Thursday, September 22, 2016

9/22/16 Get Shorty-> Get Short

It's not often my sixth sense signals an outright short, but it's kicking in this evening.  If I were to play it, I would play it safe using very liquid inverse ETFs such as SDS (2x inverse SPX).  My time horizon would be no longer than 2-3 days at a time.

The 2-day post-Fed rally feels like a bull trap, a short-covering rally that lures sidelined investors into buying, only to rise a few days later to a gap down that leaves all positions underwater.

33 comments:

  1. As always, the intuition about daily moves never fails 2nd_ave. :)

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  2. However, I will take a longer time horizon and will point out that the copper price has broken to the upside from the recent 4-day flat period, which in turn was a consolidation of the previous jump. So the up move is continuing. Now, take a look at the 5-year copper price chart. It has created a flag at the bottom, and if I were to guess the direction of the breakout from that flag, it would be UP! And given the recent gains in the copper price, that move might have already begun! So I decided to reload now at $10.65 the shares of FCX I sold yesterday at $11.02 (I actually bought almost twice as many shares as I sold yesterday).

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    1. Wouldn't it be funny if the Cooperman insider trading had to do with MMR/PXP/FCX? Bunch of fucking crooks.

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  3. That flag in AAPL is getting prettier and prettier....

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  4. BB- Do we have anything tangible on DB?

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  5. Bought some more BTE now at $3.87. Its downdraft has flattened out over the past 10 days, and the 5-year chart of front-month futures for oil (CL1) does give me a sense that a breakout to the upside is the next move.

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  6. Reopening all positions at today's close.

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    1. If I had to give a reason, it would be Hilary's performance last night. I think investors are underestimating the bullish implications, and there will be a delayed reaction.

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    2. I should at least spell Hillary's name correctly!

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    3. Smart move is my take. I haven't made many moves in a long while, just waiting it out.

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  7. Video starts around 17 minutes:
    http://www.spacex.com/mars

    There's a reason people are paying the price they're paying for TSLA

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    1. Watched quite a bit of this - smart guy and lays it out well - maybe he can make it happen.

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  8. Mark,

    no way to know on DB now. Not sure if the $14 billion the US is asking for is real, they were expecting around $5. If it is, DB is a mess. If it is around $5, stock should have a good jump. Lot of cross-currents and there is a lot of upside, but hard to say right now.

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  9. My purchase of BTE on Monday at $3.87 actually put me into a margin debt, so I will be quick to exit that position and just sold it at $4.27.

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  10. 2nd_ave, what did Hillary say that made you feel bullish?

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    1. As I recall, it was her comment re NATO and the importance of the US keeping its promises to its allies. At that point (and based on the fact that she was clearly winning the debate at that point), I thought to myself that world stocks would likely rally the following day.

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    2. So Hillary is positive for stocks and Trump isn't? Why is that? I thought he is promising to focus on the economy rather than wasting money in military engagements abroad?

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  11. http://money.cnn.com/2016/09/28/investing/oil-surges-after-opec-informal-meeting/index.html

    Oil prices spike +5% in the wake of an OPEC agreement to curtail production. The effect on emerging markets indexes (in my opinion) was muted. Yet another reason to expect significantly higher world stock prices as we head into October.

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    1. Still holding FCX calls, David?

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    2. Yes, and a very large number of shares, which consumed all my buying power and caused me to buy BTE on margin. Can't shake off the feeling that I get from looking at the 5-year copper chart that the bottom is in and the next move is up. Especially because all other metals are rallying -- see BHP.

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    3. Which strike/expiration would you recommend to someone opening a new position tomorrow?

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    4. I would recommend using shares, which gives you infinite expiration and no volatility premium to pay. :) I bought some calls only because I was running out of funds to invest, and I wanted to get much more exposure with a small investment. Still, I chose the longest possible expiration (2018) and a strike of $8, so as to have plenty of time before things finally start going my way and also so as to pay less for volatility premium. Using a strike of 80% of the current price gives me a 5:1 leverage, which is what I want. I am not looking for a multi-bagger (buying OOM options is the surest way to lose money) -- I am just looking for some leverage...

      But even that is risky -- say a recession starts soon and all commodities collapse again. So its best to just buy more shares if you want more exposure and still have some funds left...

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  12. The DJIA (along with just about everything else) is selling off, currently -171 points. This is a positive. How so?

    (a) The goal is to see new all time highs in the US indexes.
    (b) Current bullish sentiment is (make that was) a barrier.
    (c) Today's selloff (attributed by the media to worries over Germany's Deutsche Bank crisis (http://www.cnbc.com/2016/09/29/the-deutsche-bank-crisis-how-we-got-here-and-where-we-are.html) inspires enough fear to drive sentiment to 'acceptably bullish' depths.
    (d) It's certainly possible we could have hit new highs without a pullback. However, it would have been unlikely to 'hold.'
    (e) Following today's decline, the odds markedly improve for a sustainable rally in the SPX (one that breaches and then remains above 2200).

    In other words, I agree with Carl Futia.

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  13. Folks, did you see that $4.50 print on BTE today? That was my sell limit order getting hit for the shares I bought at $3.80.Thats nice. :) But why isn't FCX rallying today with oil up 2 pct? I thought that oil price is a major worry for FCX and in the recent past it tracked oil pretty accurately...

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    1. Why? The market only allows one lottery win each day!

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    2. OK, OK... :) Well, my FCX calls still have 1.5 years till expiration, so I can wait a little longer for FCX to rally. Say another week. :)

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  14. Replies
    1. My caveat is I have had zero luck with this stock this year so take it for what its worth

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    2. Mike, I got stopped out of FCX twice already, and my most recent entry was around $10.60. So if it gets to $11, I will just make up the losses I had when I was stopped out... But I do remember Alexander Elder in his classic book "Come into my trading room" saying that amateurs buy stocks like lottery tickets: they either win big or lose big. Professionals, on the other hand, use stops and they don't mind being stopped out a few times before they finally nail the trade. I am trying to change my trading pattern from hope-based amateurish to a professional one, where most of the trades end up in small losses, but a few end up in big gains that outweigh the sum of small losses...

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    3. Well, I did make an amateurish purchase of FCX calls when it dropped to $9.80, without any stop... But I did not spend too much money on them, so I won't be shaken if they expire worthless...

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  15. Copper price is falling tonight...

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  16. Let's see if I get lucky with another of my favorite trading vehicles of the recent months: placed a sell limit order at $8.08 for the shares of HLX that I picked up during the recent pullback at $7.08.

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