We all need to get away from the markets once in awhile. I have no clue where the current sell off ends, but I'll recognize the bleak landscape when the nadir arrives.
I've seen S&P 1215 tossed around quite a bit today as support.
Mad says to invest in Vietnam, maybe by using VNM. It looks like its trading around it's all time low since inception which must have been summer 2010.
bot 200 TBT at 19.79 and put out a sell order for 20.75. If I see David selling all of his then I'll probably lower my limit order.
did a silly thing and bot 2 DEC 170 calls on CF for (gulp) 10.70 each. You guys want to know when dip buying doesn't work? When I start doing it after watching a stock cycle for several days. I'll just let these ride for now. I've never been very good at setting stops on options.
My 7 lot Jan 121/124 SPY strangle was making about $80 bucks total yesterday with most of that value in the calls. Today its making $380 with the puts kicking in. It takes a lot of movement for a 3 point wide strangle to swing from one side to the other and still be in the money. So I'm hoping for another drop tomorrow and I'll sell the puts and hang on to the calls.
T D Amertrade has a free subscription to Minayanville's Buzz and Banter. The main topic for the day seemed to be MF followed by Italy of course. Italy I understand but maybe there's more to this MF issue than we've been led to believe.
So I just reskimmed today's blog. I think Italy and Greece will go bankrupt before they sell their gold. I know I don't GET gold at all but it's like politics, there is a passion about it. I've been wondering what would happen to the euro if the PIGS go bankrupt. I think the euro would dive first and then rally like rocket. But then if these countries go bankrupt, would the euro union just dissolve? It would probably take awhile if they did. Hmmm.
MF - Can't trust your broker anymore, or the SPIC to make you whole in case your broker puts your capital and assets up as collateral against his bad bets?
not much of a plan for tomorrow, if we have a big drop I'll sell my SPY strangle puts. If not and I sense a giddyness factor in my reading, I may sell my puts anyway.
I'll be looking for a chance to sell puts (DEC or JAN) on JNJ for a long term core holding position.
Also looking for an oil related energy name to start building a long term position in. OXY, HES, or somebody else.
For natty, DVN is the name I'm going with for the moment. I may look to pick up 200 shares tomorrow but I'll sell at or slightly out of the money short term calls if I do. That will be depend on the general market conditions. I guess it would be the same result to sell puts.
Mark - Thanks for the interesting article, not sure what to make of this matter yet, as how it might pertain to the rest of us, but I'm sure DC would smile over a commodities exodus.
SVM: Why try to catch the falling knife? Why not wait for it to start to resume the obvious upward trend and then go? Waiting until it climbs above yesterday's open price would be a mid-level risk trade. Heck, at least clear the top of today's bar.
GMCR - Yeah, was a no-brainer from the short side only if my account was a margin account, there are many examples and GMCR was one of the most obvious.
Brandt rant - Strange how Brandt defends leveraged traders today while he's been beating up silver crazies for complaining about PM's manipulation.
Not that I don't agree with him, b/c I do when it comes to the MF fraud case, I tend to disagree with him in the case of PM's though, there's manipulation there intended to steer traders away from PM's.
I also suspect ZH and maybe even OWS are fronts for the KGB, LOL!
Brandt is defending people who are standing in the casino innocently watching. Don't miss his point. He's not referring to people with positions on. He's talking about those who had money with MF, in their slush fund or MM acct. who had their money stolen. The equivalent of your broker going into your MM acct. when you have no leverage or margin and stealing your cash. That is theft, plain and simple. Just because your cash is held by a firm that like all others, uses leverage, doesn't mean you are always using leverage.
Mark -- thanks for a good article on MF! Here is an excerpt from it:
"At issue is MF Global's "segregated accounts" -- client money meant to be kept strictly separate from the broker's own funds, but which regulators say is now $600 million short. That pot of money shrank by $1.5 billion in August alone, government data showed. Another $1.8 billion fled over the following two months, according to preliminary estimates. In total, customers pulled out more than a third of their accounts in the three months leading up to MF Global's downfall, much of that in the frenzied final days, traders reckon."
So I will assume that the unreasonable drop in AUMN in August/September is the result of clients closing their commodity positions with MF. The same thing happened to a great little company WGW in 2008, when it was sold from $2.50 to $0.50 following Lehman bankruptcy. I called them up and asked them why their stock was so low even though they had a clear cashflow stream. They said that they had a large institutional ownership and those institutions were selling EVERYTHING left and right during the Lehman collapse.
This morning, Italian bond yields are back down below 7% (I haven't investigated yet what rabbit they pulled out of the hat this time) and, correspondingly, risk is on and TLT/$USD are down big time. The equities have not shot up yet, but they will if TLT/$USD stay down.
Someone panicked this morning away from AUMN (silly people) and my sell limit order for 10 December $7.50 puts was executed at $0.75. Will I *really* be able to buy more AUMN at $6.75 in December??? Nah, most likely this $750 in premium is just a gift I received this morning...
90% of those who buy options lose money (and TOF has data to prove that :)), and thus 90% of those who SELL (underwrite) options make money.
"A day after panicky investors drove Italian bond rates well over 7 percent, reviving fears that the euro zone was heading toward a break-up, the market calmed somewhat on Thursday after Italy managed to attract strong buying interest for a shorter-term bond offering. Also helping buoy the market were rumors that the European Central Bank had stepped up its buying of Italian bonds."
That's what I said yesterday -- all that was required was for ECB to step up its buying of Italian bonds. End of story.
David, I think you got hit by a bit of a double whammy. MF clients may have held AUMN positions but all of the miners were hit today on weak Euro/dollar strength/weak PM's. Just look at it this way, the other day you didn't think you would have the opportunity to get into AUMN again at $7.50.
I want to quote the whole article, but here is just a part of it:
"The Italian bond market is the only major market in the euro zone outside of Germany to offer investors the ability to buy or sell futures contracts. That has allowed many investors to use Italian futures not only to place bearish bets on Italy, but as a proxy for the broader euro zone itself.
“The futures market for Italian bonds has become the main conduit now for all investor angst with regard to the euro zone,” said Yra Harris, a trader at Praxis Trading on the Chicago Mercantile Exchange.
In what has become a highly volatile trading environment, investor fears can shift dramatically, turning sellers into buyers, especially if becomes clear that the E.C.B. has started buying bonds. That is why, after Wednesday’s rout when Italian 10-year yields touched a dangerously high level — 7.4 percent — word that the E.C.B. had started buying the bonds sent yields down as low as 6.7 percent on Thursday. "
Now imagine if the futures market got carried away and futures on Italian yield got VERY expensive. Then, newcomers to this market can arbitrage this craze by buying long yield contracts and hedging themselves by selling real bonds, thus driving up the yield even more. I bet that this is what has been happening, and the ECB intervention can *really* unwind this speculative bubble big time.
"Indications that Italy was moving closer to appointing a new government with a revamped legislative initiative, making it more likely that the E.C.B. would follow through with additional Italian bond purchases, also helped calm market jitters, along with the resolution of the Greek political drama with the appointment of Lucas Papademos, the former vice president of the E.C.B., as the country’s new prime minister.
Despite all the bad news, those negative bets remain a very risky undertaking. Analysts point to the fact that the E.C.B. still has considerable firepower and can move markets sharply by buying Italian bonds, as it did Thursday.
Economists also emphasize that if one excludes the amount of interest the country pays on its debt, Italy is running not a deficit but a surplus, one that in 2012 is expect to be 2.5 percent of gross domestic product, the highest of any major developed economy."
As I was typing this, TBT hit my sell limit at $20.50 for the 200 shares I bought yesterday at $19.55. This is my 3rd round trip on 200 shares between $19.50 and $20.50 -- the true money pump! :)
It is a RARE find of a security that is close to its rock bottom (i.e., 30-year bond yields). When such a rare situation appears, the "money pump" cannot lose money. AUMN might be another "money pump" out there, with $7.00 being the rock bottom.
That's probably because I held it for so long and it was on before I started posting here again. It was a crazy up and down hold onto your seat kind of trade.
Dave still thinks this market isn't well and may resolve to the downside. Big up days, big down days, news driven and all the debt and derivatives....not so good. That and all the technicals and overhead at the 200 dma with all the fuel to get to there. It's hard to muster the momentum to overcome the 200, the Fib retracement and the overhead supply after gassing it up 20 pts.
BUT, as we all know, the market can do whatever it wants.
"It's hard to muster the momentum to overcome the 200"
Yep, that's been my observation as well, I wanna see at least a nice double bottom formation on some of these charts that only have one bottom in them.
It may not mean much to most, it may only have meaning to me...
I believe it would be a very good idea to buy OPEN if the prior lows around $36 from 2 weeks ago holds. This trading is very reminiscent of NFLX back in 2004/5.
For OPEN, $38.27 on the close is the line in the sand...what I would expect to happen if it goes on to continue a bullish longer term move (which is what I expect over the next few years) is a drop below $38.27 and possibly a trade below there for a little while, and then a recovery back up above it, which should be a good spot to sell. You can do this at a lower point too. So let's say it drops down to $30 on a spike lower maybe on competitive news or something else. If it immediately spikes higher and then goes above $38.27 on a close, then you buy it Otherwise, you can watch for a retest of the $30 level and buy it if that level holds.
Mark - it depends on your time frame. if you look at the weekly / monthly charts then that really wouldn't be that big of a deal. remember that this thing had a HUGE move from under $1 in 2010 to $13. it most likely will consolidate and trade sideways for a while (unless some catalyst can push it higher). these high fliers often go through a consolidation period that can take a year or longer, during which there are huge moves that call into question the strength of the company. all of the big momo companies had these periods. even apple (2005/2006).
the most important thing to do is look at the financials of the company or the story behind the company. has it changed? if not then most likely the way the stock is trading is most likely a result of people taking profits and other people waiting for confirmation that it's worth what other people bid up for it. longer term charts are really the only ones to bother looking at for these big momentum companies.
I did a google search on online energy auctions and World Energy (XWES) had a tie in on almost all of the top 10 search results. i wish this thing had more volume in it but i guess that's how it works for these small fries before word gets out. that's how MITK was in the summer of 2010.
TBT is heading down again -- could it be setting up a fourth round trip for me between $19.50 and $20.50? Placing a buy limit order, once again, for 200 shares at $19.50.
David - I have no idea about OPEN's numbers going forward but their trends in revs/eps and their balance sheet are awesome. also, they're basically a monopoly. it took them 10 years to get to a leadership position where they're installed in tons of restaurants and more and more people are using their site to make reservations online...now it's going to be hard to unseat them. and their transactional revenue model (generate revenues every time someone reserves online) is great.
Looks like I missed the intraday pullback in TBT by just a few seconds. The $20.02 price I saw on my monitor was no longer there when I finished typing in my order. As such, I decided to move down my buy limit to $19.50, so as to catch another morning sell-off tomorrow...
“if ma and pa kettle decide to trade a leverage instrument, they deserve to lose their cash. ”
Sounds like it's not just a concern over cash, it's a concern regarding theft prevention. The system is rigged to allow manipulation and now add to that, theft. Or are there in reality, no bounds as long as DC gets to choose the winners and the losers?
I think Kyle has a point. If the big guys think we are in trouble with Europe they aren't going to sell huge positions all at once, they are going to sell into as much strength, manufactured or not, as possible.
So we see big moves down and then big moves up to sell into. There are specialists that do this stuff. Ever read 'Reminiscences of a Stock Operator'? They sell a load, buy a little to run the price back, sell more, buy more to run up the price, sell more...until they've distributed as much as possible at their price.
If the ECB prints then what will happen to the Euro and the dollar? There's a few stories about the euro reaching parity with the USD. I think that is in theory as if the euro weakens that much the USD will rise to meet it, so it isn't THAT far. That would be some whackage for the equites markets and likely a de-linking of weak USD/strong PM's as PM's would be in demand in Europe.
TOF, Italy is not going "down the shitter" -- ECB will just keep buying their bonds to keep their interest payments low, while Italy implements its austerity reforms.
Kyle, I think distribution was happening May-July, and then accumulation started happening in mid-August. That accumulation will keep driving prices up for a few more months at least...
David, I've been looking at Keltner channels, with various Prime & Fibonacci number configurations. I may be wrong. Perhaps probably will be very wrong, but, I think the distribution started from the Upper inner (pink) Keltner of 1256 and will go to the lower (pink) Keltner of 1125...
Kyle, recently I realized that technical analysis by itself is not sufficient for predicting the market direction. We need to look at technical analysis in the context of the prevalent market mood. If TA shows us that the trend is flat in a pessimistic market mood after a large decline, then most likely the market is ready to rally. However, the TA may also show a flat trend in a positive market mood (as we had May through July) after a large rally, which would mean that the market is ready to go down.
“I have complete confidence in the dedicated men and women in enforcement to carry out the necessary investigation to get to the bottom of what happened,” Sommers, a Republican, said in a statement. "
Sure, now I get it, PFM! Just like the flash-crash! This is almost as worthy as any ZH article.
Well Kyle, I don't know Keltner channels from Jim Keltner, but moving averages I think I can understand.
When the fast averages switch from on top to below the slower averages you can see in this chart what happens. Simply following the MA's can help you stay on the right side of the trend. Judging by the MA's this latest leg up is only a retrace. http://screencast.com/t/KKFZS9tglOI
David, Yes, but I have infinite confidence in the ability of the US govt. to screw up in the debt conference & the Europeans to screw up as well, so ....
So Corzine, being of GS ilk and senator of NJ, one might wonder how many unknown trillions of debt NJ has hiding off books just waiting to jump out with extraordinarily good timing, such as one evening in AH, just after a 450+ point day...
Yes, isn't it interesting though when these indicators converge? For example the weekly 'bowties' the fib retrace, the 200 dma, and on top of that, overhead supply and news driven volatility? It's like being a gazelle and noticing there is a lion in the grass at 2 o'clock.
We can all debate the short term direction of the markets, but the bigger question in my mind is:
why do we bother concerning ourselves with the impact of short term things like Italy defaulting or whatever that might be when we know that it has little or no impact on long term earnings and cash flows of companies, which is what drives the overall market? i mean, seriously, we had one of the worst downturns ever and we're now at all time highs in earnings. buffett, like graham and dodd, always talks about present value of future cash flows relative to the current value of a company. what the eff does a debt fiasco in a country like italy have to do with the longer term cash flows of companies when we know that the italy situation will be resolved eventually?
this is the reason why i think we should all just focus on the longer term trends with companies.
Mark -- I've been seeing that ever since you guys turned me on to listening to Landry's weekly videos. He's right. I don't like this rolling-over top...
Mark, i think market memory diminishes over time. For example, recent overhead (months) has more market memory than the decline of 2000.
I think really big formations over many years are interesting, but I wonder how foretelling they are. Even fairly recent H&S formations on a daily of weekly chart are visible to everyone and have a relatively high degree of failure. Almost all other indicators are the derivatives of price. The more recent they are the more they indicate market psychology.
CC - OK man. Let us know what he says. I remember the 'Kiss-the-Moving-Average-Goodbye' move, which MAY be happening (on the longer time-frame), wrt to SPX double-top (1553, 1576) and the recent top of 1370...
I've actually pretty much stopped paying attention to Italy. No way they are going down. They just aren't in that much trouble. if they had a functioning political situation, this would be fixed by now. The ECB is playing hardball to get them to push through some difficult decisions.
The reality is you've still got:
1. very low valuations 2. supportive interest rates 3. poor market sentiment 4. companies handling the weak economy very well and the economy starting to improve.
Like Warren Buffet says, ‘Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.’
And Fundamentals do Trump Technicals in the long run.
CP on Corzine: "So Corzine, being of GS ilk and senator of NJ,...".
Yes, but what I found out to my amazement some time ago was that he came from humble beginnings in Central Illinois. I am quite familiar with Taylorville, a nice small town. He also is an alum of U of I, as am I. Say it ain't so Jon. But maybe it is.
From http://en.wikipedia.org/wiki/Jon_Corzine:
"Corzine was born in central Illinois to Nancy June (née Hedrick) and Roy Allen Corzine.[6] He grew up on a small family farm in Willey Station, Illinois and near Taylorville. After completing high school at Taylorville High School,[7] where he had been the football quarterback and basketball captain,[8] he attended the University of Illinois at Urbana-Champaign, where he was a member of the Phi Delta Theta fraternity, and graduated in 1969, earning Phi Beta Kappa honors. While in college, he enlisted in the United States Marine Corps Reserve and served from 1969 until 1975, attaining the rank of sergeant. In 1970 he enrolled in the University of Chicago Booth School of Business, from which he received a Master of Business Administration degree in 1973."
Cool, I'm watching Dave and blogging at the same time.
Fundamentals do not matter to trading. The 'hope' of fundamentals matters. Some of the best trending stocks actually have no profits and some of the best fundamentally valued stocks trend lower for extended periods. Technicals ARE the psychology of the market.
The Wall Street myth of 'fundamentals' (myth number 3) is discredited by Landry in chapter one of the Layman's guide to Trading Stocks. How many times have you owned a stock of a company that reports record earnings and sells off, or one with no profits (say one of those miners or biotechs or a tech company represented by a sock puppet) that trends higher and higher? How about a stock with great fundamentals ( we have seen a few lately) but the market is fearful or in a bear market or there is a crisis of some kind and your fundamentals sell off with the rest of the market? Psychology matters. Technicals ARE psychology.
Example. David's AUMN. I posted the chart was shitty. The darned thing took off (I hope David booked those profits) and then we had some sort of Italian issue and the markets corrected and PM's imploded over the last couple of days. AUMN has good fundamentals from what I read here, but it doesn't matter. It's back to the 7's. WTF?
The reality is also: 1. Low valuations can be seen as weak market and economy. 2. Low interest rates are due to distress. 3. Maybe sentiment is accurate. How about all those bulls since early October? I'll bet their sentiment is squishy. 4. Debatable how companies are handling the weak econ. We still have very high unemployment, not a sign of strength. I'm hopeful on the economy improving but it is November near the holidays. someone that tracks shipping/trucking/freight on BC.com posted that shipping/trucking is down year over year month over month. Not a good sign of lasting improvement. 6. As Landry pointed out, this sideways up and down volatility is starting to wear traders out. To wit, Cara is turning trading over to Geoff and working on alternative investments outside of trading the markets...citing being tired of the ridiculous volatility. 7. Buffet. It would be a serious mistake to think we can trade like Buffett. For example, I do not have 60 billion dollars to ride out early entries going against me and I tried to call GS to loan them money and they wouldn't pick up the phone. Buffett is an investor. He buys entire companies or major percentages of companies. I can buy, in some cases, a few thousand shares. I'm a trader, Buffett is an investor. We can however, catch transitional patterns using technicals and make the trend our friend and do incredibly well.
Landry show hint of the week. Major top in silver on the weekly chart. Dave says he wouldn't trade it but it was a chart show "High Fiver".
S&P - I see two targets: 1011 and 1397...
ReplyDeleteThe lower target isn't in play until we break lower trend, now sitting ~1076
ReplyDeleteevening,
ReplyDeleteI've seen S&P 1215 tossed around quite a bit today as support.
Mad says to invest in Vietnam, maybe by using VNM. It looks like its trading around it's all time low since inception which must have been summer 2010.
bot 200 TBT at 19.79 and put out a sell order for 20.75. If I see David selling all of his then I'll probably lower my limit order.
did a silly thing and bot 2 DEC 170 calls on CF for (gulp) 10.70 each. You guys want to know when dip buying doesn't work? When I start doing it after watching a stock cycle for several days. I'll just let these ride for now. I've never been very good at setting stops on options.
My 7 lot Jan 121/124 SPY strangle was making about $80 bucks total yesterday with most of that value in the calls. Today its making $380 with the puts kicking in. It takes a lot of movement for a 3 point wide strangle to swing from one side to the other and still be in the money. So I'm hoping for another drop tomorrow and I'll sell the puts and hang on to the calls.
T D Amertrade has a free subscription to Minayanville's Buzz and Banter. The main topic for the day seemed to be MF followed by Italy of course. Italy I understand but maybe there's more to this MF issue than we've been led to believe.
So I just reskimmed today's blog. I think Italy and Greece will go bankrupt before they sell their gold. I know I don't GET gold at all but it's like politics, there is a passion about it. I've been wondering what would happen to the euro if the PIGS go bankrupt. I think the euro would dive first and then rally like rocket. But then if these countries go bankrupt, would the euro union just dissolve? It would probably take awhile if they did. Hmmm.
ReplyDeleteBravo Penn St. board!!!
ReplyDeleteMF - Can't trust your broker anymore, or the SPIC to make you whole in case your broker puts your capital and assets up as collateral against his bad bets?
ReplyDeleteCP- Re, MF. From what I'm hearing, those type of funds aren't covered by SPIC. SPIC is only good for 500K anyway.
ReplyDeletenot much of a plan for tomorrow, if we have a big drop I'll sell my SPY strangle puts. If not and I sense a giddyness factor in my reading, I may sell my puts anyway.
ReplyDeleteI'll be looking for a chance to sell puts (DEC or JAN) on JNJ for a long term core holding position.
Also looking for an oil related energy name to start building a long term position in. OXY, HES, or somebody else.
For natty, DVN is the name I'm going with for the moment. I may look to pick up 200 shares tomorrow but I'll sell at or slightly out of the money short term calls if I do. That will be depend on the general market conditions. I guess it would be the same result to sell puts.
later
I was hoping for lower prices!!!!
ReplyDeleteI bet we see spectacular market strength if MF's segregated account holders are made whole.
ReplyDeleteI wonder how much of the last few days is MF related. We'll never know, but they did have big bets on European debt.
ReplyDeleteCP- You might like this MF article...
ReplyDeletehttp://www.reuters.com/article/2011/11/10/mfglobal-clawback-idUSN1E7A717U20111110
I'm watching BTU/AAPL
ReplyDeleteI didn't think HEK results were that great.
ReplyDeleteMark - Thanks for the interesting article, not sure what to make of this matter yet, as how it might pertain to the rest of us, but I'm sure DC would smile over a commodities exodus.
ReplyDeleteSSRI - If this what happens when earnings disappoint, it might make sense to look at explorers that have no/little production...
ReplyDeleteTRX!!!
ReplyDeleteNot exactly bullish action here.
ReplyDeleteMDW - Back to $2
ReplyDeleteLooks like SVM is below trend line, someone usually throws a large bid up at $8.77
Man, I wish MITK's earnings weren't Monday.
ReplyDeleteCSTR - Hugging the 50SMA, doesn't seem to want/need to go lower if market holds up...
ReplyDeleteBAC - Going for broke?
ReplyDeleteSVM - Watch this action around $8.77 and tell me what you see???
ReplyDeleteSVM - I'm really tempted to add at $8.77, but the open gap up from $8.31 is stopping me.
ReplyDeleteI've seen it stop at $8.77 so many times on pullbacks, it's not funny...
SVM: Why try to catch the falling knife? Why not wait for it to start to resume the obvious upward trend and then go?
ReplyDeleteWaiting until it climbs above yesterday's open price would be a mid-level risk trade. Heck, at least clear the top of today's bar.
Did you guys see GMCR?
ReplyDeleteThat is a Landry short from $80.
Was 40.55 at one point today. Life is good.
GMCR - Yeah, was a no-brainer from the short side only if my account was a margin account, there are many examples and GMCR was one of the most obvious.
ReplyDeleteTM - Looks like low risk here to me...
ReplyDeleteBrandt rant - Strange how Brandt defends leveraged traders today while he's been beating up silver crazies for complaining about PM's manipulation.
ReplyDeleteNot that I don't agree with him, b/c I do when it comes to the MF fraud case, I tend to disagree with him in the case of PM's though, there's manipulation there intended to steer traders away from PM's.
I also suspect ZH and maybe even OWS are fronts for the KGB, LOL!
Brandt is defending people who are standing in the casino innocently watching. Don't miss his point.
ReplyDeleteHe's not referring to people with positions on.
He's talking about those who had money with MF, in their slush fund or MM acct. who had their money stolen.
The equivalent of your broker going into your MM acct. when you have no leverage or margin and stealing your cash. That is theft, plain and simple. Just because your cash is held by a firm that like all others, uses leverage, doesn't mean you are always using leverage.
Mark -- thanks for a good article on MF! Here is an excerpt from it:
ReplyDelete"At issue is MF Global's "segregated accounts" -- client money meant to be kept strictly separate from the broker's own funds, but which regulators say is now $600 million short.
That pot of money shrank by $1.5 billion in August alone, government data showed. Another $1.8 billion fled over the following two months, according to preliminary estimates.
In total, customers pulled out more than a third of their accounts in the three months leading up to MF Global's downfall, much of that in the frenzied final days, traders reckon."
So I will assume that the unreasonable drop in AUMN in August/September is the result of clients closing their commodity positions with MF. The same thing happened to a great little company WGW in 2008, when it was sold from $2.50 to $0.50 following Lehman bankruptcy. I called them up and asked them why their stock was so low even though they had a clear cashflow stream. They said that they had a large institutional ownership and those institutions were selling EVERYTHING left and right during the Lehman collapse.
This morning, Italian bond yields are back down below 7% (I haven't investigated yet what rabbit they pulled out of the hat this time) and, correspondingly, risk is on and TLT/$USD are down big time. The equities have not shot up yet, but they will if TLT/$USD stay down.
ReplyDeleteSomeone panicked this morning away from AUMN (silly people) and my sell limit order for 10 December $7.50 puts was executed at $0.75. Will I *really* be able to buy more AUMN at $6.75 in December??? Nah, most likely this $750 in premium is just a gift I received this morning...
ReplyDelete90% of those who buy options lose money (and TOF has data to prove that :)), and thus 90% of those who SELL (underwrite) options make money.
From this morning's news:
ReplyDelete"A day after panicky investors drove Italian bond rates well over 7 percent, reviving fears that the euro zone was heading toward a break-up, the market calmed somewhat on Thursday after Italy managed to attract strong buying interest for a shorter-term bond offering. Also helping buoy the market were rumors that the European Central Bank had stepped up its buying of Italian bonds."
That's what I said yesterday -- all that was required was for ECB to step up its buying of Italian bonds. End of story.
David, I think you got hit by a bit of a double whammy. MF clients may have held AUMN positions but all of the miners were hit today on weak Euro/dollar strength/weak PM's.
ReplyDeleteJust look at it this way, the other day you didn't think you would have the opportunity to get into AUMN again at $7.50.
A great article on the situation in Italy:
ReplyDeletehttp://www.nytimes.com/2011/11/11/business/global/italy-bond-market-as-euro-proxy.html
I want to quote the whole article, but here is just a part of it:
"The Italian bond market is the only major market in the euro zone outside of Germany to offer investors the ability to buy or sell futures contracts. That has allowed many investors to use Italian futures not only to place bearish bets on Italy, but as a proxy for the broader euro zone itself.
“The futures market for Italian bonds has become the main conduit now for all investor angst with regard to the euro zone,” said Yra Harris, a trader at Praxis Trading on the Chicago Mercantile Exchange.
In what has become a highly volatile trading environment, investor fears can shift dramatically, turning sellers into buyers, especially if becomes clear that the E.C.B. has started buying bonds. That is why, after Wednesday’s rout when Italian 10-year yields touched a dangerously high level — 7.4 percent — word that the E.C.B. had started buying the bonds sent yields down as low as 6.7 percent on Thursday. "
Now imagine if the futures market got carried away and futures on Italian yield got VERY expensive. Then, newcomers to this market can arbitrage this craze by buying long yield contracts and hedging themselves by selling real bonds, thus driving up the yield even more. I bet that this is what has been happening, and the ECB intervention can *really* unwind this speculative bubble big time.
More from this article:
ReplyDelete"Indications that Italy was moving closer to appointing a new government with a revamped legislative initiative, making it more likely that the E.C.B. would follow through with additional Italian bond purchases, also helped calm market jitters, along with the resolution of the Greek political drama with the appointment of Lucas Papademos, the former vice president of the E.C.B., as the country’s new prime minister.
Despite all the bad news, those negative bets remain a very risky undertaking. Analysts point to the fact that the E.C.B. still has considerable firepower and can move markets sharply by buying Italian bonds, as it did Thursday.
Economists also emphasize that if one excludes the amount of interest the country pays on its debt, Italy is running not a deficit but a surplus, one that in 2012 is expect to be 2.5 percent of gross domestic product, the highest of any major developed economy."
As I was typing this, TBT hit my sell limit at $20.50 for the 200 shares I bought yesterday at $19.55. This is my 3rd round trip on 200 shares between $19.50 and $20.50 -- the true money pump! :)
ReplyDeleteIt is a RARE find of a security that is close to its rock bottom (i.e., 30-year bond yields). When such a rare situation appears, the "money pump" cannot lose money. AUMN might be another "money pump" out there, with $7.00 being the rock bottom.
Stock indices just made a higher low intraday, and with TLT dropping like a rock, equities WILL rally today...
ReplyDeleteAnd so they did...
ReplyDeleteCC - By the way, I'm glad to hear your trade worked in your favor, even if after the fact! ;)
ReplyDeleteAUMN - I had my eye on $7.44 for some reason, not sure why that number is implanted in my head...
ReplyDeleteAUMN - It's my perception there's a little inverse H&S in today's chart, pointing to $7.80
ReplyDeleteCP, are you referring to GMCR?
ReplyDeleteThat's probably because I held it for so long and it was on before I started posting here again.
It was a crazy up and down hold onto your seat kind of trade.
Dave still thinks this market isn't well and may resolve to the downside. Big up days, big down days, news driven and all the debt and derivatives....not so good. That and all the technicals and overhead at the 200 dma with all the fuel to get to there. It's hard to muster the momentum to overcome the 200, the Fib retracement and the overhead supply after gassing it up 20 pts.
BUT, as we all know, the market can do whatever it wants.
"It's hard to muster the momentum to overcome the 200"
ReplyDeleteYep, that's been my observation as well, I wanna see at least a nice double bottom formation on some of these charts that only have one bottom in them.
It may not mean much to most, it may only have meaning to me...
BB- Congrats on MGIC.
ReplyDeleteI believe it would be a very good idea to buy OPEN if the prior lows around $36 from 2 weeks ago holds. This trading is very reminiscent of NFLX back in 2004/5.
ReplyDeleteObama won't give Palin "The Pipe"?
ReplyDeleteMaybe he has a different 'Pipe' in mind and a different orifice too....
ReplyDeleteinteresting stuff:
ReplyDeletehttp://www.objectivetrader.com/2011/11/arms-index-trin.html
I guess she'll have to beg for it, and maybe bark like a dog?
ReplyDeleteI'll be watching the $6.7ish area for MITK to see if it holds it should it drop on earnings. That seems to be a strong decision point for the stock.
ReplyDeleteThere's a 40K bid in MITK @ 8.00.
ReplyDeleteTOF- 6.70...Wow, I'd almost say it's a broken stock if it get's there.
For OPEN, $38.27 on the close is the line in the sand...what I would expect to happen if it goes on to continue a bullish longer term move (which is what I expect over the next few years) is a drop below $38.27 and possibly a trade below there for a little while, and then a recovery back up above it, which should be a good spot to sell. You can do this at a lower point too. So let's say it drops down to $30 on a spike lower maybe on competitive news or something else. If it immediately spikes higher and then goes above $38.27 on a close, then you buy it Otherwise, you can watch for a retest of the $30 level and buy it if that level holds.
ReplyDeleteMark - it depends on your time frame. if you look at the weekly / monthly charts then that really wouldn't be that big of a deal. remember that this thing had a HUGE move from under $1 in 2010 to $13. it most likely will consolidate and trade sideways for a while (unless some catalyst can push it higher). these high fliers often go through a consolidation period that can take a year or longer, during which there are huge moves that call into question the strength of the company. all of the big momo companies had these periods. even apple (2005/2006).
ReplyDelete'...I'd almost say it's a broken stock if it get's there.'
ReplyDeleteThat's actually a little harsh.
the most important thing to do is look at the financials of the company or the story behind the company. has it changed? if not then most likely the way the stock is trading is most likely a result of people taking profits and other people waiting for confirmation that it's worth what other people bid up for it. longer term charts are really the only ones to bother looking at for these big momentum companies.
ReplyDeleteI've seen nothing but "broken" stocks rise off their bottoms like zombies, nothing would surprise me.
ReplyDeleteStill waiting for BAC to flash $3...
I did a google search on online energy auctions and World Energy (XWES) had a tie in on almost all of the top 10 search results. i wish this thing had more volume in it but i guess that's how it works for these small fries before word gets out. that's how MITK was in the summer of 2010.
ReplyDeleteOn the monthly, MITK is testing the 10mma for the 3rd time. This time however, the 10 is rolling over ever so slightly.
ReplyDeleteTOF, the analysts supposedly expect OPEN to make $1.50 per share in 2012:
ReplyDeletehttp://www.reuters.com/finance/stocks/financialHighlights?symbol=OPEN.OQ
Do you agree with this estimate?
Markets open tomorrow right?
ReplyDeleteTBT is heading down again -- could it be setting up a fourth round trip for me between $19.50 and $20.50? Placing a buy limit order, once again, for 200 shares at $19.50.
ReplyDeleteThanks Mark. I've beeing looking and can't find any news on MGIC at all today, so not sure why up 12%, but I'll sure take it!
ReplyDeleteOn a second thought, I just moved up my buy limit on TBT to $20.02.
ReplyDeleteDavid - I have no idea about OPEN's numbers going forward but their trends in revs/eps and their balance sheet are awesome. also, they're basically a monopoly. it took them 10 years to get to a leadership position where they're installed in tons of restaurants and more and more people are using their site to make reservations online...now it's going to be hard to unseat them. and their transactional revenue model (generate revenues every time someone reserves online) is great.
ReplyDeleteso the question now is how much more room can they grow? and is the company cheap relative to that potential?
ReplyDeleteTRX - Does Sinclair have any gold?
ReplyDelete"so the question now is how much more room can they grow? and is the company cheap relative to that potential?"
ReplyDeleteSo why do you think they were above $100 in April? Apparently, the traders still saw some growth possibility for this company...
Looks like I missed the intraday pullback in TBT by just a few seconds. The $20.02 price I saw on my monitor was no longer there when I finished typing in my order. As such, I decided to move down my buy limit to $19.50, so as to catch another morning sell-off tomorrow...
ReplyDeleteDavid - "So why do you think they were above $100 in April? Apparently, the traders still saw some growth possibility for this company... "
ReplyDeleteYou can't rationalize with the greed emotion.
Also placing a sell limit order at $8.50 for the 500 shares of AUMN I picked up yesterday at $7.99.
ReplyDelete“if ma and pa kettle decide to trade a leverage instrument, they deserve to lose their cash. ”
ReplyDeleteSounds like it's not just a concern over cash, it's a concern regarding theft prevention. The system is rigged to allow manipulation and now add to that, theft. Or are there in reality, no bounds as long as DC gets to choose the winners and the losers?
Someone left the fish in the sun...
ReplyDeletehttp://www.bloomberg.com/news/2011-11-10/mf-global-missing-funds-may-be-part-of-massive-ploy-cftc-s-chilton-says.html
Guys - One thing I think you gotta take away as being bullish is this:
ReplyDeleteIf Italy really was going down the shitter then why aren't the markets down huge? I mean Italy is a big country with a huge bond market.
tof - I see distribution. The 1245 lvl from 12:40 yday and the 1249 lvl 13:10 yday prior to the afternoon slide down...
ReplyDeleteI think Kyle has a point.
ReplyDeleteIf the big guys think we are in trouble with Europe they aren't going to sell huge positions all at once, they are going to sell into as much strength, manufactured or not, as possible.
So we see big moves down and then big moves up to sell into. There are specialists that do this stuff. Ever read 'Reminiscences of a Stock Operator'? They sell a load, buy a little to run the price back, sell more, buy more to run up the price, sell more...until they've distributed as much as possible at their price.
If the ECB prints then what will happen to the Euro and the dollar? There's a few stories about the euro reaching parity with the USD.
I think that is in theory as if the euro weakens that much the USD will rise to meet it, so it isn't THAT far. That would be some whackage for the equites markets and likely a de-linking of weak USD/strong PM's as PM's would be in demand in Europe.
Just to add....this FEELS like some of those days in late 2007.
ReplyDeleteTOF, Italy is not going "down the shitter" -- ECB will just keep buying their bonds to keep their interest payments low, while Italy implements its austerity reforms.
ReplyDeleteKyle, I think distribution was happening May-July, and then accumulation started happening in mid-August. That accumulation will keep driving prices up for a few more months at least...
ReplyDeleteDavid, I've been looking at Keltner channels, with various Prime & Fibonacci number configurations. I may be wrong. Perhaps probably will be very wrong, but, I think the distribution started from the Upper inner (pink) Keltner of 1256 and will go to the lower (pink) Keltner of 1125...
ReplyDeletehttp://www.screencast.com/t/RhfoRjON78gs
FRO - Okay, the only thing I come up with on this one is fear over middle eastern problems has caused tanker rate increases.
ReplyDeleteKyle, recently I realized that technical analysis by itself is not sufficient for predicting the market direction. We need to look at technical analysis in the context of the prevalent market mood. If TA shows us that the trend is flat in a pessimistic market mood after a large decline, then most likely the market is ready to rally. However, the TA may also show a flat trend in a positive market mood (as we had May through July) after a large rally, which would mean that the market is ready to go down.
ReplyDelete‘Get to the Bottom’
ReplyDelete“I have complete confidence in the dedicated men and women in enforcement to carry out the necessary investigation to get to the bottom of what happened,” Sommers, a Republican, said in a statement. "
Sure, now I get it, PFM! Just like the flash-crash! This is almost as worthy as any ZH article.
Well Kyle, I don't know Keltner channels from Jim Keltner, but moving averages I think I can understand.
ReplyDeleteWhen the fast averages switch from on top to below the slower averages you can see in this chart what happens. Simply following the MA's can help you stay on the right side of the trend. Judging by the MA's this latest leg up is only a retrace.
http://screencast.com/t/KKFZS9tglOI
David, Yes, but I have infinite confidence in the ability of the US govt. to screw up in the debt conference & the Europeans to screw up as well, so ....
ReplyDeleteSo Corzine, being of GS ilk and senator of NJ, one might wonder how many unknown trillions of debt NJ has hiding off books just waiting to jump out with extraordinarily good timing, such as one evening in AH, just after a 450+ point day...
ReplyDeleteCC - Yes, but I use Prime or Fib Numbers rather than Landry's sma10, ema20, ema30...
ReplyDeletehttp://www.screencast.com/t/30Icqfsjb8B
Kyle- OR...in your chart back to '92, we go down to 850ish to form the right shoulder of the mother of all H&S patterns :))
ReplyDeleteYes, isn't it interesting though when these indicators converge? For example the weekly 'bowties' the fib retrace, the 200 dma, and on top of that, overhead supply and news driven volatility?
ReplyDeleteIt's like being a gazelle and noticing there is a lion in the grass at 2 o'clock.
We can all debate the short term direction of the markets, but the bigger question in my mind is:
ReplyDeletewhy do we bother concerning ourselves with the impact of short term things like Italy defaulting or whatever that might be when we know that it has little or no impact on long term earnings and cash flows of companies, which is what drives the overall market? i mean, seriously, we had one of the worst downturns ever and we're now at all time highs in earnings. buffett, like graham and dodd, always talks about present value of future cash flows relative to the current value of a company. what the eff does a debt fiasco in a country like italy have to do with the longer term cash flows of companies when we know that the italy situation will be resolved eventually?
this is the reason why i think we should all just focus on the longer term trends with companies.
Mark -- I've been seeing that ever since you guys turned me on to listening to Landry's weekly videos. He's right. I don't like this rolling-over top...
ReplyDeletehttp://stockcharts.com/freecharts/historical/spx1960.html
CC -- Sweet Man ... goes back to that line in Grasso's tweet from this week...
ReplyDelete"Whether you're a lion or a gazelle when the sun comes up you better be running"
Mark, i think market memory diminishes over time. For example, recent overhead (months) has more market memory than the decline of 2000.
ReplyDeleteI think really big formations over many years are interesting, but I wonder how foretelling they are. Even fairly recent H&S formations on a daily of weekly chart are visible to everyone and have a relatively high degree of failure.
Almost all other indicators are the derivatives of price. The more recent they are the more they indicate market psychology.
Oops! Thanks for the reminder Kyle.
ReplyDeleteLandry's video show is on right now!!! A special Nightime version.
Gotta go!
CC - OK man. Let us know what he says. I remember the 'Kiss-the-Moving-Average-Goodbye' move, which MAY be happening (on the longer time-frame), wrt to SPX double-top (1553, 1576) and the recent top of 1370...
ReplyDelete"i think market memory diminishes over time"
ReplyDelete-- If it doesn't, then you're not drinking enough
AND, if Mark was drinking MORE, then he wouldn't be so concerned with those 15-30 girls in the closet...
I'm in agreement with TOF.
ReplyDeleteI've actually pretty much stopped paying attention to Italy. No way they are going down. They just aren't in that much trouble. if they had a functioning political situation, this would be fixed by now. The ECB is playing hardball to get them to push through some difficult decisions.
The reality is you've still got:
1. very low valuations
2. supportive interest rates
3. poor market sentiment
4. companies handling the weak economy very well and the economy starting to improve.
Like Warren Buffet says, ‘Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.’
And Fundamentals do Trump Technicals in the long run.
CP on Corzine: "So Corzine, being of GS ilk and senator of NJ,...".
ReplyDeleteYes, but what I found out to my amazement some time ago was that he came from humble beginnings in Central Illinois. I am quite familiar with Taylorville, a nice small town. He also is an alum of U of I, as am I. Say it ain't so Jon. But maybe it is.
From http://en.wikipedia.org/wiki/Jon_Corzine:
"Corzine was born in central Illinois to Nancy June (née Hedrick) and Roy Allen Corzine.[6] He grew up on a small family farm in Willey Station, Illinois and near Taylorville. After completing high school at Taylorville High School,[7] where he had been the football quarterback and basketball captain,[8] he attended the University of Illinois at Urbana-Champaign, where he was a member of the Phi Delta Theta fraternity, and graduated in 1969, earning Phi Beta Kappa honors. While in college, he enlisted in the United States Marine Corps Reserve and served from 1969 until 1975, attaining the rank of sergeant. In 1970 he enrolled in the University of Chicago Booth School of Business, from which he received a Master of Business Administration degree in 1973."
new post
ReplyDeleteCool, I'm watching Dave and blogging at the same time.
ReplyDeleteFundamentals do not matter to trading. The 'hope' of fundamentals matters. Some of the best trending stocks actually have no profits and some of the best fundamentally valued stocks trend lower for extended periods.
Technicals ARE the psychology of the market.
The Wall Street myth of 'fundamentals' (myth number 3) is discredited by Landry in chapter one of the Layman's guide to Trading Stocks.
How many times have you owned a stock of a company that reports record earnings and sells off, or one with no profits (say one of those miners or biotechs or a tech company represented by a sock puppet) that trends higher and higher?
How about a stock with great fundamentals ( we have seen a few lately) but the market is fearful or in a bear market or there is a crisis of some kind and your fundamentals sell off with the rest of the market?
Psychology matters. Technicals ARE psychology.
Example. David's AUMN. I posted the chart was shitty. The darned thing took off (I hope David booked those profits) and then we had some sort of Italian issue and the markets corrected and PM's imploded over the last couple of days.
AUMN has good fundamentals from what I read here, but it doesn't matter. It's back to the 7's. WTF?
The reality is also:
1. Low valuations can be seen as weak market and economy.
2. Low interest rates are due to distress.
3. Maybe sentiment is accurate. How about all those bulls since early October? I'll bet their sentiment is squishy.
4. Debatable how companies are handling the weak econ. We still have very high unemployment, not a sign of strength. I'm hopeful on the economy improving but it is November near the holidays. someone that tracks shipping/trucking/freight on BC.com posted that shipping/trucking is down year over year month over month. Not a good sign of lasting improvement.
6. As Landry pointed out, this sideways up and down volatility is starting to wear traders out. To wit, Cara is turning trading over to Geoff and working on alternative investments outside of trading the markets...citing being tired of the ridiculous volatility.
7. Buffet. It would be a serious mistake to think we can trade like Buffett. For example, I do not have 60 billion dollars to ride out early entries going against me and I tried to call GS to loan them money and they wouldn't pick up the phone. Buffett is an investor. He buys entire companies or major percentages of companies.
I can buy, in some cases, a few thousand shares. I'm a trader, Buffett is an investor.
We can however, catch transitional patterns using technicals and make the trend our friend and do incredibly well.
Landry show hint of the week.
Major top in silver on the weekly chart.
Dave says he wouldn't trade it but it was a chart show "High Fiver".