Sunday, March 20, 2011

3/20/11 Aftermath



cp- It's been a series of wild storms in the Bay Area.

Aftermath newSubmitted by 2nd_ave (5342 comments) on Sun, 03/20/2011 - 13:00 #81962
The litany of Libya/Japan headlines over the weekend increases the likelihood (IMO) the SPX climbs quickly to 1300 early in the week. The same investors who sold at 1250 will have to fight the impulse to chase at 1300. Should they cave in, the SPX will turn back down. If the rally continues without them, then I think we hit new highs by the end of March.

Which brings up a question re 'volume' that I would direct to Vad. During last year's rally from 1040, a recurring 'theme' among commentators was 'low volume-' the implication being that low-volume rallies were suspect. Is it not in fact a bullish scenario- an invitation to climb aboard before the crowd? Once high volume comes into play, who's left to buy? High volume purchases by 'smart money' (aka strong hands) puts a floor under stock prices- as a trader, however, one generally seeks to fade sentiment.
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75 comments:

  1. 2nd_aveMarch 20, 2011 at 10:12 AM

    Finally got around to watching Wall Street 2 last night. A little disappointing, but I enjoyed watching Frank Langella play the founder of a brokerage firm that gets taken down in the first minutes of the film.

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  2. 2nd_aveMarch 20, 2011 at 10:12 AM

    Immediate aftermath? Up.
    Over the next 2 weeks? Down.

    Simply the rhythm of the markets.

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  3. 2nd_aveMarch 20, 2011 at 10:20 AM

    Re: Aftermath/ Immediate v Intermediate newSubmitted by 2nd_ave (5343 comments) on Sun, 03/20/2011 - 13:20 #81963 (in reply to #81962)
    Immediate aftermath? Up.
    Over the next two weeks? Down.

    The rhythm of human sentiment. Too negative last week. Lingering negativity over the weekend. Rally early in the week. Then sobering assessements of the clean-up/economic impact of the tsunami + war in Libya start to weigh. Ultimately, of course, both are minor speed bumps (no disrespect intended to those affected) when taking a long-term view of the paths of market prices.

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  4. ChickenpookieMarch 20, 2011 at 11:39 AM

    Yes rally. Looking forward to weak volume. High volume indicates smart money selling at top to, and buying at bottom from, dumb money.

    We experienced a volume spike at last week's low.

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  5. ChickenpookieMarch 20, 2011 at 11:40 AM

    Wild, wild horses.

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  6. MarkWMarch 20, 2011 at 12:39 PM

    Wild indeed. Just finished cleaning up outside. Yikes.

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  7. teamonfuegoMarch 20, 2011 at 3:27 PM

    I don't even want to consider what I have to clean up outside...it's been two months since I did that.

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  8. MarkWMarch 20, 2011 at 5:51 PM

    Futes holding up well, but crude is in that danger zone again.

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  9. MarkWMarch 20, 2011 at 6:21 PM

    Interesting from Stratfor...

    http://www.stratfor.com/analysis/20110307-libyas-opposition-leadership-comes-focus?utm_source=SpecialReport&utm_medium=email&utm_campaign=110320&utm_content=readmore&elq=1c5af691ef6d4b23ace2fbdd96949ce9

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  10. MarkWMarch 20, 2011 at 7:58 PM

    Looks like the No Fly Zone also covers any flies buzzing around Gaddafi's compound.

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  11. illiniMarch 20, 2011 at 9:09 PM

    Yeah. When Reagan struck it was curtains for one of Qaddafi's young daughters. The guy just can't get no respect. More "Shock and Awe"?

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  12. DavidMarch 20, 2011 at 9:47 PM

    I am reviewing the outcome of Friday's OpEx for me, and here is what I see:

    1. The 10 March $5 puts on GMO that I sold on Jan 31 for $0.5 have expired, earning me a $500 profit (10% in 7 weeks). I actually hoped that these puts will be assigned to me, allowing me to add another 1K shares of GMO to my core position at the cost basis of $4.5. But then, if GMO hovers around $5 and I keep selling $5 puts on it that will keep expiring, I won't mind that either. :)

    2. The 10 March $5 puts on RBY that I sold on Feb 15 for $0.35 were assigned to me, giving me 1K shares of RBY at the cost basis of $4.65. Aside from these shares, I have 1K shares I purchased at $5.16 in late February, 1K I purchased in mid-March at $4.63 and 1K shares I purchased last week at $4.28. Since I have no spare cash right now, I think I should sell some RBY so as to raise cash for other adventures that may come my way. Thus, I have just placed a sell limit order at $4.88 for 1K shares I picked up last week at $4.28. If this limit gets hit and then RBY rises above $5, I'll sell 20 $5 calls against the 2K shares I picked up at $4.64, and will keep the 1K shares I picked up at $5.16 as my core position.

    3. The March $7.50 puts on SORL I sold in early February for $0.65 were assigned to me. However, in February I also bought 500 shares of SORL at $7.05 and then sold them a few days later at $7.45. Thus, the cost basis of the 1K shares of SORL I got on Friday is actually $6.65. I'll keep these shares for the long term, and if the whole Chinese automotive sector starts moving up, I will instead start scaling out of WATG, so as to own two companies in that space for risk diversification.

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  13. RoBearMarch 20, 2011 at 10:30 PM

    David i think it is a oxymoron to have Chinese auto parts companies and risk diversification in the same sentence.:) Great job selling risk. How liquid is the options on GMO. In other words did you have to wait a long time to sell the puts?

    Although the mood seems bullish going into tomorrow i found very little of interest on the frigin charts.
    RES RNOW Keg IRBT on the long side and EMC, APKT and the ever present VXX on the short side. Like SKH here at the 50. will watch if interest picks up in this one. Still 100% cash and if I do add it will be half lots. Should be an interesting week.

    2nd: The low volume caution has been going on since the rally began, but what is different is the much higher volume on the down days. Of coarse we didn't have too many down days for most of the rally. I think we are range bound through this week.

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  14. DavidMarch 20, 2011 at 10:37 PM

    RoBear: even though both WATG and SORL are suffering from the same negative attitude toward Chinese companies now, they do have a different structure underneath (SORL doesn't have nearly as much debt as WATG and also, unlike WATG, has no large "intangible" assets on its balance sheet).

    As for GMO, the spread on those puts is not that horrendous, and with some patience, placing a sell limit at the asking price might get your order to execute in a few hours (unless the stock price rallies).

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  15. RoBearMarch 20, 2011 at 10:42 PM

    The Libya thing really shows the hypocrisy of the US and seals Obama's legacy as "the new boss just like the old boss. We won't get change again." Good news is i can recycle my "Our land not OIL LAND." Picket signs.

    Maybe as my quiet protest I will throw away more money on our ignored energy solution, WPRT and CLNE. That will show them!

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  16. JesseMarch 21, 2011 at 2:39 AM

    It appears as if I'm back for what might just be a day or two. The fight for the Great Firewall of China is as intense as its ever been over here in Beijing. The government has now shut down all VPN's and virtually every single website any Westerner would want to visit. Anyhow, I'm currently using a server in the States that only 3 Chinese are sharing. I give it a day or 2...tops.

    Anyway, most of the people hangin' here over the past couple of months know that I have been a "perma-bear". This had been due to the near record-breaking bullish extremes being set left and right. The most worrisome for me was the "smart money" OEX put positioning. Their put positions reached record levels last month only reached in 1986, 2000, and 2007. Additionally, commercial hedgers had reached an all-time high net short position in the Q's.

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  17. JesseMarch 21, 2011 at 2:53 AM

    It looks like things may be starting to change and there MAY be light at the end of the bullish tunnel. I have closed my XLE puts and will be waiting should any bullish "special situations" materialize (outside of natural gas).

    Per today's Sentimentrader:

    "Commercial hedgers in the major equity index futures have made a quick change to their positioning, scrambling to reduce their net short exposure to one of the lowest amounts we've seen in the past few years.....


    Our sentiment guides have made a surprisingly quick about-face, and we now have a plurality of bullish (for the market) indicators for the first time in six months. Only a few are in truly extreme territory, but from a sentiment perspective risk is now considerably less than any other point in the past few months.

    There were 3 other years when the S&P 500 had performed this poorly this far into the 3rd year of a presidential term (the others were 1955, 2003 and 2007). For the rest of the year, the maximum loss was -0.0%, -5.8% and -4.5%, compared to maximum gains of +29.1%, +25.3% and +9.9%, respectively.

    The price pattern in the S&P is obviously a bit troubling due to the lower low, but when we see a multi-month low with exceptionally high volume, as we did on March 16th, we normally get an intermediate-term low from 2 - 18 days afterward, usually with no more than about a -3% drawdown. So we'll be looking for some sort of re-test of the recent mini-panic selling, and even more extremes among our sentiment guides, which should greatly decrease risk for longs on a multi-month time frame......Last week, commercial hedgers covered their shorts with urgency. At this point, hedgers are net long the major indexes, with the biggest change coming in what has been the most reliable contract, the Nasdaq 100.

    This measure has its faults and failures, like every other, but generally it has been better to trade in the same direction as the hedgers when they reach an extremely high net position. Currently, they are just off their most net-long position since the 2009 bottom, so that's a fairly positive sign going forward."

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  18. 2nd_aveMarch 21, 2011 at 6:12 AM

    Press The Place Bets> CSCO/GE/INTC/WFC newSubmitted by 2nd_ave (5344 comments) on Mon, 03/21/2011 - 09:11 #81985
    More or less doubled down premarket. Bet is we see buyers rather than sellers on these large caps on a gap up.

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  19. 2nd_aveMarch 21, 2011 at 6:15 AM

    Re: Press The Place Bets> CSCO/GE/INTC/WFC newSubmitted by 2nd_ave (5345 comments) on Mon, 03/21/2011 - 09:15 #81986 (in reply to #81985)
    On the other hand, I'm a seller not much higher than where SPX futures seem to be headed right now.

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  20. 2nd_aveMarch 21, 2011 at 6:24 AM

    IQ in DC newSubmitted by 2nd_ave (5346 comments) on Mon, 03/21/2011 - 09:24 #81988 (in reply to #81983)
    "Nobody ever went broke underestimating the intelligence of the American public." - H. L. Mencken

    Grym- The cartels toast Congress and the DEA every time they escalate the 'war on drugs.'

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  21. 2nd_aveMarch 21, 2011 at 6:29 AM

    Overnight Spike In Sentiment? newSubmitted by 2nd_ave (5347 comments) on Mon, 03/21/2011 - 09:28 #81989
    The opening gap up appears 'off.' The change in sentiment feels like an overnight weather change.

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  22. 2nd_aveMarch 21, 2011 at 6:36 AM

    Re: Press The Place Bets> GE/CSCO/INTC off newSubmitted by 2nd_ave (5348 comments) on Mon, 03/21/2011 - 09:36 #81992 (in reply to #81986)
    GE off 19.66
    CSCO off 19.35
    INTC off 20.11

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  23. 2nd_aveMarch 21, 2011 at 6:39 AM

    WFC off 31.75/ Way Too Bullish For Me> Back To Cash newSubmitted by 2nd_ave (5349 comments) on Mon, 03/21/2011 - 09:38 #81994
    Sell target SPX 1295. No second-guessing.

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  24. MarkWMarch 21, 2011 at 6:40 AM

    Not sure here. Their selling the XLF pretty hard.

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  25. MarkWMarch 21, 2011 at 6:41 AM

    Same thing with X.

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  26. teamonfuegoMarch 21, 2011 at 6:58 AM

    I'm thinking we move up to 1,310 now given the amount of shorts that got caught on the wrong side...plus, this will give a lot of false hope before a drop back down to 1,260, then a move back up to old highs. Given that most of my positions are a decent amount lower I'm putting my stops in place in case I'm wrong and we just move up to old highs.

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  27. 2nd_aveMarch 21, 2011 at 6:59 AM

    May have misjudged how high they take the SPX given the bullishness this am, but no misgivings about being in cash.

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  28. MarkWMarch 21, 2011 at 7:09 AM

    SDS @ 21.80.

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  29. 2nd_aveMarch 21, 2011 at 7:14 AM

    TZA @ 39.82

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  30. 2nd_aveMarch 21, 2011 at 7:18 AM

    TZA off @ 40.03. Short date.

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  31. MarkWMarch 21, 2011 at 7:29 AM

    Short XLE @ 77.44. R2

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  32. 2nd_aveMarch 21, 2011 at 7:43 AM

    TZA @ 39.95

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  33. MarkWMarch 21, 2011 at 7:57 AM

    XLE/SDS off for $280 bucks. Whatever...

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  34. teamonfuegoMarch 21, 2011 at 8:04 AM

    Guys the bears were leaning too hard in one direction. I wouldn't be surprised if we go to 1,310 just to catch everyone off guard, then a drop back down to 1,250-1,260.

    Also, a lot of people have been talking about low volume on the upswings. One thing I have noticed that actually has volume on the moves up is REDF, believe it or not. FD: I'm long a good chunk of this from $5.48 last Tuesday so I might be biased. Also check out SIFY which has a much nicer chart than REDF.

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  35. 2nd_aveMarch 21, 2011 at 8:09 AM

    Re: TZA @ 39.95/ Stopped out 39.65 newSubmitted by 2nd_ave (5351 comments) on Mon, 03/21/2011 - 11:08 #82002 (in reply to #82000)
    Should have known better.

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  36. 2nd_aveMarch 21, 2011 at 8:22 AM

    TZA @ 39.49 newSubmitted by 2nd_ave (5352 comments) on Mon, 03/21/2011 - 11:21 #82004
    Hopeless.

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  37. 2nd_aveMarch 21, 2011 at 8:35 AM

    Re: TZA @ 39.49/ Off 39.70 newSubmitted by 2nd_ave (5353 comments) on Mon, 03/21/2011 - 11:34 #82007 (in reply to #82004)
    ...

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  38. teamonfuegoMarch 21, 2011 at 9:20 AM

    LVS doing very well today...here's a recent note out today on them:
    http://www.streetinsider.com/Analyst+Comments/UPDATE%3A+Citadel+Securities+Upgrades+Las+Vegas+Sands+(LVS)+to+Add,+Accusations+Will+Blow+Right+Over/6379420.html

    FD: Long from $37.1 on Friday.

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  39. MarkWMarch 21, 2011 at 10:17 AM

    LVS- Nice bottom fishing. I might have joined you if I'd seen that comment. Top of recent range here.

    I still think we roll over today. How much more money has to come out of the financials to prop things up.

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  40. MarkWMarch 21, 2011 at 10:19 AM

    RAS got a nice pop on closing the offering. The trade is on the next move though.

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  41. 2nd_aveMarch 21, 2011 at 10:25 AM

    Re: In EDZ at 21.03, perma short BAC/ TZA @ 39.87 newSubmitted by 2nd_ave (5354 comments) on Mon, 03/21/2011 - 13:24 #82015 (in reply to #82013)
    jack- I'll let this one ride.

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  42. 2nd_aveMarch 21, 2011 at 10:33 AM

    Re: In EDZ at 21.03, perma short BAC/ TZA @ 39.87>OFF 40.10 newSubmitted by 2nd_ave (5355 comments) on Mon, 03/21/2011 - 13:33 #82016 (in reply to #82015)
    In this market, 8 minutes qualifies as 'letting it ride.' ;)

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  43. MarkWMarch 21, 2011 at 10:48 AM

    JB- Is that you panic buying CRYP?? :)

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  44. DavidMarch 21, 2011 at 10:50 AM

    Forgot to mention that in November, when HEK was $4, I bought some call options on HEK, and the HEK shares were assigned to me last Friday. With HEK trading at $6.20 now, you would think that I made a killing on this calls, right? Well, to my surprise, the profit was barely significant in the grand scheme of things. I bought only 5 calls and chose a deep in the money strike of $2.50 for them. As a result, the calls have only doubled in price, and the total gain was only about 0.5% of my port. And this is only a paper gain so far, since I haven't sold these HEK shares yet. I placed a sell stop limit order at $5.9/$5.85 and will let these shares run.

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  45. teamonfuegoMarch 21, 2011 at 11:12 AM

    David - Unless you're a gambler, options shouldn't have a big impact on your port...they're too dangerous. Nonetheless it was a great trade. HEK is a beast.

    Speaking of beasts...LVS looks like it wants a 4 handle today.

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  46. 2nd_aveMarch 21, 2011 at 11:38 AM

    TZA @ 39.67
    Submitted by 2nd_ave (5357 comments) on Mon, 03/21/2011 - 14:27 #82020
    ...

    reply Bookmark this Ignore thread
    Re: TZA @ 39.67/ OFF 39.72 newSubmitted by 2nd_ave (5357 comments) on Mon, 03/21/2011 - 14:35 #82021 (in reply to #82020)
    I may think we close lower, but bulls have the momentum.

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  47. 2nd_aveMarch 21, 2011 at 11:41 AM

    TZA likely to breach day's lows? newSubmitted by 2nd_ave (5358 comments) on Mon, 03/21/2011 - 14:40 #82023
    Bulls catching a second wind.

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  48. 2nd_aveMarch 21, 2011 at 12:07 PM

    Re: TZA likely to breach day's lows?/ Last Stand TZA @ 39.69 newSubmitted by 2nd_ave (5359 comments) on Mon, 03/21/2011 - 15:07 #82025 (in reply to #82023)
    Famous last words.

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  49. ChickenpookieMarch 21, 2011 at 12:12 PM

    BCND - Weeeeeeeeeeeeeeeee!

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  50. ChickenpookieMarch 21, 2011 at 12:13 PM

    If I didn't know better, bulls are pricing in lower oil prices.

    I say this without having any knowledge of what's currently taking place in Libya.

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  51. ChickenpookieMarch 21, 2011 at 12:16 PM

    NKE - Anybody?

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  52. KyleMarch 21, 2011 at 12:18 PM

    NKE - Am short Apr 72.5 puts

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  53. 2nd_aveMarch 21, 2011 at 12:20 PM

    Retest SPX 1250 newSubmitted by 2nd_ave (5360 comments) on Mon, 03/21/2011 - 15:19 #82026
    That would be the most likely scenario. How/when is anyone's guess.

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  54. teamonfuegoMarch 21, 2011 at 12:25 PM

    Out of LVS and LVS calls at $38.7.

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  55. 2nd_aveMarch 21, 2011 at 12:25 PM

    Re: Last Stand TZA @ 39.69/ Off 39.90 newSubmitted by 2nd_ave (5361 comments) on Mon, 03/21/2011 - 15:25 #82028 (in reply to #82025)
    Done.

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  56. teamonfuegoMarch 21, 2011 at 12:57 PM

    Bought 20 x XLF April $18 Puts at $1.69.

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  57. JBmaderaMarch 21, 2011 at 1:04 PM

    Hey Mark - threw in the towel on CRYP awhile back, huge vol today but it's only back to where it was when we were trading it

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  58. 2nd_aveMarch 21, 2011 at 1:05 PM

    Taking a flyer> TZA @ 39.22 off Desolation Row in extended hrs newSubmitted by 2nd_ave (5362 comments) on Mon, 03/21/2011 - 16:04 #82029
    I don't care how wild a trader you are- this girl is wilder.

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  59. 2nd_aveMarch 21, 2011 at 1:17 PM

    Re: TZA @ 39.22 off Desolation Row/ Closed half @ 39.35
    Submitted by 2nd_ave (5364 comments) on Mon, 03/21/2011 - 16:11 #82031 (in reply to #82029)
    I'll sleep with the other half.

    reply Bookmark this Ignore thread
    Re: TZA Closed the second half @ 39.48 newSubmitted by 2nd_ave (5364 comments) on Mon, 03/21/2011 - 16:15 #82032 (in reply to #82031)
    Forget the sleepover.

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  60. teamonfuegoMarch 21, 2011 at 1:20 PM

    IYT was really strong today and broke out of the recent trend. I guess you could make the case that this is making a head and shoulders formation but those never seem to work. I still think the best play is to look to go long on panic selloffs. Those are much better odds. Obviously, it's always fun to try your hand at shorting things but I think we need to keep it really small in size.

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  61. 2nd_aveMarch 21, 2011 at 1:43 PM

    tof- You're right about position size when shorting. Keeping it small allowed me to jump in and out without breaking a sweat. I also have to say that few trades give me as much pleasure as winning on counter-trend plays on TZA or VXX ;)

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  62. 2nd_aveMarch 21, 2011 at 1:47 PM

    Going long off the tsunami lows has taken the portfolio from -1.4% to -0.3% off YTD highs. Whereas multiple intraday plays on TZA netted a few hundred max.

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  63. teamonfuegoMarch 21, 2011 at 2:03 PM

    2nd > Keeping it small until we're back under the 200 DMA is kinda like placing small bets on the undercard before the main event. No one can sit there and just watch the welterweights without any skin in the game right? That is, unless you're not human.

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  64. ChickenpookieMarch 21, 2011 at 2:34 PM

    BTU - I think I'd sell it here.

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  65. teamonfuegoMarch 21, 2011 at 3:15 PM

    Chicken > I hope a lot of people do...I'm watching and waiting for it to drop again...that and CAT. The two strongest stocks on my board.

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  66. MarkWMarch 21, 2011 at 5:25 PM

    Just to give me a reason to wake up, I left a burgundy chip on the SDS table. (21.85)

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  67. 2nd_aveMarch 21, 2011 at 5:28 PM

    We're just a couple of gaming addicts, Mark. I came that close to throwing a chip on TZA just before 5 pm. Honestly, I have no idea where we open tomorrow- Happy, however, to be in cash.

    ReplyDelete
  68. illiniMarch 21, 2011 at 6:53 PM

    CSCO finally gets some respect. RSI 7 crosses 30 on an upswing today. I hold at a loss. Still thinking it is a freaking bargain. More of a long term hold for me, until it isn't.

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  69. ChickenpookieMarch 21, 2011 at 7:40 PM

    CSCO - I agree, it's got to be a bargain. I saw them advertising a cloud presence tonight on television.

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  70. illiniMarch 21, 2011 at 8:51 PM

    CSCO - Fundamentals are VG @ price. Cash and cash flow, etc. But fundies always are second place to overall market.

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  71. ChickenpookieMarch 22, 2011 at 6:10 AM

    PKX - I knew that was coming, Yea, baby!

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  72. ChickenpookieMarch 22, 2011 at 6:45 AM

    DEER - Hah, what a funny chart, I wonder how many people were thinking the chart looked good and took the bait?

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  73. ChickenpookieMarch 22, 2011 at 7:49 AM

    Japan - I really don't understand why they want a stronger currency while their manufacturing machine is out of commission, I would think a stronger currency would provide an advantage in ordering the materials goods and services they'll be needing to rebuild.

    Their monetary emphasis is on export while import is the immediate need.

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  74. ChickenpookieMarch 22, 2011 at 9:25 AM

    What I meant was, a weaker currency.

    ReplyDelete
  75. DavidMarch 22, 2011 at 10:00 AM

    2nd_ave was so excited last night that he forgot to notify us about him making a NEW POST. :)

    ReplyDelete

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