Friday, August 26, 2016

8/26/16 Get Shorty

Have you noticed the number of high-profile investors (most notably George Soros + the Goldman Sachs team) calling for a market downturn?  The right question to ask is why.  In my opinion, they sold out earlier (in Soros' case, hedged with SPY puts) and are hoping to reenter at lower prices.

This morning, Janet Yellen is signaling an increase in interest rates.  The DJIA promptly responded by rallying +120 points.  So a rate hike was already priced in.

I still believe we're overdue for a sharp dive, but for the time being a combination of skepticism (record high cash positions reported by global funds, all the more remarkable as US indexes set new highs) + short bets has placed a 'floor' under the markets.  

My best guess?  The S&P500 (currently trading around 2184) will rise another 4-5% before we take a nosedive.  Of course, it's only a guess and we may well spiral down before Labor Day!

26 comments:

  1. The +120-point spike in the DJIA transitioned to a -90-point dive, which has now recovered to near parity with Thursday's close.

    The above comes close to an ideal scenario, as it likely bumped off short-term Nellies (who will later help the averages clear resistance when they inevitably buy back in!).

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  2. Interest rates up and the US$ up as well after initial drops. Gold backed down after it's spike.

    Personally, I think the the growth phase for the economy and the market is finally starting. We'll see as we've had a lot of headfakes, but rising rates due to a good economy is a positive.

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  3. Just as one Hulbert article starts to tick me off with its bearish tint, he decides to print another with the opposite take.

    http://www.marketwatch.com/story/surprise-gold-has-bullish-news-for-the-stock-market-2016-08-26?siteid=rss&utm_source=tf

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    Replies
    1. I realize the time horizons are quite different, but just the same.

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  4. DJIA +100 in early trading. SPX (S&P500) +0.5% to 2179. I think the SPX is on its way to 2200, which will be a new all-time high. It may take several weeks to decisively breach 2200 (in some ways the longer the better, in order to create a solid 'support' level) but once we do I think a year-end target of 2300 will be in play.

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  5. BTE had a noticeable pullback already from $5.5 where I sold it last week, so I started scaling back in, buying some now at $4.80.

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  6. Been a few days....still holding the same positions....

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  7. Replies
    1. Wow, actually kinda looks like SEDG. Bumping into it's lower sloping MA.

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  8. http://www.marketwatch.com/story/get-ready-for-a-5-10-stock-market-drop-2016-08-30

    The above story is an example of the kind of headline I want to see. Each instance lessens the odds a decline will actually occur.

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    1. Well, if that there are only a few such articles circulating, then they might have a point -- investors indeed got very bullish, judging by popular-followed measures. If, however, such articles are in the majority, then they jointly might have missed the point when the majority of investors have turned bearish...

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  9. Under my assumption that we are in a new bull market for gold, a pullback in GDXJ to about $40 seems quite reasonable on a 1-year chart. I've been waiting for it, and now that we are almost there, I bought some GDXJ at $41.47.

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  10. It is amazing how much out of sync with the sector can the crappy stocks like MTL move. First, the sector (SLX) has been going up for a long time, MTL was declining. Now, SLX has been steadily declining for a while, while MTL is shooting up. The remaining part of my position was sold today when my sell limit I set at $1.99 was triggered at $2.02. That was about my cost basis, so I didn't make anything on MTL, but I didn't lose anything either! :)

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  11. How boring has Aug '16 been? S&P 500 has traded in a range of 1.54% (based on closing prices). Since '28, only 6 months have been less.

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    1. BB, has something about Rolls Royce, have not read it and do not know if you still hold it. FWIW

      http://www.marketfolly.com/2016/08/ruane-cunniff-sequoia-fund-investor-day.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MarketFolly+%28Market+Folly%29

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    2. Thanks T3d. I'm still holding and down about 10% on this, but sure seems like the type of stock that should do well longer term as its new engines roll.

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  12. Placing a sell limit at $45 for the shares of GDXJ I purchased yesterday. I think there is a good chance that GDXJ will carve out a bottom between $40 and $45, and so I'll have another chance to buy it back near $40.

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    Replies
    1. This order was triggered this morning at 45.63 -- always nice to see price improvement. :)

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  13. Now that we had some kind of a low for a couple of days, it is possible to buy some commodities now and place a stop at yesterday's lows. So I just bought a decent size position in BHP $30.65 and placed a stop at $29.90. The stop is close by, so my maximum loss, even on a large position is small...

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  14. Notice how my strategy has changed. In the past, I would have been just buying on the way down. Now I am waiting for some kind of a bottom to form, for the price to rise above this bottom, and only then do I buy with a stop under the recently formed bottom.

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  15. There is a small chance that SEDG made a local bottom yesterday, so I just bought some at $17.08 and placed a sell stop limit at $16.70/$16.60.

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    Replies
    1. Will buy more SEDG if it rises above $19 without breaking yesterday's low, for in that case the chance of that indeed being a low will rise, IMO.

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  16. I'll also make an assumption that FCX had bottomed yesterday at its strong support of $10. So I just bought some at $10.47 and placed a sell stop at $9.98/$9.9.

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  17. I hope everyone had a great long weekend! I am still in the Sierras with my family, exploring wild lakes and streams, where my boys are trying to fish... Did anyone also go out into the wild for this weekend?

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  18. It's near freezing here at night, so my wife asked to stay in a hotel, and we did find one in the El Dorado National Forest. There is also WiFi here, so taking advantage of it, I looked at what is happening with stocks and saw that oil is barely positive, but most oil related stocks are up strong. This suggests that more upside is to follow, and so I decided to reload HLX at 7.53 which I sold two weeks ago at 8.40. HLX is not following the crowd yet, but it soon should.

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