58 in a blink of an eye.

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  85. Good thing I covered my REDF short yesterday at $4.87 -- otherwise, I would have been stopped out today at a much higher price.

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  86. I've got a funny feeling that when we wake up tomorrow, gold will be 1400 and silver will be 25.........

    Like kids on Christmas morning:)

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  87. cp - TGB is a prime example of why I'm stepping away from all this 'chicken-scratch' BS and moving over to Vad's style. I traded VXX most of the day & some FAS and it was OK...

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  88. well with this GOOG fiasco it looks like i will lose about $1,000 tomorrow. thats the price you pay for being short anything in this market. i'll take that as a learning lesson. maybe i'll get lucky and the dollar will bounce on the good earnings reports (throw INTC and AMD in there) so that Gold will drop and maybe MGM will rebound enough so that I can make up for this mistake tomorrow.

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  89. Kyle - I don't have a clear understanding of Vad's style, but it sounds interesting.

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  90. TGB....I guess Goldman plugged in their shiny new program, with a flashy nickname like the "The Exterminator" or some such.

    It kept hitting thin bids machine gun style until the price fell below the old breakout area around 4.70 trigging millions of shares worth of stops.

    Goldman (or whomever, the names don't really matter) bought all the shares and will have made, because of todays predations,....fill in the blank.

    I only wish I'd been around watching to try to take a stab at it.

    I have never been in a stock during one of those crashes but I sure do like to buy during them.....

    Remember Krystallex? Makes my yes moist with nostalgia thinking about it.

    It was one of my first actual trades, my mom was standing next to me watching.

    KRY dropped from something like 3 to somewheres around 2 bucks in less than a minute. I step up and buy 300 shares (boy I'd like another stab at that one too) and promptly turned em over for....I don't remember but it was an enormous profit, something like 75 cents a share a few minutes later.

    I thought I was king Farouk. I thought Kruggerands came out of my ass:)

    Boy was I mistaken:)

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  91. Vad's style involves very short term trading. There's zero (or next to) investment component.
    I don't believe he ever holds overnight and if so it's extraordinarily rare.

    For Vad it's all about what is happening right now right in front of you, taking quick profits and quick stopouts should things not go your way really fast. I haven't really dug through his stuff too extensively and this is where Kyle should take over the description of setups and whatever. Best I can figure Vad is trading against a lot of other people like....Vad:).

    I just feel everyone needs to play their own game and hit this thing from whatever angle feels most uncomfortable:)

    Kyle? Any thoughts?

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  92. cp - Vad usually publishes his daily log a few minutes after market close at

    http://tradinglog.realitytrader.com/

    I see today that APOL was the 'daily catch'. Hope you have the download BW to see it. But the whole log is there. LVS, RIMM, HIG are typical daily candidates. Let me know if you can see it.

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  93. GOOG is involved in another fiasco? These internet companies are too much to keep up with...

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  94. Dave Said, "The question is: what your annualized percentage return is going to be on this trade..." Yes that is exactly why I am doing it. Seeing if it is worth while % gain wise and acceptable Volitility wise. For a possible larger trade in the future.
    Bob

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  95. I often take a peek at his daily best of, yes. And it is impressive the whole idea of it. Maybe someday.......

    For me the thing is, you sort of get the gunfight you ask for in this biz.

    Question is, is everybody using glocks, or fifty caliber machine guns:)!

    I remember one day playing not my game going long Goldman at support and selling at resistance it seemed like all day long. Until the one time it didn't work:) Still a fun day though.

    Generally though I feel the junior miners are, particularly now, really compelling buys.

    Does anyone "know anything" about TGB?

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  96. Kyle - My impression is Vad trades in real time, I don't have the experience or tools available that are necessary to accomplish such a feat.

    No hope there really, but if I were serious at making a living at it, it would be worth a try.

    Bullet-train territory...

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  97. haha...cp, the google fiasco is my idiotic move to buy a few $500 puts expiring tomorrow with the hopes they would miss earnings. a very intelligent move would have involved buying one put and one call, each priced $35 from the price at the time i bought the puts. those, assuming the price stays where it is after hours, would have resulted in a 5 fold move. so $350 invested in one put and call would be worth about $2,000.

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  98. shark - I'm not a 'member' of Vad's group, but I did buy his 1st book 'Techniques of Tape Reading'. The first part talks about some of his initial mistakes and how they led to his current style. There was a big loss on an over-night hold of ESOL in March '97 that led him away from over-night holds. On p.15, he talks about trying to trade 'small stocks' that were 'getting activity on fresh news' and winning 'fast-trigger contests' re getting in & out before other contestants.

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  99. TGB - Not really knowing anything about it other than by faith, I'd say it's a great company.

    A quick peek at a 52wk chart shows me it's near previous highs, so I'd ask myself which way the market's going from here in addition to what effect an event like today's might have on share holder confidence.

    Looks like someone's in direct control of that one, doesn't it?

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  100. cp - it is 'real-time' although some of the chart patterns do evolve over much longer time-frames if I understand correctly. Can you pull up a 3day-5min chart of VXX?? It looked like a Cup&Handle w/ all of yday being the 'cup' at the 14.60 level and then the 'up-shot' over 14.6 coming at 11:30 or so.

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  101. Re: Adding BAC @ 12.51/ SMH @ 28.15>>SMH off @ 28.51... newSubmitted by 2nd_ave (4751 comments) on Thu, 10/14/2010 - 17:06 #71672 (in reply to #71633)
    after hours on the goog news...

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  102. TOF - An intelligent "fiasco" such as your second scenario sounds much better planned than your actual move.

    Uncharted territory for me...

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  103. BTW - GOOG is a pretty impressive competitor, it must've taken some guts to bet against them.

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  104. Re: WFC @ 24.45>> Closing @ 24.76 newSubmitted by 2nd_ave (4752 comments) on Thu, 10/14/2010 - 17:10 #71674 (in reply to #71617)
    I'll take the gains. Keeping the BAC for now...

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  105. Re: Adding BAC @ 12.51>> BAC off @ 12.56 newSubmitted by 2nd_ave (4753 comments) on Thu, 10/14/2010 - 17:12 #71675 (in reply to #71672)
    Screw it. No trust in the overnight action whatsoever in this crazy market...

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  106. VXX - Yes, I see a C&H pattern with bottom of cup formed yesterday. So how do you play that, is the play in progress npw or already complete?

    From my understanding, the end of the handle is significant in determining future direction.

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  107. If Wall Street were to outsource their foreclosure robo-signing to India, wouldn't that be a kick in the pants?

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  108. cp - the play is already complete. What happens overnight, POMO, Friday positioning, ... will certainly effect what happens next, BUT it's those patterns - those 'snap-shot' patterns that Vad seems to focus on.

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  109. shark - I'm not so sure that there isn't an 'investment' component in Vad's stock selection. I haven't looked at his trades today (other than APOL which doesn't fit the mold), but many of his trading vehicles (LVS, RIMM, CAT, CHKP, FCX, HIG) are what I would call 'Upper-BB' huggers. Take a look at the 1yr-daily...they're in the Upper-BB

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  110. CP - it happens. i only put $1k into the trade so it's not a big deal given how much I've made over the past couple of months, but you never like to give money back.

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  111. Gold About to Stall/Crash? newSubmitted by teamonfuego (2203 comments) on Thu, 10/14/2010 - 17:31 #71676
    The past 6 weeks has been unGodly good to me from an investing standpoint. My thought yesterday was to not give my money back after big gains. However, this thinking can make me miss what could turn out to be a continuation of the market move. However, I don't want to go crazy with highly speculative stocks given the run we have had. If the markets continue to move higher, I think the one asset class that is ultimately going to be affected the most is gold. I think the chorus around additional stimulus will become muted and the urge for QE2 will subside. While the long term trend seems great, the chart for gold looks clearly over extended and the volume in the ultra shorts is really high, which in the past has coincided with big down moves in gold. So with this thinking, I decided to open a big short gold position (through DGZ and DZZ).

    Today's volume in the markets was huge yet again. heavy volume on a rising market generally speaking means the market is going higher, maybe much higher. If this happens, I think it could spell doom for the price of gold for a while. What happens if the economy is actually stronger than people think? What if equities are set to go to 1,300, which will translate into jobs growth and no need for QE2? in that scenario, you could easily see gold off 20% in my mind. At least, that's how I'm betting.

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  112. Re: Gold About to Stall/Crash? newSubmitted by teamonfuego (2204 comments) on Thu, 10/14/2010 - 18:07 #71679 (in reply to #71677)
    Silver:
    1 Day: +2.29%
    5 Day: +9.12%
    1 Month: +19.84%
    3 Month: +33.79%

    If that's not a parabolic move I don't know what is

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  113. TOF - I bet you don't get any coherent responses on your gold short.

    QE2 - I also have doubts it will occur, but you never know. I do still think there's not much cause for a stronger dollar at this point given the way things have gone for the past 20 years in terms of constant import with minuscule creation of value while only exporting employment and technology.

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  114. TOF - I also see a C&H pattern in the recent CADC chart, with the bottom being ~$3 and the handle that seems to indicate further downside in the cards.

    But I've found I'm not much good at nailing these kind of patterns...

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  115. I meant Kyle, on that last post...

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  116. cp - what timeframe are you looking at??? It's volume was only 167K... all I see is 'chicken-scratch'. Sorry man, can't help much with that one...

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  117. Here, in a nutshell, is what BACML has spewed about QE2:

    "What is the threshold for the Fed to restart asset purchases?
    The Fed is only likely to adopt “QE2” if the outlook deteriorates much further. We
    see three possible triggers: (1) below-trend growth of 2% or less on a sustained
    basis, (2) unemployment rising back to 10% or beyond, or (3) clear signs of
    deflation. If the Fed had conventional tools to deploy, we think they would have
    already eased policy further. But given the uncertain effects of QE and the current
    growth outlook, and our view of the possible triggers, we see roughly a 35%
    chance that the Fed will take that step within the next 12 months."

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  118. "Investopedia explains Cup and Handle
    A couple points on trying to detect cup and handles: Length - Generally, cups with longer and more "U" shaped bottoms, the stronger the signal. Avoid cups with a sharp "V" bottoms. Depth - Ideally, the cup should not be too deep. Also, avoid handles which are too deep since the handles should form in the top half of the cup pattern. Volume - Volume should dry up on the decline and remain lower than average in the base of the bowl. It should then increase when the stock finally starts to make its move back up to test the old high. Retest (of old high) - doesn't have touch or come within a few ticks of old high. However, the further the top of the handle is away from the highs, the more significant the breakout needs to be."

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  119. Kyle - I was thinking the cup began to form beginning September and only just was completed four sessions ago, we're into the handle now...???

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  120. So if Vad's right and VXX is completing a C&H pattern, then according to Investopedia there should be additional upside from here.

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  121. So TZA is off AH, if VXX is headed up then wouldn't we anticipate some downside tomorrow?

    Maybe GOOG will sell off despite their earnings?

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  122. Inflation: "Be careful what you wish for"

    Oh sure, so we shouldn't anticipate any clamoring for this planet's unlimited natural resources as the human race expands exponentially and the US has managed to export it's technology along with it's jobs and has been running solely on debt for the past 20 years!

    Be real.

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  123. Chicken, Kyle, That C+H on VXX is not a play Vad would do. The cup bottom is an all time low. The best C+H patterns are on up trending stocks near an intermittent high or after a long consolidation period. tape readers/Chartist don't like this pattern at the lows because there is a boat load of resistance above a break out from the formations. I believe VADS reversal trades are usually capitulations or double bottoms. But I hope it doesn't breakout because i am short the VXX, so don't listen to me.
    Bob

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  124. RB - I'm short VXX as well in a way, just not directly.

    Maybe WDC will eventually discover mechanisms that don't destroy job creation in this country?

    GLTA!

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