That pretty much sums up today's action. It felt as if we simply extended Wednesday's trading session by another 6 1/2 hours, and ended up a little higher. And does little to inform my trading.
BB- I agree with your comments, with the exception of your take on sentiment. Look forward to another update from Hulbert. I sense traders are generally confident we move up into EOY- which is not the kind of sentiment we need for a year-end rally.
illini- Another Midwestern kid corrupted by the big city. Corzine has nothing to worry about- if he does time, he'll be under Mob protection. Is it possible to have been Governor of NJ without becoming connected?
ReplyDeleteCan you believe I briefly (but seriously) considered two trades during the first 30 minutes of the regular session today, and chickened out both times?
ReplyDelete(a) TZA at 30.96
(b) SLW at 34.10
No cojones.
Unbelievable sell off in HK last night.
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".
tof- There is always 'the exception to the rule.' It may be that the massive outflows in October presage a sell off, not a rally?
ReplyDeleteHere's a column I read earlier today:
http://www.marketwatch.com/story/is-it-1973-all-over-again-2011-11-10?link=home_carousel
And the quote that has stuck with me all day:
'Prechter was quick to add: “None of this PROVES anything. Today’s huge intraday TICK and TRIN [two technical indicators] numbers, in fact, would usually be associated with a near-term bottom, so there is plenty of room for uncertainty. But the main exception to that tendency occurs at the kickoffs of major declines, and that’s how the waves seem to be positioned.”'
Set aside the fact that we're talking about Prechter here. The key word in the above comment is 'exception.'
CC - At one time Buffett was a small fry. Granted he got to be a big fry during a large bull market. Who's to say we also don't have a big bull market on the way? I for one think we probably trade sideways for a few years as we work off this debt, driving valuations even lower as earnings edge higher. Perhaps we go to 1,000 again if we're lucky but all this is doing is paving the way for the next big bull market. In the meantime I think many stocks can do well if you pick em correctly.
ReplyDeleteSpeaking of AUMN(and PM miners in general, not just AUMN), nobody was too pleased with the action today. The basic suspicion is there's another metals raid in the pipeline and preparatory shorts were being put on the miners today.
ReplyDeleteWe may have a big bull market coming, but the market has to prove that. No one knows, which is why we have a ranging, sideways leaderless market. BTW, we have a broadening wedge forming. Look up that pattern. Leaderless broadening wedges always ( I rarely say that) end badly.
ReplyDeleteHow does a bull market happen from here?
We have to get above the 200 dma and hold it, break through the overhead and make new highs. We need sectors to lead the advance.
ALL sectors are either rolling over or are up against major overhead supply.
We are always are working toward some trend, up or down. We do not know what that will be until it happens. I can wake up and predict what is likely to happen that day, and in a trending market, perhaps a week or so, but beyond that no one knows. I don't know.
All I know is I'm waiting for sideways to turn into up or down where we make money.
ALL traders need a trend to make money. That is the one fact of the market.
BTW, Buffet himself says the markets were far different when he started than they are now and he was lucky. He does have a talent for asset allocation, but these days it;s his large capital reserves that allow him to profit over the long haul. You or I don't have that cushion. Well, you might, but I don't.
I could run out of money waiting to be right, so I trade trends. Sometimes that means doing nothing and waiting. Or as Buffett says, "this isn't baseball, you don't have to swing at every pitch or have a limit of balls. You can wait for your pitch".
2nd ... Absolutely and absolute power still corrupts. I weep. Not for Jon or Hank or Loyd but for the rest of us. Even the 99% is controlled by the upper 99.9%. That's the upper .1% of income who are the drivers with unlimited funds (IRS data). These people are in the Forbes 400 on net worth also.
ReplyDeleteIllini- Good to see you my friend.
ReplyDelete$SPX - Here's an annotated chart:
ReplyDeletehttp://stockcharts.com/c-sc/sc?s=$SPX&p=W&yr=2&mn=11&dy=0&i=p41260873129&a=235939760&r=4 24
AKAM - There's a gap up in this chart that needs filling, so don't worry if you're thinking you missed out!
ReplyDeleteJudging by the chart, this company is still a going concern.
Japan - Wow, sounds like there's radioactive dust all over the fallout zone in northern Japan, many areas won't be inhabitable for at least 30 years...
ReplyDelete"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?"
ReplyDeleteTOF -- people get greedy and leverage themselves, and then the cannot survive a temporary pullback and thus they start to deleverage themselves (a.k.a. "sell") when things get gloomy and then leverage up due to greed once things become less gloomy.
Clear Cut: companies with good fundamentals trend down only if their P/Es got too high at some point. In the case of AUMN, it has a NEGATIVE P/E now, but will have a POSITIVE P/E below 1 if its stock stays at $7.50 when it starts producing 8M oz of silver per year. Thus, I totally don't care how its chart looks in 2011 or even in 2012. I know that at $7.50 it is absurdly undervalued and there is NO WAY it can stay that low once it starts producing 8M oz of silver per year. Thus, one only needs to have patience to wait for it to shoot up. And the only way not to miss its insane climb when it finally arrives is to be fully invested NOW.
ReplyDelete"short term things like Italy defaulting"
ReplyDeleteYes, the domino effect, where 3rd party swaps and defaults can cascade up the food chain and trigger multiple problems.
No that's not the Disney tigger!!!
Was MF global dead once the CDS's they held were discovered worthless? And look at what happened to their customer accounts... It's not a confidence inspiring experience.
evening, had tickets to an Aeros game. Hockey wears me out,
ReplyDeletebot 100 cf at 167.40 and sold at 168.05. I had an order to sell at 172.50 but it just never rallied that hi after the drop and I didn't want to carry it overnight. Maybe try again tomorrow.
bto 200 tbt, cuz I like David's idea, at 19.67 and put out an order to sell a 20.75 but we never made it that hi. I still have the 200 shares which I don't mind owning at this level but I'll still have my order out there. I'll be watching to see what David does.
My 121/124 Jan spy strangle went from +$350 to almost flat today. I can see us coming in to a -500 day at anytime so I like the idea of holding puts at al times now. I may try to pick up another strangle tomorrow. These strangles just give me a position that I may have the opportunity to trade at some point.
Some of the highlights I've latched on to are
GM's big dissapointment. Someone in the cara site is pointing to lower rail traffic which is where it begins. I didn't have time to review he links but I will. Dow Chemical in Freeport has laid off some contractors and cut back the hours worked for others. My sister in law was let go and she's not eligible for unemployment. I guess thats because she just started about 2 months ago.
An Alabama county filed for bankruptcy - the largest municipal bankruptcy in US history. I think of this county as Greece. The problem is, how many more of these counties are out there.
http://www.cnbc.com/id/45237814
Fannie ask for anothe $7 bill to help cover losses.
http://www.cnbc.com/id/45215654
that should just about do it.
CSCO got several upgrades and I'm in my 1000 shares around @20.00 or so. WOOOHOOO. I did the same thing in Intel, bot at 21 and sold at 19 while it traded on up.
ok, i can't type. Good luck tomorrow.
ReplyDeleteport - Did you see INTC's big gap up in April? I see the price came back to close that gap and retest $19... ;)
ReplyDeleteDavid, how did AUMN go up a few days ago if it has a negative P/E? The P/E logic has no basis in reality.
ReplyDeleteStocks trade on emotions, that is, fear and greed, period.
Fear of some European country defaulting and spreading some awful financial contagion? Sell, sell, sell. Rumor of some deal or bail out? Buy, buy. buy.
Markets, sectors, stocks tend to trade together.
Even if you have the greatest fundamentals, if another company in that sector craps out for some reason, guess what? Your great fundamentals won't matter. If the market goes down for some reason, guess what, the whole market is going down WITH your fundamentals.
Why? Emotions matter, fundamentals are a function of the higher brain and fear is a basic reaction of the lower brain and overrides the higher brain. THAT is a scientific behavioral fact. Fundamental fear overrides financial fundamentals. Every time. You may keep your cool but if everyone else holding your stock sells on fear, guess what? You are going to lose money.
"Thus, one only needs to have patience to wait for it to shoot up. And the only way not to miss its insane climb when it finally arrives is to be fully invested NOW."
ReplyDeleteIOW, you are trading on the HOPE of fundamentals. They don't exist yet, you hope they do. They may or something else could happen, but the price going up with negative P/E is on the hope of future fundamentals, not reality. It is on emotion.
EFT Financial Products in Zurich:
ReplyDelete"Gold is excessively leveraged via the OTC and futures markets. Whilst many commodities are rarely settled physically, as it would be impractical, we could see a surge in demand for delivery of physical gold during a financial crisis. With the current 92-1 leverage in the markets, should 1 percent of investors request physical delivery, then the whole system would come under considerable strain."
"Stocks trade on emotions, that is, fear and greed, period.
ReplyDeleteEven if you have the greatest fundamentals, if another company in that sector craps out for some reason, guess what? Your great fundamentals won't matter. If the market goes down for some reason, guess what, the whole market is going down WITH your fundamentals."
Clear Cut, you are looking at what drives stocks on short and medium time horizons (less than 1 year), and you are totally right about emotions being the key factor at these time horizon.
TOF, on the other hand, is talking about holding companies for several years, and on that time horizons, fundamentals ARE THE ONLY THING that matters. Thus, the EASIEST way to make money is to be patient, wait for a local panic (like the one we had this summer) and load up on companies with great fundamentals that will keep thriving no matter what. Then sell those shares in a period of local optimism that lie outside of a recession.
If that seems too boring, then dedicate 1/2 of your port to such a strategy and then trade the other half by mindlessly scaling in on weakness and scaling out on strength, using limit orders placed ahead of time.
Port, wouldn't read too much into the Alabama bankrupcy. From my reading, it is just a comedy of errors. The Fed's forced them to upgrade their sewers and spend a whack of money they didn't have. they put in a tax to cover this, then the state ruled it illegal. Costs went up and they didn't have a hope.
ReplyDeleteSimilar to Harrisburg, PA. Their municipal finances were fine, but decided to build a huge garbage incinerator to deal with waste and this went way over budget and they couldn't afford to pay.
Does not seem like anything systemic so far.
I completely agree with David. Yes, stocks do trade on emotion in the short term. Why the hell else would BIDU trade down to $10 in late 2008? Why would PIR be at $0.15 back then? Obviously the fundamentals said both should be much higher but people refused to pay attention to fundamentals then.
ReplyDeleteClear Cut,
ReplyDeleteLots of ways of investing. I'm sure pretty much every stock I buy would be considered poor by "technical analysis", but yet I have above market returns almost every year.
P/E is only one way of looking at fundamentals. It is obviously not the proper one when looking at AUMN. AUMN has a huge resource which can be bought very cheaply at current sock prices. You are buying now because you believe management can execute and turn this resource into strong cash flows.
Fear only overrides fundamentals in the short term. In the long term, prices go back to fundamentals. Look at 2009 - many stocks whose business was not hurt by the finanical crisis at all had their stocks smashed, but a couple years later, they are right back to their fundamental valuation.
For you guys that like larger cap stocks, check out ITT...well, what was remaining of ITT. It split off into 3 companies. I think if you bought all 3 you would do well.
ReplyDeletepretty soon here the bears are gonna capitulate. laz might be right...this might be the stage of the bull market (stage 3) where people finally accept that it is a bull market and that we ain't going back to the bear market lows again.
ReplyDeleteLOL! Rosie on perception from this AM's newsletter.
ReplyDelete"• The last word: All we hear is how cheap the market is but I can tell you that valuation is always a case of beauty being in the eye of the beholder and never a case of being a very useful market-timing device."
I'm not immune to a fundamental story, but it's better for me if the technicals indicate others are buying the story. Or selling it in the case of shorts.
Not to pick on anyone but to be quite candid, two of my current biggest RED holdings were touted here just a week ago with fantastic fundamentals. NLS should be $3 (maybe 3.40) and CVV was cheap. Apparently the market thinks the fundamental price is lower than estimated.
Just sayin.
I'm not down so much I'm losing sleep, but I should add, my best trades are trend knockouts on reestablishing trends, both long and short.
Nice move from red to green in MITK.
ReplyDeleteMan, I still can't trade this market at all.
CC, you can be wrong on fundamentals just as easily as on technical buys (or you just need more time to be proven right, which is often the case with fundamental buys).
ReplyDeleteI've gone back through some of the picks recommended by technical analysts on TV and they are buy no means immune from top-ticking a trend.
Got to go with what works for you - if you're making money with your trend following, keep doing it. There's no wrong way to make money.
Part of the Landry system is to ignore the news ("don't confuse the issues with the facts") so that means definitely don't watch the so-called TA on TV, unless T and A means tits and a@@!
ReplyDeleteLandry doesn't use what might be called the standard TA. Rarely do you see the TV TA 'experts' talk about what a bar on a chart really means. you do see a lot of so-called support and resistance talk, which is a little crazy if you ask me. So what works you ask?
This AM SHAW set up.
The buy was upon clearing the closing price on Nov 8th at $24.47. The stock can move $2 a day on noise, so the size and stop are dictated by port size, percentage of risk and that $2 of HV.
The stop is just below the low of Nov 9.
It is now at $24.90 and since the market is still 'iffy' I only put 1% at risk.
If you pull up the chart you can see the resumption of the trend.
Man, who in the F is pushing MITK here? On volume too.
ReplyDeleteTA - I thought it was all about titz and a$$....
ReplyDeleteHmm.... I don't have much capital in either category... Well thanks a lot, now I'm forced to rethink my entire strategy! ;)
MITK - Well, it bounce off what appears to be strong support at $8, so I'm not surprised.
ReplyDeleteI bet you could get in cheaper if the market takes a big dump on Monday on news Europe's still financially hamstrung and nothing's been resolved, but how liable that to be the case?
P/E looks rich, but that could change?
The Theme:
Can't help agreeing with TOF's logic, sooner or later everyone gets over their obsessing, turns the page, and these problems eventually fade into history?
Dunno when that's gonna happen or if it's happening now, but the open gap up in the SPY chart needs to be closed IMO, there's one in the SVM chart I bet closes simultaneously...
So generate a trading plan that encompasses the various scenarios, with some time horizon in mind?
There are plenty of gaps down that need filling too, is the market receiving enough relief going into EOY to accomplish the feat?
ReplyDeleteAKAM - Just filled one of these gaps down...
Interesting theme CP.
ReplyDeletemark - MITK is probably going to $10 or even $11 today
ReplyDeleteMITK - Looks like if it can close above the lower ascending trendline ~$9.40? I guess the likely target would be over $11.
ReplyDeleteLast night would've been a low risk entry, look at the RSI(7), etc., to see where in the cycle the indicators are...
SVM - In the case of this one, I'm expecting the gap up from $8.31 to close and note that the 50SMA is now just below that gap, so a retest of the 50SMA is probably in the cards.
ReplyDeleteIf the retest is successful (there's no reason for it to fail as long as silver is over $32, IMO), that would provide a good place to add or take a position.
Also note that RSI(7) is presumably headed back down to cycle through 30 after having recently cycled through 70...
Thus, I'm looking to add back my trading shares in the low 8's...
MF Global - 80% of the missing money has officially been located in JPM's coffers, but not yet returned?
ReplyDelete"Lots of ways of investing. I'm sure pretty much every stock I buy would be considered poor by "technical analysis", but yet I have above market returns almost every year.".
ReplyDeleteThat's great, BB! I also buy poor TA stocks (actually, I like buying the WORST TA stocks, like miners and chinese small caps this summer), but my annual returns are like -30% every other year. So far, on good years they have been high enough to keep pushing my port to new highs. Let's see if my return next year compensates for this year's fiasco. :)
As for being wrong on fundamentals, I would say it is possible only if you choose a company based on its P/E. However, if you rather choose it based on a steady growth in earnings, then eventually P/E is going to become low enough that the stock will shoot up. That's what we want -- find companies with steady earnings growth for YEARS ahead, like AUMN. :))
Wow, now Bloomberg got screwed up on their bond quotes:
ReplyDeletehttp://www.bloomberg.com/markets/rates-bonds/government-bonds/us/
The price of 30-year US Treasuries is NOT 99! That would imply yield of 3.75%!
Bond markets are closed.
ReplyDeleteJust shoot me.
ReplyDeleteAUMN is back in play today! So that drop below $8 was NOT a return to the $7.50 level, but a major takeout of all stops.
ReplyDeleteWhy am I watching CSTR? The Fing thing is a buck fifty below where I sold it for a loss. I still like it though, go figure.
ReplyDeleteAUMN:
ReplyDeleteThis stock has moved as much as $2.10 in a day, which a person then has to factor in as normal noise. If an amateur sets stops within this historical volatility then chances are his stops are going to get hit on normal noise. If you get in at $7.50 then your stop needs to be at least $2.10 below $7.50. This risk is then offset by position size.
Twits...
ReplyDelete$CSTR - Coin Star tanking ever since a trader bought a block of 3,500 Dec. 42.50 puts to open - any1 see any news
AUMN. Good point CC.
ReplyDeleteTRX. Could have caught a double in one day.
ReplyDeleteMark - Since CSTR is below the 200 DMA you might as well wait until $39/$40.
ReplyDeleteMy suspicion is we gap higher on Monday and close above recent highs...maybe a pullback into the close today to fake out traders.
Every once in awhile I play blind squirrel Mark. It helps to reinforce my own discipline which at times is sorely lacking.
ReplyDeleteIt's late Friday, time for more euro noise!
ReplyDeleteTOF- Yep, I agree, which is why I don't understand watching it like a hawk :))...Now go find something liquid we can actually trade!!
ReplyDeleteCC- Yeah, I need to something soon, that's for sure.
ReplyDeleteOK, she's cute.
ReplyDeletehttp://seekingalpha.com/author/abigail-doolittle
ReplyDeleteBuy side imbalances abound.
ReplyDeleteDamn Kyle!! Your fast!!
ReplyDeleteDamn MMYT getting hit hard past few days. I'm starting to get interested again. Would love to see it below $20 again.
ReplyDeleteMark - Check out NOIZ....I have a position in it....excellent recent revenue/EPS growth. I think it becomes a momo stock very soon. there is some risk because of the potential budget cuts to defense coming up, but i doubt it has an impact on them. volume is putrid, so you just have to try to nibble on it. I have about 7k shs at around $7. they recent announced EPS of $0.24 last quarter and EPS is just totally ramping. i've been searching high and low for the next DXPE/BOOM type stock and this is the closest I can find. they have a very highly leveraged business model (i.e., fixed costs with revenue growth ramping = new revs drop right to bottom line and jack up EPS). you know how the crowd works...if they see another quarter of $.25 or so or better this sucker will ramp up to $20 quickly.
ReplyDelete"Now go find something liquid we can actually trade!!"
ReplyDeleteDoes beer count?
Hey, where's the obligatory Friday pre-close announcement proclaiming all's well in the Eurozone?
ReplyDeleteLOL, SPY gaped up again this morning, you guys gonna short that?
CC- In 3 hours it sure as hell does!! I'll trade me headache for a beer :)
ReplyDeleteMark, do you know what happenned to TRX? Used to be a $6 or $7 stock.
ReplyDeleteBB- Geier LLC had about 10M shares of TRX. As best as I can tell, it looks like they dumped about 6M on the market yesterday. It's really hard to tell with all of the puts they had also. There was also a large short that might have covered yesterday, but I haven't seen any filling, so it might not have been large enough to have to report it.
ReplyDeleteI have no take on it at all.
new post
ReplyDeletePEIX - ?
ReplyDelete