Saturday, February 5, 2011
2/5/11 Jumpin' Jack Flash
I was drowned, I was washed up and left for dead
I fell down to my feet and I saw they bled
But it's all right now, in fact, it's a gas!
But it's all right, I'm Jumpin' Jack Flash,
It's a gas! Gas! Gas!
Trying to short the rally left me bleeding last year- no doubt about that. Now that I'm trading with the trend, it's a gas gas gas.
Re: The Role Of Chance And Coincidence/ An Extraordinary Rally newSubmitted by 2nd_ave (5234 comments) on Sat, 02/05/2011 - 19:17 #79157 (in reply to #79120)
I recall reading a fun fiction book where the presence of a certain creature caused all sorts of unlikely but possible situations to start happening. One such situation involved all the air molecules in the room to suddenly move (through random brownian motion) to the right side leaving the left side of the room a vacuum.
Possible? Yes. Likely? I forget how many lifetimes of the universe have to go by before such a thing has a decent chance of happening if "normal odds" remained in play. Let's call that unlikely too, but not impossible.
dave-
The 1929-33 bear market was punctuated by several explosive rallies. That's not fiction.
The odds that we're experiencing one now? Pretty good. The odds that we're due to retest and/or exceed the 2008 lows? I don't know. Does it really matter?
The point is to make money during this rally. That's all I'm trying to do. Sitting on the sidelines waiting for the indexes to turn over doesn't do it for me. Trying to short the rally certainly didn't work well. Now that I'm playing the long side, I'm making money.
We're programmed to look for associations/reasons/causes. The problem starts when we 'find' one- as soon as we come up with one that makes sense, we become biased. And if our bias is based on faulty premises, it gets in the way of trading prices.
Each rally during 1929-33 was followed by sell-offs that took the DJIA lower than the previous low. Anyone who shorted and held on was ultimately vindicated. Anyone who sat out the market was vindicated. But it was also possible to make money during each of the rallies- a lot of money. And there's no guarantee that 2008-12 plays out the same way. What if the low was printed in 2009, and the market never looks back? What if we in fact see GS's predicted SPX 1500 by December? It's more fun to make money while waiting to see what unfolds, no?
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Seems like gold and the S&P kinda have a correlation thing going on between them. Love affair, one night stand, or just an infatuary period?
ReplyDeleteJust more "real" than Ben's confetti. One is stuff, and the other is the best companies
ReplyDeleteI bought GLD on Nov 15 and hold at a small loss. Meantime, SPY has gone up, about 10% in relation to GLD.
ReplyDeleteWow...KGO TV channel 7 here (ABC) has paid programing on right now. (Commercial for 70's music)
ReplyDeleteThat was on after the news on a regular channel here earlier. Must be testing the concept.
ReplyDeleteRe: The market goes to "a million". newSubmitted by 2nd_ave (5235 comments) on Sat, 02/05/2011 - 21:45 #79162 (in reply to #79158)
ReplyDeleteaiki-
(a) No way the US goes 'out of business.' Even China, a country subjected to deliberate upheaval during the Cultural Revolution, never lost its balance and eventually regained its composure.
(b) Re 'karmic retribution:' A certain amount occurs in this lifetime, of course, but I believe most of it is reserved for the afterlife ;)
(c) Re 401(k)s- It's interesting that investors who diversified into let's say the SPX and held through the 2008-09 sell off are now down only -13% from the highs. So we can't use the term 'decimated.'
(d) I like your thoughts about SPX 1332. The likelihood is we turn around (initially) at 1320 in anticipation, or we gap up to 1350 on short-covering. But I would agree we see more upside before any resumption of the bear market. The exuberance seen at tops hasn't yet materialized, IMHO.
(e) Re the 4% yield. When it comes to housing, it's all about affordability and access to capital. The speculators that drove prices to unsustainable levels are mostly gone. Taking their place will be a younger, more fiscally responsible population of homeowners- the daily grind of going to work and making money the old-fashioned way will eventually stabilize the housing market and return price appreciation to historical norms. As that occurs, the yield should also return to historical norms.
(f) 'The market is always right.' Right on. It's like everything else in life- where do we get the idea that we know more than the market about the way things are supposed to work?
Good stuff- keep it up.
Mark- That's ironic. Seventies music is/was about as non-commercial as it gets.
ReplyDeleteGuys, as you scan the Web this weekend, do you get the feeling that no one is actively professing a pullback now? Even the perma-bears seem to have moderated their tone (out of pure desperation and exhaustion) and are simply saying that we shouldn't trust this rally even though there is no way to predict when it finally turns around.
ReplyDeleteDavid I agree my friend. I have made waaaaay more than I ever could have imagined playing the "bad stock" given up for dead. Im officially in transition to less risk. Started on friday by selling some ras. How much more can I honestly expect to make (percentage wise) without getting badly beaten?
ReplyDeleteOn friday I noticed some visible signs of cracking in energy...so we have seen some small cracks in high tech / momo, then gold/silver, then. Transports and small caps...and now energy. These cracks are tiny but they always start off small. I think its high time to remove high risk. If I miss the next 15 percent then I miss it. But I think im ready to move to short term trades only and play it a little safer for now until my comfort level rises and/or prices fall
Meanwhile, I would like to point out again that S&P finished Friday at the highest point during this rally, while the number of stocks hitting new 52-week highs on NYSE on Friday didn't even make it into the top 10 largest readings observed since November 2010. I think something BIG is brewing beneath the veneer of this happy rally, and when it comes out, those accustomed to buying the dips (which is pretty much everyone now) will be completely destroyed.
ReplyDeleteAs RoBear said: you make ONE mistake (as in switching to the long side NOW), and ...
The Advance/Decline line for Russell 2000 is at the same level now as in mid-December, even though Russell 2000 is higher now than it was back then:
ReplyDeletehttp://www.masterdata.com/Reports/Combined/ADLine/Daily/$RUT.htm
So the broad market stopped participating in this rally in mid-December, and since then the rally is living on "borrowed time."
So I think it is time for me to make another attempt to get back into the short side. Having learned my lesson of not shorting the winners, I'll focus exclusively on shorting the losers -- stocks/sectors that have already rolled over and are below their peaks: FCX and IWM.
ReplyDeleteLet's start with FCX. Despite the copper futures breaking out to an all time high on Friday, FCX has been flat for the past four days and is well below now the level it reached in mid-January. So if copper takes a dip now, FCX will amplify it greatly. So I have just placed a sell short stop limit order on FCX at $55/$54, just below the lowest point over the past 4 days.
Now for Russell 2000: I already have 1000 shares of TWM, and I just placed a buy stop limit for 1000 more shares at $12.10/$12.15.
Finally, my good ole friend VXX is down $2.50 from the place where I let it go, so if I get back into it 50c above its Friday's close, I'll feel like I saved myself $2. VIX is below 16 now, and so far it was able to stay below 16 at most for a couple of days. So I have just placed a buy stop limit order for 500 shares of VXX at $29.50/$29.60 and for 900 more shares at $29.75/$30 (wanted to place the second order for 1000 shares but ran out of the buying power in my main trading account).
Technically there is a good chance for a break out. QQQQs are setting up in a bullish base near resistance. If QQQQ get above 58. I think the worry about missing a large gain is going to supersede fear of a loss.
ReplyDeleteillini - You're absolutely correct: "SPY has gone up, about 10% in relation to GLD."
ReplyDeleteI must have been wishing out loud, or thinking only of this week's early action.
ABX - took a nice pop after I sold with a few pennies loss, I did considerably better in RAS.
I just can't seem to find my groove with gold...
Where to from here?
ReplyDeleteMarket is in a good position, rates are low and corporate profits are 11% of GDP. I believe these profit margins will eventually distill into an improving employment landscape.
CCME - The fur is really flying over at pumpcast news central. As hard as it is to believe Deloitte's forensics may be deficient, the bears may have a leg up.
ReplyDeleteMGA - Nice balance sheet there.
ReplyDeleteDavid - one thing I think you should be careful of: I believe group on and linkein are going public this week if I'm not mistaken...that will definitely juice the market...In fact I'm tempted to buy qqqq calls just because of this
ReplyDeleteHa..damn mobile devices...Groupon and linkedin
ReplyDeleteMorning....What a beautiful day here. Sun rising over the hills east of my house and temps in the 60's already. OK, I'm done with the jeans until next year. Shorts and flip-flops BABY!!!
ReplyDeleteI watched this video last night... http://www.alphatrends.net/ ...Yeah, it's a little long, but kinda reflects my feelings about trends/top/bottom picking.
ReplyDeleteBrilliant!!! http://boston.barstoolsports.com/random-thoughts/beer-filled-from-the-bottom/
ReplyDeleteWhat the time is it anyway? :)
craig- Was Mark Stover part of your dog trainer circle?
ReplyDeletetof- Right on. I'm debating whether to throw DJIA 12500/SPX 1350 out there.
ReplyDeleteCP--"I just can't seem to find my groove with gold..."
ReplyDeleteI know what you mean. I have a history of trading GLD and more recently miners for small profits. Then I became convinced that I must hold GLD or risk the train leaving the station without me on board. Thats where I remain except I threw out the speculative miners last week when they blasted up. That was to reduce risk but I may be sorry.
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