Monday, August 1, 2011
08/01/11 Faith is a trading strategy
The fall of 1973 I took a music composition class at the University of Michigan, which met on the 7th floor of the Bell Tower. Before introducing himself at the beginning of the first class, the prof unjacketed this LP and played 'Summer in the City.'
'Hope is not a trading strategy.' Yeah, we all know that one. But what is often dismissed as 'hope' may in fact be its fraternal twin, faith. How often have we given up and sold a position at the very point where faith should have saved us?
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Obviously, the debt ceiling has now become a non-event, and global markets are focused on the ISM.
ReplyDeleteNikkei is back around 9800.
ReplyDeleteI have to agree with CP- given his phenomenal track record, tof has achieved 'secret weapon' status.
ReplyDeleteTOF, why don't you read the complete Mauldin's writeup at http://www.investorsinsight.com/blogs/thoughts_from_the_frontline/archive/2011/07/30/an-economy-at-stall-speed.aspx? He mentioned many times that he gets information from 100's of sources daily, and it would greatly damage his reputation if he were to make up facts. He is currently educating the US senators on the US deficit problem, and I don't think he wants his reputation damaged...
ReplyDeleteFaith? I see SPX 1380 within the next few weeks. Unfortunately, it may require 40 days and 40 nights in the desert.
ReplyDeleteETP -illini - Here's an Texas oil/gas company I had on an old list, weren't you recently looking at these plays?
ReplyDeleteThat double bottom target looks to be about $52, a 9% gain from here...
David- Based on a combination of (a) record low interest rates, (b) low listing prices, and (c) a mild contrarian take on the prevailing opinion that housing prices have further to fall- I recommend you start looking.
ReplyDeleteI'll go out on a limb and opine:
ReplyDelete(a) Nikkei closes green.
(b) DJIA gaps up +30-40 points on Tuesday, and closes up 3 digits.
I recently received an e-mail notification about a new service that John Mauldin started:
ReplyDelete"So I've launched a new service, Over My Shoulder, with a laser focus on discovering unique perspectives. I'm your expert filter, going through the hundreds of analyses and reports I read each week to bring you the 5 or 10 pieces that bring a perspective different than the herd's. You'll get the discernment I've developed over 3 decades as an analyst. If you believe that opportunity comes from the quality of a different idea, instead of the quantity of the same ideas, click here to join Over My Shoulder."
I do have to say that the quality of information he brings to me in his free weekly letters is outstanding and I can fully understand why some people would want to pay for such a service.
As for me personally, I have already made my bet on ECU, and so no service will help me any more. :) Only God can help me now. :) And maybe TOF with deciding when I should hedge my downside with some put options. :))
David- Too funny. You can still save yourself by transitioning the ECU funds into a down payment on a beautiful home in Campbell.
ReplyDelete"David- Based on a combination of (a) record low interest rates, (b) low listing prices, and (c) a mild contrarian take on the prevailing opinion that housing prices have further to fall- I recommend you start looking."
ReplyDeleteI agree, 2nd_ave -- the prices of 4BR townhouses in our complex are edging down, with the most recent listing being at $520K, which is already acceptable to me. Unfortunately, ECU is still too undervalued for me to withdraw money from it, and GMO has not tripled either from my $4.50 average price. So I have no funds now for a decent down payment... Realistically, I don't think ECU will start powering higher until they release their 4Q2011 results in March 2012 and show that they have tripled their revenue relative to 1Q2011. I spoke with their investor rep last week and he said that in order to increase the output of their oxide mill from 500 tpd to 800 tpd all they needed was a new crusher, which costs a couple of million dollars, and with the $15M financing they already got from Golden Minerals, they WILL get their oxide mill to 800 tpd by 4Q2011 and they will also get their sulphide mill to its full capacity of 320 tpd from the 160 tpd it is operating at now. Plus, they will starting mining higher grade deposit now that they have plowed through all the dirt and opened up their veins for processing at a rate of 1100 tpd. So the market can go up and down, but ECU's production is moving only in one direction -- UP, and it is just a matter of time before it shows up in their quarterly reports.
2nd_ave -- my older son won the lottery for the alternative public elementary school in Cupertino (McAuliffe), and so we most likely will need to buy something in Cupertino, which is more expensive than Campbell. Thus I have no choice but to wait for my ECU position to hit $1M before withdrawing money from it. :)
ReplyDeleteDavid- That's even better! I'm not worried, and I have faith in you. You may or may not be filthy rich within the next 10-15 years, but you'll be what understated folks call 'comfortable.'
ReplyDeleteYeah, I know. The only way for me to become "rich" is to keep my ECU position for 5 years, until they build the 2000 tpd mill at Velardena and then another 1000 tpd mill at El Quevar. That can get their stock up to $50. But I'll probably succumb to the peer pressure and withdraw funds from it as soon as I'll be able to comfortably buy a home in Cupertino, and so my family will be just comfortable, having what we need and not more. On the plus side, it looks like the key to happiness is not having more than one needs, because a lot of extra headaches come from the need to manage the extra stuff.
ReplyDeleteSo how low can rates go?
ReplyDeleteObviously, the fear of default is debunked by the continuing Treasury rally, and I suppose some could make the case that today's dollar rally was a result of fewer than anticipated budget cuts in the immediate sense?
The far left and far right have vowed to block the current deal as is.
I also heard from the Pimco horse's mouth that their portfolio consists of 80% US T' paper... Hey, I thought they sold?!?!?
David- I would agree with your assessment. Having enough money to tool around in a 500S + help your kids through college + down on their own homes in the Bay Area is the sweet spot. Any more than that, and you invite some serious psychological issues- not so much on your part, but on the part of your kids.
ReplyDeleteI'm actually glad to see Asia selling off tonight.
ReplyDeletePFF - Someone mentioned this one as a possibility a few days ago (don't recall who), but the dividend is pretty decent...
ReplyDeleteTOF,
ReplyDeleteyeah, that's basically what I understand the bear argument to be as well.
I don't think we have a recession, I think we make our way through this and the world comes out a better place.
Recessions are generally caused either by an inventory correction or higher interest rate due to inflation. I don't see either of those on the horizon.
I think the real question is then "is it different this time"? Ie. is this financial crisis going to cause more problems with the economy over the next couple of years that are not associated with traditional recessions (like the 1930's).
I don't think so and the reason I don't is I believe the imbalances in the world are slowly, but surely reducing and getting back to a place where we can get sustainable growth. For example, the devaluation of the US dollar, the increasing of minimum wage in China, the refocus on manufacturing in the Western world (and not sucking all the smart people into financial services), the rise of consumers to South America, China, etc. that will take up declining demand in the west, etc.
I also see the US corporations as being at the forefront of taking advantage of this environment (and the very low interest rates supporting it) and like stocks at these valuations.
It's always easy to focus on the bad news (and I'm not saying you're doing this), but the press is, a lot of investors are and I think the upside is huge is things just work their way out.
I could see you being right about the market going down and then up, but I'm more of a long term investor and don't mind living through a 10% pullback.
CYD - That double bottom should be good for $26, a 35% gain?
ReplyDeleteHonestly, I'd be surprised if we exceed today's low, but the double top target speaks to me and dollar strength could make it happen.
ReplyDeleteSeems like everytime the dollar falls a little bit, foreign government step in to buy US T's. Sooner or later they're gonna rotate back into commodities...
ReplyDeleteThe following cmt somehow got lost, at least on my laptop with Wi-Fi on battery:
ReplyDeleteETP - CP, I don't like LP's in general since I was "took" by T. Boone in the 1980's with his Mesa Limited Partnership. It went bust. ETP has a wonderful long term record but I cannot get over my prejudice. Another negative is the tax prep paperwork technically required when an LP is sold. Just too much of a hassle but can be overlooked by the IRS (at your risk) if you are not a big bucks player and just report it as any other capital gain/loss. To do such a thing probably is a wash or maybe is even in favor of the IRS.
August 1, 2011 6:19 PM
DNR - Another O&G play that's beat down to support.
ReplyDeleteWNR - RB - You still got that position? It's been hittin' on all eight and you've been quiet as a damn mouse....
ReplyDeleteBB > I love the long term mentality...I can't quite get myself comfortable to do that yet, but I've seen plenty of fantastic setups. The volatility of this market has allowed for some pretty tremendous returns if you're just patient. I suspect these opportunities will become fewer and farther in between as volatility continues to come out of the market. The VIX spikes were in the 60's to 80's in late 08/early 09, then to the 40's in 2010, and now it's to the mid 20's.
ReplyDelete2nd > I wish I could back up the secret weapon status but it's nothing more than a string of good luck, especially on the timing of my entry points. Plus, staying on the bullish side for most of this run has helped.
David > I thought ECU got bought out...why the continued hope for more gains? Thanks for the reply on Mauldin...I trust that he's legit...I just group him in the permabear camp just as I group Birinyi and Altucher in the permabull camp.
> I thought ECU got bought out...why the continued hope for more gains?
ReplyDeleteTOF, as I posted before about ECU -- my position in ECU will be converted into a position in the new company, whose stock will become a claim on the potential cashflow from BOTH ECU's and AUMN's properties. The combined market cap of both companies is around $450 million now. Based on the 1100 tpd output at ECU's Velardena alone, the market cap of the company should be more than a billion => a 2X to 3X upside by March 2012, when the 4Q2011 results are announced. Once they add a 2000 tpd mill in a couple of years, the stock should go up a few times again, and so on...
> Thanks for the reply on Mauldin...I trust that he's legit...I just group him in the permabear camp just as I group Birinyi and Altucher in the permabull camp.
If you actually read Mauldin's letters, you'll see that he doesn't stick to any opinion about the stock's futures. He doesn't even express them. His letters are treasure boxes of interesting developments that are happening in the financial world. That's it. He leaves it up to his readers to figure out what these developments imply for the stock market.
Commodities about to come off?
ReplyDelete"Will China Burst Its Own Bubble?
A. Gary Shilling, 07.20.11, 06:00 PM EDT
Forbes Magazine dated August 08, 2011 "
http://www.forbes.com/forbes/2011/0808/investing-gary-shilling-international-investing-china-burst.html
Did the market crash of 1930 cause The Great Depression?
ReplyDeletePerhaps the FED caused the depression on purpose:
http://fintrend.com/ftf/Stock_Market/Great_Depression_Cause.asp
David - Thanks for the quick reply...will have to check out the new combined entity; however, miners ain't a strong suit for me so I'll probably steer clear of it...the industries are too cyclical for my liking and i don't understand the cyclicality of them.
ReplyDeleteAnd thanks for the reply on Mauldin. I do actually read his notes from time to time but they always tend to sound negative. Not that the economy doesn't warrant it...
CP > People always say the crash caused the Great Depression but I would say that the Depression caused the market to crash.
Moore Inflation Predictor - "It's coming"
ReplyDeletehttp://fintrend.com/ftf/mip.asp
TOF - That article leads me to believe the crash and the depression were independent of one another, it explains the the market was too small to have had an effect.
ReplyDeleteThis article claims the depression and the market were taken down by an external source, intentionally.
Note that volume was high...
ReplyDeleteCP I stupidly cashed out of WNR within a week of when I bought it. I was up 15%. It was just lunch money. Since July I have been just scalping. I even spent a week with VAD. It was fun, but could not seem to get the returns he was getting due to slippage. I am going to start swinging and hopefully trend trading (if there is a trend) next week. Hopefully will have trades every other day.And yes try to hold on to a position for longer than 10 minutes. :). Tomorrow lets go over a shopping list. We are in a range-bound mean reverting market and we are at the lower end of the channel.I would like to see 1260s so I can have support for inexpensive stops. Change methodology to buying oversold stocks that have some strength. Maybe using RSI 30 crosses on some strong stocks. I have been using RSI 14. I know you use 7 Maybe we should split the difference and use 10.5 not sure if that would break any trading laws.
ReplyDeleteHey 2nd, I understand your jail term, thanks.
ReplyDeleteECU, David it is clearly your baby and you know a lot more about it then me, but I pose the following for thought.
a) what if your wrong?
b) do you find it odd that in the second greatest bull market in gold since the 70's, it is acting poorly?
c) why leverage with borrowed money in one of the most speculative sectors in the market?
d) management lies, especially small company sub $5 guys
e)I can cite a fair number of these small stocks like this that cease to exist or are selling for pennies. BQI for one.
FWIW, the amount of risk you are doing on this one stock is extreme. Gann one of the smartest traders of our time would at his most aggressive only trade 10% of his portfolio in any one security.
I really hope it works out for you! I only say this since I been kicked in the nuts before by the market and it hurts. I once woke up with a position in Ashanti Gold and it was down 70%. These types of things can happen.
Again, I hope it works out, I do not want to be a downer.
BTW. Opened your bottle of Nadurra last night and had a shot, hell that bottle can last me the rest of my life. Gonna take to a party some time and get people fired up. Cheers mate.
For what it's worth:
ReplyDeleteThe Dow has declined for seven trading days.
Since 1990 there have only been four other Dow losing streaks of seven days or more. Only one of those times did this extend to eight days. Every time yielded a 1000 point rally, but 1 time, the 8th day turned out to be a 2-day small rally, followed by a 1000 point drop, then a 1000 point rally.
Anyway you look at it, it was a significant bottom which is what I am thinking will happen once we scare out the "market will bounce on the debt deal" traders.
MITK started at buy by Janney Capital with $18 Price Target.
ReplyDeleteAnother day, another drop. Was it only 2 1/2 months ago I was so stoked I 'predicted' 20 up days in a row?
ReplyDeleteNow things are so desolate I almost have to predict 20 up days in a row.
ReplyDeleteJanney's been following your posts on TT.
ReplyDeletet3d- I think David bought a case of Nadurra at Costco last summer. So we now have two Nadurra extremists on this blog.
ReplyDeleteBEXP - Comes out on top here:
ReplyDeletehttp://seekingalpha.com/article/283677-which-is-the-best-pure-play-bakken-oil-stock?source=yahoo
I hold as does the author.
BEXP, NLY, MITK, REDF...the list is endless, really. Someday a researcher will archive this blog while completing his/her thesis re the dying years of the Day Trading Wild West.
ReplyDeleteI bought 2 x AMZN $230 Puts this morning at the open that expire in 3 weeks. Price: $12.6
ReplyDeleteI also bought 1 x AMXN $230 Put expiring this Friday at $9
I think AMZN is going to get hit with a downturn in the market because of it's silly valuation. I'm not saying the company is a bad one, just not priced correctly.
RB, there's nothing wrong with using longer RSI's, it's a good idea. I look at them too occasionally, especially when I'm preparing to make a commitment.
ReplyDeleteRSI(7) has been working pretty well though, in this up three days down three days action.
I'm fully aware that thousands of traders have said the same thing about AMZN at much lower prices.
ReplyDeleteBEXP refuses to come in.
ReplyDeleteSo, I guess we test the years open? 1260ish?
The one thing I am trying to figure out, but can't resolve in my mind, is if the economy is so bad, are the oil services companies reporting such strong earnings and outlooks.
ReplyDeleteYou would think the E&P companies would be cutting back or looking to reduce costs, so it implies demand is growing which leads to a growing economy.
Not sure if anyone has noticed this is other cycles, but it does help me think the economy is not as bad as the economists (with their backwards looking data) are indicating.
MITK showing 70K shares on the ask @ 9.94. Let's see if those are real.
ReplyDeleteThe global economy may be 'bad,' but it's not that bad. We've all seen this before. 1981-2 was prelude to a roaring bull market. Remember Charlie Sheen in Wall Street? It stalled in the early nineties, only to spike even harder into 2000. The yin/yang of sentiment.
ReplyDelete1277.6 - Seems like buyers have been coming in there, I'm interested to see if that continues today...
ReplyDeleteOil - WNR has been on fire, with their east cost facility I'm guessing, producing product from WTIC and shipping it into the euro market to undercut high BRENT and capture the spread.
ReplyDeleteCould TOT/VLO and XOM be buys here? Maybe, if I had a handle on what's really going on instead of doctored data.
Added two more AMZN $130 puts that expire in a few weeks at $13.2
ReplyDeleteActually, it appears that tof's 1250 or lower scenario may be in play.
ReplyDeleteThat's OK. 1380 is also in play.
ReplyDeleteIYT is confirming bearishness
ReplyDeleteGetting ugly quickly here. News?
ReplyDeleteWhat we need is a complete sell off with a gap lower to just clear out any hope in this market......enough of this lower then small bounces back to keep the hope alive.
ReplyDeleteGPL - A gap up move... Material news? I don't see any and if none, gap is likely to close.
ReplyDeleteSVM - Same thing, just not as pronounced.
ReplyDelete$silver - $40.86 remains the line in the sand, important level to overcome.
ReplyDeleteIs the bull market over? I'd say odds are certainly increasing. I'm currently about 98% cash and 2% short via puts...for some reason I can't quite get myself to buy the fear just yet. I think the sentiment in the market has changed so dip buying might be a waste of money right now. maybe at lower prices.
ReplyDeleteTwo similar periods to this year are 1907-09 and 1974-77 just in terms of trading. Both instances featured a sharp deep pullback, followed by a big 2 year rally. Afterward, the market grinded lower for a year and a half or so, resulting in a pullback of about 20%. I could see that happening again, which would bring us down to the 1,100 area...
If this happens (pullback to 1100 over the next year or so) then we will probably see a 2 handle on the 30 year mortgages as we talked about last summer. My friend that works for BAC seems to think housing will be stuck here for a while. He said the amount of foreclosure properties they have on their books is still really high.
ReplyDeleteObviously, the one big unknown in all of this is that the world's governments continue to print money. I guess the price of oil is the big thing to watch. If /CL gets below $90 then I suspect the Fed will feed that it's ok to go ahead with QE3.
correction: feel it's ok to go ahead with QE3...
ReplyDeleteIT PASSES. Brace yourselves for the relief rally!
ReplyDelete"correction: feel it's ok to go ahead with QE3..."
ReplyDeleteActually, that's a good point. With the growth fears abounding now and with Treasury yields going down, all the talk about inflation will disappear for a while now. So it will only be natural for the Fed to do QE3, justifying it as a counter measure to the fiscal drag created by budget cuts.
Still think this debt drama is a buying opportunity and company fundamentals will win out and the year turns out really well. 2 of my Canadian small cap companies received buyout offers the last 2 weeks, so others see value too.
ReplyDeleteQE3 - An offsetting factor will be rampup of domestic oil production, I think this might be key.
ReplyDeleteI also think the US economy may be benefiting greatly from oil sands production in the sense that market is a captured one these days (WTIC/BRENT spread).
Bank real estate inventory - I'm pretty sure it's off the charts in new territory. I thought your outlook involved housing market improvement?!?!?!
There's another guy that comes to this board occasionally, claims he's a home builder, but he rarely provides update on the real estate market...
CP > I'm allowed to change my mind :) Honestly, I think we do see improvement in housing, so maybe my friend will be wrong? One of the main reasons I think we will see improvement is because the price to buy is on par with the price to rent (or even lower) in many places in the country. This hasn't happened in a while.
ReplyDeleteAnd now for the jynx: AMZN is cratering!
ReplyDeleteOur secret weapon is working again! :)
ReplyDeleteMy "consolation prize" in the form of DB puts is also working today... :) Too bad I purchased only $1K worth of those puts and it will be just a small consolation prize... I just placed a sell limit at $11 for these November $57.50 puts, which I purchased at $5.50 each.
ReplyDeleteJust bought 1000 more shares of CADC at $2.01.
ReplyDelete1266 - July double top target, ding, ding, ding! 1170 is the H&S target, will there be downside overshoot or is Ben gonna give us a break?
ReplyDeleteAlso, raised the sell stop on my remaining 1000 shares of RBY to $4.09.
ReplyDeleteTOF - We all have to be capable of changing our minds, perhaps more often than our underwear.
ReplyDeleteMark excepted! ;)
If Doug Kass thought 1,300ish was the buy of the year then this must be the triple best buy of the year.
ReplyDeleteChanneling uber hyper trader Doug Kass...
T3d -- what gives me the confidence in my ECU position is that I feel that NOTHING good is priced into that stock at $0.75. ECU was trading at $0.60 last summer when silver was at $18 and ECU had no prospects of increasing its production. Now silver is trading you-know-where, ECU already got $15M from Golden Minerals (which will be enough to finally bring its mills to their full capacity at 1100 tpd), AND the merged company will have $85M in cash -- enough to weather any kind of recession over the next 2 years without having to raise money at the market.
ReplyDeleteI agree that buying ECU on credit was a little risky before this merger was approved, since a collapse in the price of gold/silver (a very unlikely but a possible event) could have reduced ECU's cashflow below the one required to meet its $500K/month debt payments. But now, with the extra cash coming from the merger, even the unlikely drop in gold/silver should not affect the combined company. So in my opinion there is no possible downside to the combined company (especially at the current preposterously low valuations) and the upside is many X. How often do you find stocks with such a profile of possible outcomes? When you do, you should go all-in, which is what I did.
AMZN - Maybe that earnings gap was the final last gasp exhaustion gap...that's what I'm betting. However, until we see these high fliers crater, the bull can't be denied just yet.
ReplyDeleteI still don't quite understand the valuation on AMZN....great company, no doubt, but jeez it's trading at 45 times free cash flow, over 100 times earnings and has a 4 PEG ratio. If it was a $10 Billion company I could kind of understand that, but it's a $100 Billion company.
Kass -- his baseline range was 1250-1350.
ReplyDeletehttp://seabreezepartners.net/letters&id=1009&catid=15
The Amazon Bull story is total world retail domination. Ask borders and Barnes and noble if amazon is overpriced. In addition they have more cloud exposure than csco they are directly competing with APPLE and netflicks as a media content provider.. My wife just had to smuggle in 5 Kindels to Hungry for her friends. Paper text books for education is dead. Amazon is going to get a piece of the action in that huge industry. I like amazon,but don't own it. Because The state tax on internet trade is an amazon killer though. I am surprised it held up with the Cali news.Yet they are diversifying their business in the above mentioned areas to limit the impact of the eventual state taxes. 90 pe is too much but...
ReplyDeleteKyle > yeah I was just making fun of him for tweeting that it was a great buy at 1,310 or so when he was saying all along his range is 1,250 to 1,350....basically that just tells me he's a hyper active trader. We're all wrong at times though so no biggie.
ReplyDeleteI suspect we will find support around this area for a couple of days, then break support and close around 1,240. Then I'm thinking we go to 1,305 to 1,310 from there, then crater once more to 1,220ish. Just a plan that I'm considering trading...
WE are at lonnng term support. If we hold a buying opportunity. Cp what do you have on your list. What sector will be good. I'm not so hot on tech like i normally am. IPGP had good numbers though.
ReplyDeletetof -- Agree with you. My attempts to catch bottoms in MCP didn't work out too well today. Believe the 1227 from last Nov and the 1175 level are coming into focus...
ReplyDeleteIf we can trade above 1,275-1,280 then I think this ST plan is out the window.
ReplyDeleteTLT - Boy that's one hot mama today...
ReplyDeleteRB - If I were buying something other than PM's, I'd be looking at LECO or FELE among a few others I can't think of at the moment.
ReplyDeleteCHRW/DCI/ECL are a few other possibilities?
ReplyDeleteThe problem I have with trading PM's is on a day like today it's really hard not to go for risk. There are so many stocks out there that are beat down I wonder why not just move my capital into them...
ReplyDeleteCP > I hear ya but I would wait for a break below support...that's the point that everyone is watching and that point at which they bail...so I would think that that is a good buying point. I'm thinking 1,240 is a great ST buy....as in a week or 10 days.
ReplyDeleteEveryone watches the same support and resistance levels and sets stops, etc there...
Wow...some homebuilders are getting crushed. Look at SPF for one. XHB very weak.
ReplyDeleteActually, TOF, the safest entry would be to wait for S&P to rise above $1250 AFTER it drops below that level and hits all the stops. Otherwise, there is a chance that we drop through $1250 like a rock, and you don't want to be buying in that case...
ReplyDeleteTBT at all time low.
ReplyDeleteHome building market here is in the toilet.
SVM - Reports tomorrow after close, my hope is it takes off from this level and runs to ~$14. My Shaolin wish is to add below $9.22 b/c the gap up needs to close. This gap is like a boat anchor.
ReplyDeleteI kind of like the negative vibes here.
ReplyDeleteSo do I -- they indicate that bargains abound in this market. Too bad I have almost no buying power remaining in any of my accounts...
ReplyDeleteYes David, A retracement above support is safest entry with definable stop area's.
ReplyDeleteCP I have no desire to own PMs. Just a look at GGs chart is my reason. Look at price of gold, look at price action of best of breed PM. WTF? Why is GG not at all time highs. Owning true religion or lulu seems to be safer.
Negative vibes? We're simply slicing and dicing the charts... ;)
ReplyDeleteHmm, isn't that an unfilled gap down I'm looking at from this morning?
We just had the biggest volume bar on that last thrust down guys.
ReplyDeleteDavid - Yeah that is a good point. So a great entry would be to go long BGU or something like that when we drop below support at 1,250, then bounce back up to support. That would give us a low risk buy point where our stop would be below the low. I like that idea...
ReplyDeleteHopefully we can get a move down below support some time over this next week or so with a big spike in volume (as in at least 320 Million or so shares in SPY)
ReplyDeleteNo, I guess not. That is, I think it doesn't qualify.
ReplyDeleteShort VXX.
ReplyDeleteBidding SSO @ 47.74. Just a hair below S2. 1000 shares.
ReplyDeleteRB - I know how you feel about PM's, which is why I suggested those other few.
ReplyDelete1250, 1100. Whatever. All I can do is pace my cell.
ReplyDeleteLong TBT. Probably going to hold on to both until my grand kids are old :) or until friday.
ReplyDeleteCome get me Fer's!!!
ReplyDeleteCome on, Mark. 10,000 shares.
ReplyDeleteDon't forget to light a candle in deference to tof, patron saint of SPX targets.
ReplyDeleteSold 2 of my 6 AMZN puts with AMZN price at $211.6. I was looking for $211 as first support price. I also turned around and bought 2 x $205 calls expiring Friday at $7.8 just to help hedge my other puts and also to possibly play another gap up open...
ReplyDeleteS&P has collapsed over the past 3 days, while both VIX and VXX are below where they were on Friday! I just bought 3 September $25 puts on VXX at $3.60.
ReplyDeleteDavid- Please. VXX has a place of honor in the POS Hall of Shame.
ReplyDeleteI think a rebound is in order here, and so I just sold at $7.90 the 2 DB puts I purchased at $5.50 last week, for a gain of $480. Will re-enter DB puts on a rebound.
ReplyDelete"David- Please. VXX has a place of honor in the POS Hall of Shame."
ReplyDeleteExactly! That's why I think my puts will be an easy double. :)
1000 SSO @ 47.73.
ReplyDeleteI was thinking about picking up some IWM calls at the close but indices are breaking down out of their well-defined downward channels.
ReplyDeleteThis has the feel of a possible crash scenario. If the market breaks down out of the head and shoulders pattern, the resulting sell-off is very swift and steep.
There are a bunch of buy indicators in place, but I simply don't want to risk it. I don't see anything setting up, the small caps (RUT) hit its 200 day this morning and bounced hard to the downside. SMH hit previous support this morning and bounced hard to the downside as well.
Those frisky momo stocks were pretty clear indicators a couple weeks back. Unfortunately, I don't see any of them setting up and we are entering the worst month(s) of the year to boot.
David - I think a lot of fear was built into VIX heading into the debt ceiling debacle so it's reasonable to me that it was only marginally higher on today's huge drop. If we do bottom out around 1,230-1,240 then we will probably only see a further move up to maybe 27 or so, which would mark yet another lower high since the fall of 2008.
ReplyDelete"Unfortunately, I don't see any of them setting up and we are entering the worst month(s) of the year to boot. "
ReplyDeleteMy first reaction is ALWAYS to dismiss those silly seasonal sayings but jeez if you sold in May and went away in 2010 and 2011 you would be sitting pretty.
DJII has not had 9 straight down days in the last 30 years. Could happen tomorrow, but the odds are getting very strong for a bounce.
ReplyDeleteA lot of charts I look at have had significant drops the last week with no news implying they are being sucked down with the market.
Could be like 2007 when the same thing happened, but I tend to think it is fear based selling and these will be seen in hindsight as good chance to buy.
"if you sold in May and went away in 2010 and 2011 you would be sitting pretty."
ReplyDeleteYes, and I've been wondering if there isn't some ST play that doesn't take advantage of the monthly 401K contribution cycle as well...
Re the insurance companies:
ReplyDeleteKCLI reported good earnings last week and today, LNC reported good earnings after market and this morning Quebec insurer Industrial Alliance also had good earnings.
I'm surprised to see the ones that didn't report take such a hit today (eg. MFC down 4.5%).
These insurance companies do have some market and interest rate risks, but have very strong balance sheets with high capital holdings, so can ride out these bumps easily.
TYP - Another chart with an octabottom.
ReplyDeleteFCX - Enter your stink bids @ $47 and go for a sea cruise?
ReplyDeletePKX - Looks like an H&S(head end of March) that's just unbelievably ugly.
Wow...if XLI or XHB are pre-cursors to the market's move we could see a whoosh down to 1,180. Crazy how sharp those pullbacks are.
ReplyDeleteDamn, all the years returns wiped out just like that.
ReplyDeleteI hope your right BB. The more I trade/follow this crap, the more I'm concerned people will say enough of this shit. I'm out and wont ever get back in.
TOF -- if VIX spikes to 27 tomorrow, then I'll buy more VXX puts. I on purpose opened only a small position today ($1K), so as to be able to add on any further upside in VXX.
ReplyDeleteOne thing really concerns me at the moment regarding the market. Semiconductors always lead the market. Of late, I've been reading solar/semi industry reports that indicate that the "supply tsunami" coming out of China and S. Korea will create supply/demand imbalances 4 times greater than the credit crisis of 2008 leading to companies being forced to sell at cost in the first half of 2012.
ReplyDeleteThe massive new supply starts coming online mid August w/ further additions coming in early Fall. The anticipated result being virtually all tier 2 and tier 3 players being completely wiped out next year.
I don't like this at all. I think about this every time I get the urge to be a hero.
WFR - Gettin' their ingots sliced off pretty badly, I'm beginning to wonder where this is headed...
ReplyDeleteCP- I just read yesterday's CSFB WFR analyst note. They have been by far the most bullish house on WFR. They are saying that the internals are a mess. Taking the estimates down from .25 to .01 this quarter. The consensus is still at .08.
ReplyDeleteThe huge risk in this name is the consensus of .34 (which hasn't budged) for next quarter. Poly and silicon prices will be cut in half in the next 6-9 months, so unfortunately regardless of eps forecasts, there is zero chance for this sector to experience a sustainable bounce until well into 2012.
For instance, SOL's 2012 eps consensus is $0.97. I saw the most recent analyst update taking their 2012 estimate to .03 given the current supply/demand dynamics. This doesn't take into consideration other reports I've read forecasting a 50% cut in prices.
The consensus estimates in this arena are a complete mess at the moment. The sector is simply un-investable.
As for WFR, their growth engine is Sun Edison. Many of Sun Edison's long-term contracts have been re-negotated at lower pricing. Prices are plummeting so fast that the sector is a complete mess.
Good work Jesse, I have to imagine the trend isn't positive as of today. Poly and silicon cut in half should help semi houses, a major part of their production expense.
ReplyDeleteThe other thing I try to keep in mind involves timing the eventual migration away from traditional semi manufacturing process materials.
Polysilicon, not poly and silicon! Shame on me...
ReplyDeletePolysilicon price trends, is there a shortage and to what extent?
ReplyDeletehttp://blogs.forbes.com/carljohnson/2011/05/31/polysilicon-price-trends/
Wow...I must have been smoking something about the SPY volume because we have seen 3 days in a row of heavy volume. That, coupled with a big selloff, suggests we are very close to a ST bottom. As such I will be selling off the rest of my AMZN puts tomorrow most likely (and probably the AMZN calls I bought right before the close as well just because I'd rather be in some really beaten down things like XHB and XLI) and will be looking to buy some in the money calls in SPY expiring in August or September. I'll wait first for a close below the support lows that we're currently at and then a bounce back up to the support levels before entering (thanks for the tip David)
ReplyDeletePolysilicon - It's also important to examine the various applications for polysilicon, that used in semi device manufacturing is ultrapure grade while renewable power industry require, then throw into the mix Japanese production issues probably being resolved to unknown extent?
ReplyDeleteIt no doubt will require some digging to sort it all out...
http://seekingalpha.com/article/283702-a-lost-decade-for-stocks-not-so-fast?source=yahoo
ReplyDeleteby the way, one company that I think will be a HUGE long term winner is IBKC. I've been following this company since 2008...if you don't know anything about them, they're a regional bank that has basically tripled it's asset size during the 2008-2011 thanks in large part to FDIC assisted buyouts of failed banks. They have just taken on their assets with little risk, a tremendous way for them to grow in the long term. I think they're setting the stage for a tremendous long term growth strategy that will help turn them into a very large regional bank like USB. They're growth strategy is almost identical to that of the large banks that emerged from the S&L Crisis 20 years ago.
ReplyDeleteRight now, their market cap is about $1.5 Billion and their dividend yield is about 3%. I could see them becoming a $10 Billion + company over time and I could see an investment today yielding 15% or higher within 5 to 10 years.
TRID - As Trident continues down the glide path, even their Smart TV chipset can't save them apparently.
ReplyDeleteCYMI - A healthy company and low risk entry?
ReplyDeleteSamsung adjusts capital expenditure:
ReplyDeletehttp://www.digitimes.com/news/a20110729PR204.html