Friday, August 12, 2011
08/12/11 Monday, Monday
'Reasons' for the gap up include, but are not limited to, the following:
(a) Both ST traders and LT investors were shaken out of their positions in the past two weeks.
(b) Although the sell off was 'capped' at approximately -20%, it was violent.
(c) Unwarranted Kass bashing. No one bashes market commentators more than I do. However, when I sense they're right, I'll back them. Kass is right. He may in fact be 'wrong' more often than he is right, but unless one tends to be right 'when it counts,' he/she won't develop a following. Kass has one. Why quote him otherwise?
(d) Maximum frustration. When betting on market direction, always rely on first principles. I have no numbers to back it up, but the number of times I read 'wary,' 'cautious,' and 'in cash' when scanning commentators tonight leads me to believe it's shorts who get ambushed on Monday.
Monday morning you gave me no warning of what was to be
Monday, Monday, how could you leave and not take me
Were I a finance professor, I would assign 5-10 page essays on the above two lines- what gets turned in will separate the wheat from the chaff- ie, the winners from the losers.
+500 points on the DJIA.
Watch the Market make a sorry-ass you-know-what out of me come Monday. I would then take the entire class to the 21st Amendment for pizza and pitchers of fermented starch.
Subscribe to:
Post Comments (Atom)
You know why God created alcohol, right- it's drowned out more pain and sorrow than any other substance.
ReplyDeleteI'll go!!
ReplyDeleteActually, if the DJIA gaps up +500, I would still take the class to 21A for pizza and pitchers of fermented starch.
ReplyDeleteAlcohol's a versatile substance- also highly appropriate for celebrating success and victory.
ReplyDeleteIn fact, should the market go nowhere, alcohol is a perfect substance with which to break the monotony.
ReplyDeleteLooks like you have it covered. Time is not an issue, correct?
ReplyDeleteMight as well book the upper balcony for an after-class debriefing whatever the outcome.
ReplyDeleteMark- To quote from one of last year's films- 'Beer doesn't know what time it is.'
ReplyDeleteWell, just a lesson in how to throw a Friday night party.
ReplyDeleteSometimes Friday night through Sunday afernoon just seems like a long bathroom break before the markets open in Asia.
ReplyDelete....With some soccer in the mix...
ReplyDeleteWTF? TOF plays a few holes of golf and craps out?
ReplyDeleteAnd yardwork.
ReplyDeleteYeah, same here. I actually wish I had less property. Man, I'm wussing out like Team.
ReplyDeleteDamn, now we HAVE killed the party.
ReplyDeleteAlright, lights out in this place at 8 pm. No worries. We gap up on Monday, or I drink fermented starch.
ReplyDeleteHave a good weekend, y'all!
Man what old fucks!
ReplyDeleteWhere the hell are my reading glasses?? For Christ sakes.
ReplyDeleteWhat the...Ah hell, I think I just pooped myself...
ReplyDeleteActually i had those same thought the last 15 min also. Darn we have a synergy.
ReplyDelete"I see a helluva a lot of people saying they will go all in on the short side at 1,250. That can mean only one of two things:
ReplyDelete(1) We never get that high
(2) We just blow right through there."
There is also another possibility, TOF -- S&P hits 1250 and stalls around there, making headfakes in both direction so as to stop out traders who try to pick a direction too early. Then it makes the real move, most likely down.
Alright its official...the new blog name is drinkingtopics.
ReplyDeleteExcuse me while I go change my Depends. ;)
ReplyDeleteFrance - GDP report is 0 growth.
ReplyDeleteWhy are global corporations holding so much cash? Because they're not investing, their business models aren't forecasting growth.
ReplyDeleteMark - I think you need one of these for your business to take advantage of the image that it represents:
ReplyDeletehttp://cgi.ebay.com/ebaymotors/ws/eBayISAPI.dll?ViewItem&item=250870910349
Successful businessmen don't drive economy cars?
WPRT - Have you guys neglected to place your stick bids up under the $18.08 gap up?
ReplyDeleteNat gas transportation act:
ReplyDelete"T. Boone Pickens, owns a 41% stake in natural gas station provider Clean Energy Fuels (Nasdaq: CLNE ) . Pickens also holds nearly 2 million shares of SandRidge Energy (NYSE: SD ) and nearly 900,000 shares of Chesapeake Energy (NYSE: CHK ) "
I just took a look at the CC web site to see what Patrick thinks about the last week's events, and I see that there are no Post-Close Commentaries there anymore. Did they announce at some point that they won't be writing them anymore?
ReplyDeletePatrick's last commentary was on 04. Not sure what happened...
ReplyDeletehttp://caracommunity.com/content/bill-caras-blog-aug-4-2011
Jesse - Gotta say great call on your market outlook from late July. I agreed with you but I thought we would see a momentary drop below 1,250 perhaps to about 1,220-1,230...never quite fathomed a drop to 1,100. That was a humbling move for all of us.
ReplyDeleteAs such there's probably more room for a rebound, but if we're in a 1938 scenario (driven in large part by the bond markets forcing austerity) then this rebound could very well be over (it would put us right around 9/16/1937. The throwback rally in 1937 went to 190 on 8/14/1937. It then dropped 17% to 158. The throwback rally from July of this year went to 1,350. It then dropped 17% to 1,120.
Having said that, though, I know you said the leaders have not rebounded much, but some of the leaders like LULU, CMG, AMZN, AAPL have rebounded quite a bit and look ok.
Safe and vault sales spike:
ReplyDeleteOn Amazon.com (AMZN, Fortune 500), SentrySafe's $170 1.2-cubic foot combination safe was among the site's biggest "movers and shakers" Friday, with sales rising 44% over the past 24 hours.
Port Charlotte, Fla.-based Value Safes said it sold an average of $13,000 in safes a day in the past week, more than tripling its daily average of $3,500 from the previous week.
http://money.cnn.com/2011/08/13/pf/safe_vault_sales/index.htm?iid=HP_LN
BCO - Take this H&S formation for example. According to the "rulebook", the target price would be $18 or less.
ReplyDeleteI'm intrigued with Craig's comments on Landry's $$ service. Anyone? I'm not trading much now except to increase a position in cash. Unfortunately perhaps, my last trade was with GTY REIT before it imploded for the second time on non-payment lease news. Great yield now but when will the nonsense end?
ReplyDeleteThe significance of the number 42:
ReplyDeletehttp://en.wikipedia.org/wiki/42_%28number%29
42 is the atomic number of molybdenum
$42 was the monthly high for silver.
$42.42 squared is $1800, the monthly high for gold.
42 minutes - The time it takes to fall through the earth and come out the other side.
42 - The number of US gallons in a barrel of oil
42 - In Japanese culture, an unlucky number
42 - In the Bible - It is prophesied that for 42 months(3.5 years) the Beast will hold dominion over the Earth.
Spent the day at UCSC, what a beautiful campus. The place is packed with tree hugging liberals just like my daughter. No wonder it was her first choice (no sports, what a bummer for old dad)
ReplyDeleteStill a bull, there is no stopping a billion BRIC folks from moving into the middle class and that in and of it self will drive a rapid increase in consumption globally.
The people that forecast the demise of corporate profits, mainly do to the decrease in consumption by US consumers, completely miss the fact that over time there will be 4X as many new middle class consumers than the total US population.
Biggest driver of global consumption: INTERNET....virtually zero barriers to entry.
Strong buys: Internet infrastructure co's, Cloud co's and transportation co's (the whole darn index)
JB- Totally agree, just going to be a bitch getting there.
ReplyDeleteUCSC- Beautiful campus. Let me know when you guys go again and we will hop down.
CNN Money today...
ReplyDelete'Hiding cash in tampon boxes - other sneaky spots.'
So that's really the top story you want me to read on a Sun. morning?
Later!!!
Mark Cuban on Buy-and-Hold...
ReplyDeletehttp://blogmaverick.com/2011/08/13/wall-streets-new-lie-to-main-street-asset-allocationdiversification/
"Strong buys: Internet infrastructure co's"
ReplyDeleteThat would be CSCO, right?
Hey David - I really like CSCO, NTAP, EMC, AKAM, among many others. Not for a trade but a long term hold. I'm putting a basket together plus I am already long these and others thru various ETF's......but you're our resident tech experts so I'd like to know your thoughts here.
ReplyDeleteAAPL
ReplyDeletehttp://www.moonalice.com/
Click on Roger's Slide deck, 10 Hypotheses for Technology Investing.
Jam Band Investment consultants. I dig it!
ReplyDeleteI just posted commentary regarding what happened last week in the market. There are a few interesting charts and quotes you may find interesting. 2nd and I agreed not to post a link to this site as to prevent the riff raff from discovering it. I can certainly change that at any time at the board's request. Happy Sunday.
ReplyDelete* *A little known long-term institutional sell signal that only occurs every 5-7 years just triggered.
* *Why will massive deleveraging start now? Can’t we kick the can?
* *U.S. debt will be downgraded several times by different agencies over the next 6-12 months.
* Who will force austerity in the United States?
* Did we see this coming?
* Why this selloff is unlike the previous ones.
* This is much bigger than the stock market.
* How long will this process take and how bad will it get?
* Government stimulus will not help the stock market.
* The China statement.
* Market is extremely oversold and bounce higher should continue in the short term.
* Should you be scared?
http://whatthehellhappenedlastweek.blogspot.com/
"but you're our resident tech experts so I'd like to know your thoughts here."
ReplyDeleteJB -- I have a pretty narrow field of expertise, and unfortunately internet infrastructure is not something I follow...
Thanks for the compliment 2nd. Just trying to keep up with you! We were neck and neck in Q1 but you thoroughly trounced my performance in Q2!
ReplyDeleteSorry, meant to thank TOF. 2nd trounced my performance by a country mile in Q2 as well:)
ReplyDeletePrecter
ReplyDeletehttp://bloom.bg/pLUNEY#ooid=RwcWJxMjp8bm5_0RsU4sMgHGCXwlJbLf
Wow Jesse! Bravo. What an effort...and I read the whole thing.
ReplyDeleteBill sees everything through the prism of Golf, but I found it interesting to learn about that point of view:
ReplyDelete"So, if Gold is going to continue soaring, I would see that as a lack of confidence in the G-7 central bankers as well as in the recoverability of the broad market at this point.
$GOLD lifted +$84.50/oz this week. That’s showing me not much confidence in the broad market, yet. If $Gold were to flatten this week, and capital move into the Goldminers and the rest of these international ETF’s continue to recover their recent losses, we would argue that the selling phase is over and prices of most stocks are still in a primary Bull phase."
Jesse- Just finished reading your blog post. Looks like Mark and I were reading through it at about the same time. Very well-written! I'll have to think twice about which route to take if/when we hit the 1250 area.
ReplyDeleteThousand (3), million (6), billion (9), trillion (12)
ReplyDeleteOne trillion is a one with 12 zeros behind it.
1,000,000,000,000
How did we think this would end?
Nikkei opens up +1.58%.
ReplyDeleteGreat link, Jesse! I have read through half of it so far, and I really like it. We should have all listened to you more attentively when you pointed out that momo stocks are going down. Now, I will take seriously the fact that 50-day MA is below the 200-day MA -- I am sure LOTS of black box models alter their strategies based on this fact, and the market character will indeed change.
ReplyDeleteBill continues to surprise-
ReplyDelete'I am preparing to move my securities trading company to the US and to take CaraCommunity.com to Hollywood. While I can’t say how much time I’ll be there, I do expect to set up a residence in West Hollywood or Burbank because that is where I feel the center of the web universe is going to be located.'
Jesse - Just got in contact with your blog and recent posts here and there. Enjoyed it and reading about you. Interesting stuff. I take it you only post there infrequently and only at turning points, maybe. Good enough if you also drop a few ideas here. We are rolling with the tides and maybe the tsunami nowadays.
ReplyDeleteNice news out of Japan tonight (GPD not down as muc as expected due to earthquake). That could help with the gap up tomorrow.
ReplyDeleteStill happy with my Gold puts. Things seem to be calming down on the macro side. Think we will see selling build on selling and get a significant pullback like we got in Silver when it ramped up.
West Hollywood is the center for one thing. The Gay community of LA county. Maybe Bill is having a transformation. Not that there is anything wrong with that.
ReplyDeleteNo, and not anything wrong with the fact that he is a nomad. Or I should say jet-setter. Or maybe a seafare. What ever happened to Miami as a destination? I guess he likes to contemplate moves. More power to him.
ReplyDeleteWhat I do not get is his frequent references to establishing ETF's, for several years now. Where are they?
Thanks for reading the post guys. Its a marathon read! Kudos. I actually posted it before editing it lol. Just finished the edit! But I definitely do not recommend re-reading it:) F'ing bit*^ to get through.
ReplyDeleteEdited:
http://whatthehellhappenedlastweek.blogspot.com/
So, just finished about the most bearish piece imaginable and I'm looking for stocks to go long!
Illini- I put up that blog literally today as I felt the timing of the essay was appropriate. The posts made "on my favorite blog" were posted here in Tradingtopics:)
Yes, good write up Jesse, it is clear that austerity by gov't will lead to decrease spending, will lead to less corporate profits, which should lead to lower stock prices.
ReplyDeleteAlso Prechter thinks we are staring wave 3.
RB liked the link to Factor Trading and his risk management discipline.
One last thought this one from Tischendorf, I think you can take it to the bank.
ReplyDelete"Contrary to popular belief, winning traders are not the ones who make the most during bull markets. Winning traders are the ones who give back the least during bear markets."
I've been following Stephen Stewart's momentum trading site for a long time now. He profiled MITK at 2, REDF, TZOO, SIFY OPEN, GMCR, NFLX etc. all when they were babies at fractions of their current values. He rolled out shorts for the first time at the end of June.
ReplyDelete6/21- FFIV and RVBD- "Not timely as of yet to short....watching. The day is coming to short these with both fists."
6/28- "Initiate short w/ partial position RVBD 37.73 and FFIV 108.78. "FFIV" will be at 50 or lower w/in 6-9 months.
He's now initiating banks.
BAC- "Odds are soon that this will break 2 bucks. Let's watch." "Look at this bear flag. This stock looks like its going to get punked. If it happens, it will hurt the general market too. I hate bear markets. I hope this bear flag fails but don't count on it."
Citi-8/14- "Shortalicious. OK, I will say it....Short with both fists. Follow hugger short rules of engagement."
Banks all have same patterns. Kinda like 2007 redux. Not too good going forward.
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID4371160&cmd=show[s241636100]&disp=O
looks like the 6E and ES are back in lock-step, at least for now.
ReplyDeleteFrom the New York Empire State Manufacturing Survey. So it appears in order to get a job, you either need to either:
ReplyDelete1. Have advanced computer skills
2. Show up for work on time
3. Be able to talk to customers / co-workers
Survey Findings:
As in the earlier survey, workers with
advanced computer skills were
seen as the hardest to find: On a
scale of 0 to 100, this task received
a difficulty rating of slightly more
than 61 in this month’s survey—
almost identical to the rating it
received in 2007. Finding workers who
are punctual and reliable received
the second highest difficulty rating,
followed by the task of finding
workers with good interpersonal
skills; these results, too, mirrored
those from the earlier survey.
Long SDS at $24.078 average...Now holding about 18% short the market and 82% cash...will leg into SDS.
ReplyDeleteAdded another 16% to SDS at $24.03. Now 66% cash. If we can close the gap from 1,200 and rally to 1,220 I will add more.
ReplyDeleteActually, since there is a tendency to fill gaps and then reverse if the trend is strong (in this case the down trend) I figured this would be a logical point to take at least a decent size bet...so I added another lot of SDS at $23.88...now 50% long SDS, 50% cash. I will add more if we either drop below 1,170 and stay down there or if we can move up over 1,200 and get to 1,240 ish.
ReplyDeleteMan, they've been cranking energy early. Let's see if it's marking up to sell all day.
ReplyDeleteWhen I say marking up, take a look at HERO. That's what I mean.
ReplyDeleteST traders are looking for continuation of the bullish trend. I think the downtrend is being ignored in hopes that this meeting tomorrow between the French and German govt pull something out of their hat. I decided to move to 100% long SDS here...I am willing to take the pain to 1,230 if need be...
ReplyDeleteLong SDS at an avg price of 23.96
TOF- Big bet man. GL. I'm looking to get more flat.
ReplyDeleteyou're in good company tof, the gap guy says that given current market circumstances an up gap like we had this a.m. s/b faded.
ReplyDeletegl!
XHB rallies a little on flat #'s.
ReplyDeletecommercials are buying again this morning, that last candle on the ES was a real surprise
ReplyDeleteMark - is XHB back above zero? I stopped following that pig.
ReplyDeleteHow was soccer this weekend? Do you ever have tourney's over near UCSC? We'll have to meet up
SPX- This should be resistance here.
ReplyDeletethanks guys...i'll need the luck as the bulls are back in charge it seems.
ReplyDeletei think it's pretty normal to see a rising channel after a big move down if the ultimate longer term trend is down. i think 1,220 is probably in play if it can get above the 1,200 area.
Bro- There is a tourny in Santa Cruz. I'll let you know. Nothing this weekend, which is kinda nice, but really, the kids are all used to going some where every weekend, so they get kinda bitchy just hanging out here. Poor babies.
ReplyDeleteYou guys must be desperate if you're taking tips from some guy at the Gap.
ReplyDelete2nd - Why research stuff when you can rely on the Gap!?
ReplyDeleteI'm not quite sure what Gap Guy is to be honest.
USSIF - U.S. Silver Reports Record Second Quarter 2011 Results.
ReplyDeleteLet's be fair. Someone could accurately ask why anyone would take trading advice from some guy who sounds like he resides on 2nd Avenue, drinks too much, and claims to have a sixth sense.
ReplyDeletehaha...very true 2nd. i still think the blog name should be drinking(andtrading)topics.blogspot.com
ReplyDeleteGood trade so far TOF. I just woke up and am looking at the inverses. I will really be licking my chops if the market closes around here today. VIX looks ready for a snapback.
ReplyDeleteI see lots of possible a,b,c corrective patterns in the inverses which would result in a powerful move back up. Rather than get into the inverses, I may start shorting individual plays. Perhaps C and BAC for starters.
Jesse - I think if this is a wedge pattern then the logical move for this sideways wedge move in the markets is to see a test of the lower trend first (maybe around 1,130-1,150), then another new high to say 1,220-1,230, before moving down below the wedge. i will personally be selling half of my SDS at 1,130 to 1,150 if we get there under the assumption that this is a wedge...
ReplyDeleteMARKET TALK: Barclays Goes Bearish On US Hardline Retailers
ReplyDeleteLast update: 8/15/2011 11:25:12 AM
11:25 (Dow Jones) As earnings season kicks into high gear this week for retailers, Barclays Capital cuts its price target on nearly a dozen stocks and lowers its view on the US hardline space to negative amid the economy's latest bout of weakness. "We believe that holiday spending may be relatively weaker as still-high unemployment weighs on the consumer and wage growth continues to lag CPI. Back-to-school spending at some of the office products retailers is off to a slower start relative to expectations, which could translate into lower-than-expected total spending during the back-to-school shopping season." It downgrades electronics chain hhgregg (HGG) to underweight, and Williams-Sonoma (WSM), Pier 1 (PIR) and PetSmart (PSMT) to equalweight. PIR and WSM down 5% and 4%, respectively. (kevin.kingsbury@dowjones.com)
EWA is my candidate.
ReplyDeleteWhy the heck is natty down so much? Is it Thursday?
Lots of momo stocks reversing pretty hard today:
ReplyDeleteAMZN, OPEN, LULU, CMG, ISRG, GOOG,
OINK - Why can't this pig fly?
ReplyDeleteTLT - Looking weak lately...
ReplyDeletetof- The only exception I would make to your statement above is GOOG- it's actually holding up quite well given the MMI news.
ReplyDeleteBIDU, TZOO both big reversals as well...
ReplyDeletecp- OINK is worth a look. There's no way a hog company in China can pull a fast one on the largest pork-consuming economy in the world. It may be a harbinger of lower food prices, which in turn would hint at caps on inflation.
ReplyDeleteillini- How much are you shelling out for your current timing service? I think Craig mentioned 80/month for Landry.
ReplyDeleteI want to start a service where for say $100 a month, you get all of the best stock picking newsletters- navallier, landry, zanger, leavitt, oxford club, faber, etc. etc...
ReplyDeleteUnfortunately, there are a multitude of legal and ethical issues. But now that I think about it, China doesn't recognize patents or copyrights. What if it was a web-based service from China? Hmmm...
jesse- Now you're talking! That's the kind of thing that gets me jacked up! Making money + copyright infringement.
ReplyDeleteNo worries- I didn't see TT listed among the best stock-picking newsletters, but Mark and I will 'donate' access to our blog for a fraction of its current price.
Good to see some relief on the CDS spreads, although spreads are still quite elevated compared to just a month ago when Spain and Italy were both in the 270s...
ReplyDelete1st BAC short 7.66 small pos
ReplyDeleteTed Spread continues to widen, but levels aren't that high relative to other panics...still worthwhile to observe the overall trend.
ReplyDeletecovered BAC short. Looks like it could be a trend day to the upside. ECUXF finally looks good.
ReplyDeletesentimentrader Jason Goepfert
ReplyDeleteCommercial hedgers went from ~$21.9 billion net short equity index futures in mid-July to ~$3.3 billion net long as of Tuesday.$$
12 Aug
"From the New York Empire State Manufacturing Survey. So it appears in order to get a job, you either need to either:
ReplyDelete2. Show up for work on time"
Damn! That means I won't get hired if I lose my current job, as I don't show up for work at all. :)
I got paid an annual bonus from Oracle today, and I promptly transferred a part of it to Etrade and bought 10K more shares of ECUXF at $0.63. Even though the current price is a killer price, I'll leave a part of my bonus in cash out of respect for the fact that we are most likely in a bear market now, and so I will either have a good chance of adding to ECUXF at even lower prices or I might need to load up on put options or inverse ETFs like TOF is doing now.
ReplyDeleteI am making a "line in the sand" at today's intraday low on S&P of 1187, which is also the price where traders could actually buy S&P in the morning. If S&P breaks below it, then I sell my VXX puts and S&P calls and load up on inverse ETFs (so as not to pay an exorbitant premium for put options).
ReplyDeleteI wonder what Bill will say about today's action in the gold sector: gold is soaring now AND goldminers are soaring as well.
ReplyDelete"I wonder what Bill will say about today's action in the gold sector: gold is soaring now AND goldminers are soaring as well."
ReplyDeleteI am referring to the fact that lately, as Bill pointed out, we EITHER had gold soaring when risk was perceived as high OR goldminers soaring when risk was perceived as low...
David - that level should be interesting, the WEEKLY Pivot Points are in the chart below. Demark's R1 is 1188'ish...
ReplyDeletehttp://www.screencast.com/t/yf7sTBTDm
Peter Brandt covered a majority of his shorts on Tuesday. He's looking to re-enter up to 1250. Today's comments:
ReplyDeleteOne can argue from the quarterly and yearly semi-log U.S. stock index charts that the 2002 and 2008/09 declines were pretty much non-events (tell that to people with 401 K plans). In fact, the yearly DJIA chart shows that these two “bear” markets could serve as the left and right shoulder lows of a 13-year H&S top; and that the right shoulder high is in place.
Damn, David. You received a bonus for not showing up at work?
ReplyDelete2nd - I pay $30 month which is the minimum level where all you get are the three major indices. Next level is futures (which I do not do). Then there are two higher levels.
ReplyDeleteDoing some monthly chart analysis over here. Obviously, we have a huge monthly bar. This does not necessarily mean that the market can't rise over the longer term, but what is set in stone is this:
ReplyDelete-Huge monthly bars simply do not "hammer" i.e. close near the high of the month. I can pretty much guarantee that we will not close the month near the highs.
-Huge monthly bars that close in the middle of the bar always make a lower low the following month.
-Huge monthly bars that close at the low of the bar usually have follow through the following month, but in some instances mark a low.
-In virtually every instance a Huge monthly bar after a period of lower volatility follows with several monthly bars at lower levels.
-My bet is we close the month at SPX 1217.59
"Damn, David. You received a bonus for not showing up at work?"
ReplyDeleteMy manager said that he is very happy with my work (read: he is very happy that he doesn't have to see my face at work) and that the bonus he gave me is much higher than average for my job grade! :) Just like in the stock market: the money flows in the most counterintuitive direction. :)
"In fact, the yearly DJIA chart shows that these two “bear” markets could serve as the left and right shoulder lows of a 13-year H&S top; and that the right shoulder high is in place."
ReplyDeleteWith all due respect, Jesse, I think the H&S pattern makes sense only on short time horizons of less than 1 year. This pattern was initially motivated by psychological reactions of traders, who would make 3 attempts to rally a stock past some resistance level, and if the 3rd attempt was the weakest, then we could say that their belief in the stock is waning and the stock will then get sold to much lower levels. On a 13-year time horizon, the traders THEMSELVES have changed, their algorithms have changed (now computers do most of the trading) and most importantly, the underlying economy they are trading has changed. So I don't think we should attach much significance to H&S over such a long period of time. What do others here think?
On the other hand, 50-day MA being below 200-day MA IS a very serious pattern, just like indices being below their 200-day MA. I am sure that THIS fact goes as input to many trading algorithms, causing them to sell the rallies much quicker and waiting for new lows before buying the dips. So THIS fact can easily tip us into a bear market if it persists for a little while longer.
FAZ -- Dbl Bot @ 55.48 - let's see how that goes
ReplyDeleteSVM - I've got R1 as $9.34. So far it's holding, by a thread.
ReplyDeletecp - look at SWC
ReplyDeleteMan, SPX has been a monster today. I might have to hedge (short) the close...Unless MITK gives me another easy out. 10 Q came out Friday and looked solid to me.
ReplyDeleteSince the risk of a reversal back into a downtrend around S&P 1220 is high (in fact, the current 1200 level is as good of a reversal point as any), I decided to start scaling out of my risky long bets now, rather than hoping to get out of them all at once at THE top of this rebound rally. So I just sold at $4.08 my 5 SPY 120 September calls that I bought on my fist "bottom-fishing trip" at $4.60 before the US downgrade. I feel lucky enough already that I am able to exit from these risky short-term calls with just a minor loss of $200. If the market doesn't break down soon, then VXX will keep going down, and I'll keep making money on my September VXX puts, so I won't feel that I totally missed this recent V-shape move and didn't make any money off it...
ReplyDeleteSWC - I've got R1=$15.00, and it's holding on by the skin of it's teeth as well.
ReplyDeleteMark- Since we're set to close nowhere near my best or worst scenarios, no need to buy any pizza for anyone. That leaves me enough for a few bottles of fermented starch from TJ's.
ReplyDeleteJust staying true to our renamed blog (which is perfect, b/c referring to it as DT is like a secret handshake- and I'm a fan of meaningless secret handshakes).
cp - I was looking on the 3month view, but SVM, SWC and TC look about the same
ReplyDelete"On The Road Again", or "Angel Flying Too Close to the Ground"?
ReplyDeleteI hate it when they try shaking me out and don't show me the courtesy of sending a memo to my inbox...
Today's strong close is a perfect set up for a continuation gap up tomorrow morning. A subtle shift underway from indiscriminate selling to don't-get-left-behind buying.
ReplyDeleteSWC - An attractive PE, if that means anything.
ReplyDeleteTC - FCX opened their moly mine last month...
FCX - That is, reopened their moly mine. The one in Colorado.
ReplyDeleteCP- It used to be that the phrase 'telegraph their moves' meant something. Now tweets occur at 100x the speed of wiring a message. And HFTs occur at even higher speeds. Maybe that's why we get so many useless outdated 'memos' from commentators.
ReplyDeleteFAZ - something about that 55.48 level
ReplyDelete2nd- Okey Dokey smokey.
ReplyDeletePicked up TBT at the close.
ReplyDeleteMark- 10-4, buddy.
ReplyDeleteThere's a good trade. TBT has the DT stamp of approval, bro.
ReplyDeletepicked up 20% portfolio weighting in SPXU at close to hedge. Holding longs still.
ReplyDeleteSVM - What killed me was when it free-fell from $10.40 to $8.95. Argh, added too fast.
ReplyDeleteShould've trusted the RSI(7), but PM's weren't falling... blah, blah, blah, excuse...
PAL - This one was a big winner. They've got a huge wad of palladium under their feet and if they hadn't tossed a chunk of money into their hobby gold mine(gold production cost $1500) I would've stuck with PAL.
ReplyDeletePAL - That was the 'Shark' play right...
ReplyDeletePMI - WTF?!?!?
ReplyDeletePAL - Yep, Sharkie was playin' it. They issued shares to raise cash at the same time were talking about opening up the lower zone deposit but surprised by buying a clapped out gold mine (Sleeping Giant). I thought they were going to develop the lower zone.
ReplyDeleteAnyway, SWC and PAL both should be well situated in palladium market, there aren't many other pure plays out there I'm aware of. I just was disappointed in PAL management for tossing perfectly good money into SG.
Shark, PAL. PAL, Shark. That's my mental association, Kyle.
ReplyDeletePMI- Return of the 'small cap momo play.' It can only mean good things for the bull case.
ReplyDeleteSwing Trades - Not sure I have anything to add here, but I do have small positions in SWC, TC, TQNT, JBLU, STLD, UXG, WFR, RBY, AKS, GMO, SVM, DNN, GSS .. and I hate this swing trading crap...
ReplyDeleteRunning it up into the Merkel - Sarkozy meeting, huh? Lots of hope relying on the Europeans...I guess the expectation is that euro bonds are a go, which would be surprising given Germany's prior statements, but people change.
ReplyDeleteToday's action smells a lot like trying to put fear in the heart of shorts like me that are betting this is just a relief rally and trying to get people thinking they missed the boat. I suspect it's not quite done, unfortunately for me since I'm now 100% short and about 1.3% down from my purchase level.
TOF -- wouldn't it be better to close your SDS after hours, now that S&P is above the 1200 level, and place a "line in the sand" at today's intraday low of 1187, at which point you would re-enter your short position with vengeance (say by buying 3X ultrashort)? In this case, if the market keeps chugging along, you can just keep raising your "line in the sand" while not losing any money in the process?
ReplyDeleteAdded TBT 27.03 after hours. TNX has 50% to rise to levels of a few weeks ago.
ReplyDeleteFrom Zero Hedge regarding last auction: "most shockingly, the Indirect Bidders Imploded to a paltry 12.2%! Those wondering if Chinese posturing would lead to anything more than just jawboning have their answer. It was so bad that the Directs were for the first time in 30 Year history greater than the Indirects. And yes, while the yield was close to record low it won't stay there especially if as is now expected, August 26 will see the BEA report a second GDP revision of ~0.6% at 8:30 am, which will be promptly followed by Bernanke's 2011 Jackson Hole address....one of the ugliest 30 Year auctions ever seen."
David - Well if I knew the future and knew that the market would be up to 1,230 tomorrow, then yes, closing my SDS after hours now would make sense. I still think there is much more risk to the downside and the markets tipped their hand the last 3 weeks. This has been an impressive rally and has me a little scared, but I'm willing to risk more than a 1.3% loss to make money.
ReplyDeleteAusterity is a bitch and the bond market is imposing it's will on the global economy, unfortunately.
BC posted some interesting comments at 15:08 today from the creators of http://www.consumerindexes.com/index.html -- the bulls here will enjoy reading them. :)
ReplyDeleteDavid - I read those consumer index links froma month or so ago when they were saying things were getting better but it's odd to me that they were suddenly getting better after a HUGE market run and I was wondering if those were possibly even contrarian indicators. I doubt that. Instead perhaps its just a matter of them going from down big to flat, from what I remember. Is that the case? If so, I mean it's only natural for things to flatten out at some point right? Is there any correlation between it and the markets?
ReplyDeleteI just noticed that Jeremy Grantham put out some new writings recently, and here is an interesting excerpt from him, titled "Freakishly High Corporate Profits"
ReplyDelete"Looking at corporate profi t margins, one could argue the same for them – that they do not seem to be connected to economic reality. There never was – and perhaps, with luck, never will be again – such a terrible comparison between the economic well-being of corporations and their officers and the economic ill-being of their ordinary employees. My colleague Ben Inker has written (as has Andrew Smithers in London)
that, other things being equal, corporate profi ts will rise when government debt has risen. And, boy, has it risen! A more intuitive variant of this is that normally when you lay off everyone and cut your costs, your profi ts rise, if you do it alone. But when you all do it together, everyone’s top line drops and you collectively cycle downwards. Here though, for a while anyway, a great surge in government spending made up the difference on the top line, making for the temporary best of all possible worlds for corporate profi ts, an outcome that I must admit I never saw as even a faint possibility. It belongs, however, to the growing family of can-kicking maneuvers: when the government debt ratio inevitably falls, or even as it rises at a decelerating rate, it will put offsetting pressure on margins. As individuals
continue to restrict their spending and as commodity prices stay high, other pressures on profi ts also intensify. Lower margins are the great threat to market performance, even more so than the above long-term average P/Es."
So, 2nd_ave, may I suggest that you rethink your buy-and-hold strategy for broad stock indices? You are a trader in heart, and I know that you can take a loss from a strategy that turned sour and move on to better strategies. Why not use the recent crash as a warning of things to come and then use this rebound as a chance to get out with only a small loss? Compare the stock index chart for S&P since 2000 and for gold since 2000 -- doesn't it make more sense to go all-in buy-and-hold on gold?
I love it when somebody comes on and says you have to buy because of high corporate profits or high margins. "The PE ratio is so low" etc.
ReplyDeleteI watched that Prechter video last night. It was so spot on.
You buy when there are NO profits ('09) and sell when everybody is saying how cheap everything is on a PE ratio. ('11)
Buy when the PE ratio is 100 and sell when its at 10. My neighbor works for Intel. "The PE ratio is 10! Its gonna soar!"
Ha, ha, ha
Leading indicators and NDX closed right at neckline today which is retracement target for the indices. I admit, I'm a nervous nelly.
ReplyDeleteSold my TBT even after hours. I was risking too much capital.
I also can't seem to understand why double inverse bond etf's like PST, TBT etc. don't move nearly as much as a non-leveraged TNX. Heck, the TRIPLE inverse 7-10 year treasury etf TYO doesn't even keep up w TNX.
TNX was up 2.15% today. TYO should be up around 6.5%. It was up 1.23%.
I'm gonna pull a Warren Buffet and opt out of an investment that confounds me.
"Leading indicators QQQ and NDX"
ReplyDeleteJeremy Grantham's observations above about inevitable decrease in profit margins in the face of government austerity measures fits very well with what Jesse wrote about on his blog about austerity measures picking up now and providing obvious headwinds to the stock market.
ReplyDeleteJesse - Yep absolutely man. It is definitely crazy how the mass gets behind these ideas. The projected profits for 2012 are about 50% higher than the previous high in 2007. That's growth of 8.4% annually in 5 years. Let's say there's we get to that profit estimate. The issue is how sustainable are they when the debt levels across the world are at record levels relative to GDP over the course of the past 150 years. These debt levels spill into corporate earnings. Just go back in time and ask CSCO of 2010 if that's the case. And bond markets are forcing governments to cut back on debt or else face significantly higher borrowing costs. So logically I would have to imagine it will be difficult for earnings to be close to where they are now when governments will be cutting back debt levels for several years or more.
ReplyDeleteWith that said, I think a current P/E of 12 is reasonable if profits can stay flat at these levels or rise say a few % a year...but I think the risk is they start contracting say 5% a year for the next few years with continued austerity by the large governments of the world. The US is basically being forced to cut debt over the next 10 years or will be if we continue to get debt downgrades. Italy and Spain are in the same boat and I'm sure that France will be too if they agree to Eurobonds. If we were to get 3 years of 5% declines in EPS not only would that bring earnings down to about $85/share, but I would have to imagine that people would be willing to pay far less than 12 times earnings. In major market bottoms before bull markets begin, I think P/E's typically bottom in the mid to high single digits. So if you say $85/share x 8 = 690 S&P. So there's the potential (not saying it's definite) that we could see a lot more downside risk.
ReplyDeleteSome concluding remarks from Grantham:
ReplyDelete"Twenty years is a long time, so most investors think that dipping to fair value for a minute and
bouncing is normal. It is, in fact, highly aberrant historically. Markets staying down and washing away a whole generation’s false expectations, high animal spirits, and excessive risk-taking – that would be normal. In the long
run, a prolonged period of lower priced assets would lead to a much-improved, less risky, and less bubble-prone environment. In short, a more manageable world. It would also mean much higher returns from investing at lower prices. Long-term benefi ts from short-term pain."
So, 2nd_ave, if S&P stays around 1000 for a few more years, then THAT could justify doing buy-and-hold of S&P. That is, if you for some strange reason don't want to start buy-and-hold of gold now, then I suggest you sell your index funds now at 1200, make 20% annual return from trading for the next few years, and then get an all-in buy-and-hold entry below 1000 in 2015.
Either way, I will get more positive if we get the following:
ReplyDelete(a) Stabilization in CDS/bond rates in Italy/Spain/France
(b) Double test of the 1,100 level that holds, creating a good point to go long from
(c) Break at least 3% back above the 200 DMA
Team a story that may help your resolve.
ReplyDeletehttp://www.robertsinn.com/2011/08/15/1212/
Warren Buffet is known as the buy and hold forever guy, but really he is just a position trader. He is buying and selling all the time. He increased his Mastercard holding probably before this last pop.
ReplyDeletehttp://blogs.wsj.com/deals/2011/08/15/warren-buffett-buys-into-dollar-general/
Now the bullish argument. All CNBC headlines.
ReplyDelete"Volatility Sparks Biggest Fund Exodus Since 2002″
“Stocks May Have Seen Highs For Year—But Not Lows”
“Don’t Be Fooled by Rallies: Rough Road Ahead for Stocks”
“Investors Park Record $50 Billion in Money-Market Funds”
“For Consumers, Low Interest Rates Won’t Mean Much”
With all that Bullshit got to be long.
Exactly RB!
ReplyDeleteDRWI - Here's one without an PE, hence there's no need to concern oneself over this particular metric should it shrink? (Just kidding!) ;)
ReplyDeletenew post
ReplyDeleteCall it a simple explanation, but the potential underlying phenomenon I can imagine for the huge selloff last week can be explained by a large bank(s) that was too highly leveraged and forced to liquidate.
ReplyDeleteIe: I still suspect the hullabaloo over the debt downgrade was simply a smokescreen.
Now if government bond markets in every country weren't being manipulated, we might have a slightly clearer picture.
Regardless, currency fundamentals don't appear to be developed world positive. The wild card in my mind involves the resiliency by definition, of a worlds reserve currency.
Hopefully politicians are, or will at some point, discuss some sort of compromise with global corporations freeing them to hire and invest. I suppose this won't happen until developed world incomes become competitive to those in developing world (again, currency related).
Oh, but our currency shouldn't be sacrificed! Well, then how do you propose to pay your debts? Spending cuts, taxes, currency adjustment, employment are the four basic options for adjusting tax receipts?
Will the rally continue? I have 11,500 as the line in the sand. While the Jury's still deliberating, here's my offering to appease market gods:
http://stockcharts.com/c-sc/sc?s=$indu&p=D&yr=0&mn=7&dy=0&i=p99295968853&a=217994610&r=7 736