If I don't trust my thoughts anymore,
it doesn't mean that I can't share some charts and links with you,
right? :) You then do with these charts/links whatever you want. This is the heritage I felt I had to leave behind before dissolving into universal consciousness...
First, below are the updated versions of the two charts of my own making, which I have already posted before. They show the ratio of net short position (CS - CL) of COMEX gold commercial traders (includes producers and commercial banks, mostly JP Morgan) relative to their total short+long (CS+CL) position.
http://www.cmegroup.com/delivery_reports/MetalsIssuesAndStopsYTDReport.pdf
which
shows the actual gold deliveries at COMEX ("I" means the bank issued
gold, "S" means it received gold. "C" stands for customer accounts, "H"
stands for house accounts). Note the MAJOR deliveries of gold made by JP
Morgan in February and April, against the short positions they opened
in the prior months (now tell me that JP Morgan did not know in Advance
about gold's collapse in April). In fact, this report shows that JP Morgan accounted for more than 99% of gold selling prior to April, and since COMEX is the largest part of the gold market (the ETFs account for 10 times less trading than COMEX), we can say that JP Morgan single-handedly *created* the 2013 gold crash with its selling.
After selling out their house gold, JP
Morgan disseminated that info to its customers, which went massively short the June contract (and delivered on it, as the report shows). The July data shows that neither JP Morgan nor its
customers had noticeably amounts of short gold futures, for otherwise
they would have already delivered on them (the seller pays warehouse
storage fees until the contract is delivered, and deliveries are allowed
starting the first of the month, so there is a BIG incentive for the
seller to make deliveries in the first few days of the month).
The chart below shows that JP Morgan had basically sold out of all of its COMEX gold prior to the April crash:
Finally, below is a chart of net short COMEX gold position among those traders who classified themselves as commercial banks. There were less than 5 such traders (that's why COMEX, in order to conceal their identities, gives a range for their number). A little research shows that JP Morgan holds a lion's share of open interest in COMEX gold contracts among the US commercial banks. Note that for the first time in many years, the US banks went net long gold futures in June.
Here is a link to the bank participation reports:
The July report was released a few days ago and showed that the net long position of US banks grew to 45000 contracts. If we look at all the Big Boyz (both US and non-US commercial banks trading gold on COMEX), then they are still net long gold, 20K contracts. All these Big Boyz are on the Fed's Primary Dealer list (http://www.newyorkfed.org/markets/pridealers_current.html) and are much closer to the action than we are. They are in the business of making money, not losing money (and Bernanke is hell bent on making sure that banks stay well capitalized).
To complete the picture, check out this story:
So we know that after selling almost all of its gold prior to the April crash, JP Morgan then suggested that its customers do the same. In June it bought the gold sold by its customers and went long gold, and now it is recommending that its customers do the same, thus chasing the price up and making money for JP Morgan. We don't know which month futures JP Morgan went long in June, but when that month comes, we'll see major re-stocking of JP Morgan's COMEX gold vault with the cheap gold it picked up from its customers. The story is as old as the market itself...
Friday eye candy!! Yeah :)
ReplyDeleteDavid - This is all fine and good, but:
ReplyDelete(1) How do you determine the value of Gold?
(2) How do you arrive at the fundamental reason why Gold is worth 5X what it was 12 years ago?
TOF, if we don't know why gold is worth buying at the current price, it doesn't mean that the big long-term investors (the ones who actually matter) don't know how to value gold. For example, I am pretty sure that the Chinese have a very good model for valuing gold, and that model is not swayed by the noise in the western media in 2013, because in the first 5 months of 2013 China has already imported about 20 million ounces of gold, compared to 26.7 million in all of 2012 and 13.8 million in all of 2011. If these import numbers hold up through the year, they would be equivalent to 50% of global mine production.
DeleteThe commercial banks also must have a good reason for buying gold now -- their in-house traders are in the business of making money over the intermediate horizon (months), and they would not have switched from short gold to long gold unless they had very compelling reasons for doing so. If we don't know their reasons -- it is our problem, not theirs. :)
But I am pretty sure that we will soon start hearing more and more good reasons for buying gold, which will be spread by the analysts at the big banks, who have already internally positioned themselves long gold.
So the investment thesis isn't based upon a firm understanding of how to value gold...it's based on the Chinese having a good model for valuing it?
DeleteI know if I take a big position in something I need to know every single thing about the company and assess the pros and cons in my head to give me some level of comfort/conviction if things go against me.
Conviction is a very dangerous quality, TOF, as I have learned myself recently... Besides, I have never seen you hold a position that goes against you -- you always cut your losses and move on to the next opportunity. This flexible approach to investing is what kept you out of trouble in the recent years, and trying to *convince* yourself irrevocably of some investment will only get you in trouble...
DeleteAlmost every big winner I've held has gone against me 5 to 15% initially. Without knowing the ins and outs of how to value the company and what the catalyst is, I would have bailed on every one of them. If something goes 20% against me then I'm out no matter what.
DeleteAlso, that knowledge of a company's value/catalysts will keep you in when a stock goes up big and comes all the way back down to where it started. YRCW is a perfect example.
DeleteI don't think I've ever heard your 20% rule. I'm assuming that is a total loss and not from first entering right? Seems about right to me. GMO got to about 13%ish I think. Flat now.
DeleteAll commodities are valued on supply and demand.
DeleteSupply is controlled by the marginal cost of production, meaning supply will increase or decrease as the cost to bring on a new mine is measured against price.
Demand can be qualified more easily in consumable commodities like oil, which is used and gone and there is a set, slowly changing demand pattern.
Measuring demand for Gold is much more difficult as the only consumption value is in jewelry and some electronics and these demand sources have been less than supply for a while now. So you are counting on investment demand to absorb the excess supply, but the problem with investment demand is that it really is future supply as investors buy something to sell later. And as fear has gone out of the market and rates have risen, investment demand has fallen driving down prices.
The patient investor in gold would probably wait another 10 or 20 years for mines to close, new mine openings to slow until we get to a situation like the late 1990's / early 2000's where real consumption demand is in excess of supply and then buy for the next multi-year bull.
David,
DeleteConviction is a strong asset in investing. Many, and I would say most, successful investors have high conviction levels.
But, but you must constantly be retesting your thesis to make sure it is correct. You are right in that if it is incorrect, I agree, it can be very dangerous. I would say fundamental analysis is the most important part in determining conviction levels.
OT is jumping into the miners and coal (WLT) here.
ReplyDeleteDavid- What bothers me about all of the above arguments is that 'everyone' has heard them, and understands them. Yet the market has done its best to confound and frustrate investors. The market doesn't comply with well-reasoned arguments. It's perverse.
ReplyDeleteYour 'problem' is your analytical mind. Your ability to reason, analyze and predict has served you well in school and at work. But it's a detriment when faced with perversity. The market is a serial killer, bro. It's Ted Bundy or Hannibal Lecter. You need to alter your approach accordingly.
DeleteOne of the things I noted over the years with 'Smart' / 'Self-Confident' people is that they believe they understand all the variables involved and become somewhat 'Theorem-Proof' in their approach ( IF A & B & C -> D must follow) and it's just not like that. This GAME is played at a much HIGHER (or if your're familiar with one of JFK's quotes re. Nixon 'It'll be handled at a much LOWER level').
DeleteDavid - might be a good time to read / re-read Lefevre's 'Reminiscences of a Stock Operator' (esp end of Chap IV): "This is how I came back to Wall Street for a third attempt. I had been studying, of course, trying to locate the exact trouble with my system that had been responsible for my defeats in A. R. Fullerton & Co.'s office." ...
DeleteStay strong man --
'Successful people keep moving on. They make mistakes but they don't quit.'
“Success isn't permanent, and failure isn't fatal.” -- Ditka
2nd_ave, Kyle -- you are totally right. If I ever come back to the market, I'll use Craig's approach of only buying things that are in an uptrend (preferably those that are just coming out of a big short-term pullback) and of ALWAYS placing a stop below the previous low (making sure that it is a HIGHER low, i.e., making sure that a turnaround in price has actually begun).
DeleteI will also disable my margin and make sure to never borrow money to invest. Turning a 250K portfolio (at the end of 2010) into 100K of debts is not pretty... Well, whatever happened HAD to happen, and I see how it has helped me tremendously to grow and realize my true nature. And as 2nd_ave said, it is great that I got this lesson while I am still relatively young and can easily rebuild my port with just my salary (if I don't do silly things, then I should pay off these 100K in 3 years using my salary). Putting myself and my family in debt a few years before the retirement (if this lesson were given to me in 20 years) would not be the right thing to do, even for a Buddhist. :)
DeleteDavid -- Please Take Good Care Man -- Secure your savings and protect your family -- Don't worry, this Piss-Ant Stock Bullshit Game will be here when you get back, but the same illogical dance will still rule the day.
DeleteDavid, I can't take any credit for the methodology I use.
DeleteI credit Dave Landry. He has helped me a lot with my bad habits. I can't say I have completely overcome them but I'm better than I used to be. I hope you are able to overcome your debt in short order. I'm certain you will be focused and successful.
Here is a humorous video to explain much of what I used to do and what I avoid now.
http://www.youtube.com/watch?feature=player_embedded&v=Vb2zl-F3S4U
"I don't think I've ever heard your 20% rule. I'm assuming that is a total loss and not from first entering right? Seems about right to me. GMO got to about 13%ish I think. Flat now."
ReplyDeleteMark - I don't have a hard rule on the 20% but if I don't like the way something is trading I'm out, regardless of what I think of it. I just think it is absolutely vital to remain flexible. If you're not then you'll end up dead sooner or later.
Any percentage would really depend on the percentage of the portfolio the position is, right?
DeleteI mean if a position is 50% of your portfolio and you lose 20% of it, you are in trouble.
I think limiting losses to a percentage of the total portfolio and sizing positions by how volatile they are or how much they can move is a better plan for limiting catastrophic losses, which is what this is all about, right. Risk aversion. Limiting risk while attempting to take unlimited gains.
CC - a lot of that comes down to what level of risk you're willing to take and how much patience you have. you really need to figure this out before investing.
Deletethe one exception I make for the % drop is when a company's cash is almost the same as the value of the company (assuming its in the US of course b/c i don't trust Chinese stocks). take a look at ZNGA for example. $1.6 billion in cash. $2.00 per share. last three quarters have been free cash flow positive. when the stock recently traded down to $2.50 it was kind of a no brainer. could it trade to $2.00? sure but it wouldn't stay there for long. that would imply that the entire company is worth nothing. FMD is another example of this, albeit they aren't at cash flow breakeven yet but they're trending toward it.
I personally never use stops.
DeleteI am very certain, that while stops would have helped in a few cases, they would have hurt me far more often by selling a stock out. It's amazing how wrong the market can get things sometimes.
But I do limit my risk by maintaining a diversified set of stocks with never more than 10% in any one. Plus, also trying to understand the value of a stock, gives me the conviction to add to my down positions and lower my overall cost when the rebound usually does come.
Yeah, both of these are value methods, but they assume you can value the company and that human nature is different here than China for example. I don't think humans are less greedy or corrupt here than in China. YES, the penalties are more severe in China, but that depends on who is supervising, which I think is no one until some hedge fund guy or short seller makes it public that X stock is run by criminals. How many times do we see some American co rip off investors? How many times do they beat by a penny? Come on.....
DeleteThen there is the assumption the market can be wrong. Say what? The value of ANYTHING is what the market will bear. Remember when RE could never go down? And a house was worth X because it would take X + to build it? The market spoke. Yes, it may rebound to X and X+ to build it, but value is still what the market will bear through supply and demand and in the value of the currency the item is traded. Oh, and how honest the officers, treasurer and auditors are.
There is no doubt the market can be wrong. Especially on individual companies. Investors are notoriously short-term focussed, they project 1 year's good results indefinitely into the future, and get caught up in excitement forgetting about the reversion to the mean which almost always occurs over time.
DeleteThat is exactly what happened in real estate. It was pretty obvious the market was overvalued with the NINJA mortgages, etc., but no-one cared as people were just riding along making money. People always jump on a bandwagon and try and ride too long. Look at Cara and Gold. Gold at $1,800 seemed very high and the gold bugs told you keep buying. You have to do your own critical thinking and look under the covers if you want to buy stocks on a value basis.
By far and away, most companies are legit. CFO's have license rules on them regarding signing financials and they put that law in a few years ago where CEO's and CFO's can go to jail if they sign off on something that is not correct. Pretty harsh penalties. Plus, you can get a feel for how companies run their accounting by looking at the assumptions they use (conservative vs. aggressive), being forthright with bad news, presenting lumpy numbers, etc.
I agree the value of anything is what the market decides - pure supply and demand fundamentals at work, but the value of a company changes far less slowly and the opportunity is when the price offered on a stock is far less than the value.
Absolutely, but there are exceptions to all rules.
DeleteIf it were simply a matter of valuation then everyone would own the markets and the world, right? David used his knowledge and logic to value miners. He made a case using fundamentals, charts, Fed activity, money supply, etc etc and there were a lot of other factors that played into the result. There is a lot of human emotion that is a factor. What is the cash value of Apple? They have more money than God, they continue to raise cash at an alarming rate, yet the stock was cut in half. They release results that blow the markets hair back and the stock goes down in price. There are a lot of factors to consider besides perceived value. Then there is time, emotions, the Fed, politics, world events, etc. This isn't a game for the weak or unprepared. Sometimes the best thing to do is do your due diligence and then tear your thesis apart.
DRAM. Nice Day. Sold the tiny position I had left 4.70
ReplyDeleteStill holding Pz. I figure this could do an absolute moonshot if earnings are ok. If not oh well not a big deal.
DeleteI bet it can at least get back to the previous highs which is about another $1. It sure has moved a lot recently.
Deleteif it moves it will move a lot higher than the recent move. market cap is $7 million. if they can turn a profit it could go up 100%+ in a day.
DeleteFMD sure looks good. There are a lot of sell orders going through on the bid but it's not budging. I find it odd that there are so many hidden bids. I've seen about 70k shares go through on the bid in the past 5 minutes and there are only 1500 shares showing up on Level II.
ReplyDeleteThis kind of trading is very similar to CECO and VG...lots of large holders selling but the stock holds in strong and then makes a push higher after the selling is done.
I never look at level II anymore. Conditional orders make level II relatively useless. Price is important though, so if it holds during a lot of conditional selling that's good.
Deleteman we have a loooong way to go if everyone is in this mindset. I guarantee they will start getting antsy the higher things go:
ReplyDeletehttp://www.cnbc.com/id/100886899
" Despite the big gains, 54 percent of investors told Gallup they had benefited either "a little" or "not at all" from the recent market rally.
And they're perfectly OK with that.
(Watch: Distrust on Wall St. Hurting the Market?)
While missing some of the big gains, 83 percent said they don't regret their choices, and more than half said they would not be adjusting their portfolios as they hold to their long-term investing choices.
"That's totally real," Baum said of the Gallup findings. "They feel like, we're OK, we're not making a lot of money, we're not losing any money. We're up."
I think there's at least a decent chance we are seeing the exact opposite of the fall 08/spring 09 drop. basically just flip the chart upside down. we get nice moves up followed by sharp mini pullbacks that get everyone bearish and then it's on to new highs. this could be an epic blowoff top coming. we shall see.
DeleteThe other thing I'm seeing is a lot of longer term bulls are getting cautious. Guys like James Paulson at Wells Fargo, Thomas Lee at JPM was getting bearish a little while ago, Jeff Saut is now at best neutral short term...speaking of which i just read his report for this week and I think he's reading DT:
Delete"As for the term “blow off,” this represents a large and dramatic price movement that is generally seen at inflection points in the stock indices, or on individual stocks. Go back and look at the SPX’s pricing action in March 2009 if you want to see a downside “blow off.” Then turn that chart upside down and you will see what an upside “blow off” looks like. It looks remarkably similar to what we are currently experiencing. In any event, this week or next, we are about to find out if my timing models will continue to work as well as they have been working."
Saut's been very good on his longer term views on the market, but more hit and miss and trying to time these shorter term corrections.
DeleteSure, it's probably a good time to sell some winners that don't have much upside after the run we've had, and maybe you hold the cash for a bit to try and get some lower entry points, but I wouldn't be selling any really good stocks I had that I want to own for a longer period as I might not get back in.
Steady as she goes over here, admit regretting having sold 2k shares of FMD and not buying more but someone had to do something to unlock the computers horns and who knows maybe it comes back to me and I can finish accumulating.
ReplyDeleteCC,
ReplyDeleteI think the hard part is valuations are not "simple". If they were, then all stocks would accurately reflect the true value of the company at that time.
How else would you explain stocks like YRCW being worth $6 in March and $30 now? If everyone knew it was going to get its business turned around, it never would have been that cheap. But by digging into it like TOF did, you could find out that there was more value there that the market wasn't recognizing.
Could AUMN have been worth $100 per share? Absolutely, they had a huge mine and if silver had stayed over $50, it would probably get there. But the flaw in the fundamental case is that it is a high cost mine, so if the price of the commodity falls, the value of the asset decreases faster.
Many of the gold bugs believed that the price of gold and silver couldn't go down while Bernanke was still printing which, of course, is not accurate and should not be used as a basis for investment. The price of any commodity is supply / demand driven.
The 2 keys, in my opinion, to investing based on fundamentals, are:
1. Always be checking your theory and facts, because it could be wrong or change.
2. Diversify, because no matter how good your work is, unexpected things can happen.
In the end technical/trend investors use the same ideas.
DeleteThey typically ignore value (although value and technicals/trends combined are better than either alone) but they wait for price to confirm the move (because theory/facts can change making them wrong), they diversify because money management limits position size and risk, and they place stops with a pre-determined loss that is well outside normal market noise so they don't get needlessly stopped out on noise, but limit risk in case they are wrong, conditions change or unexpected things happen.
Most people place stops WAY too tight then get upset when they are stopped out on noise and the position then takes off without them. The stops I use are as far below the entry as the price target is above the entry. At the beginning the risk is 1 to 1 (2% overall loss or 2% gain). When the price target is hit it is theoretically zero risk (barring extreme gaps below the initial entry price), but the reward after the price target is hit is theoretically unlimited.
It'a basically the same stuff with a few different rules.
"I think he's reading DT:"
ReplyDeleteOh wonderful, so who's leading who?
Hmm... Is it time to short oil yet?
ReplyDeleteWhy is it so damn hard to find nice, functional place mats?
ReplyDeleteMan, the problems in your life....
Deletehttp://www.google.com/imgres?imgurl=http://www.drsfostersmith.com/images/Categoryimages/normal/p-36481-56774-dog.jpg&imgrefurl=http://www.drsfostersmith.com/product/prod_display.cfm?pcatid%3D25456&h=255&w=432&sz=33&tbnid=JZshBoLQesv9hM:&tbnh=90&tbnw=152&zoom=1&usg=__R44R8BASindexcFQfVpje0og-zs=&docid=6mIlJh3BQRCSlM&sa=X&ei=Sk7lUfSjO6n3igLDrYDIBA&ved=0CGgQ9QEwBQ&dur=5704
DeleteFunctional? You mean like those fake-looking stiff plastic grass ones every camper trailer has just inside the door? Those things are pretty effective....
DeleteI have been doing some more work on energy stocks and what I'm seeing is that they are pretty much the cheapest they've been during this oil bull market (say since 2005).
ReplyDeleteBut, if I look back prior to that, they are still quite expensive. If you think back to that period though, oil was in the $25 range and the Saudi's wanted to keep the price between $20 and $30 to not destroy demand, but also not to encourage too much competition. Now with oil around $100, the Saudi's like that price area.
So, the investment in oil really is less about picking the right stock here and more about figuring out where the price of oil is going. If we see strong pricing, oil stocks are cheap and will move up. If we see weakness, valuations will likely move down as will earnings, so could see a big slide.
Something wrong with my data feed, or a sign of the future!!!...My 'Today's change' amount just flashed +$135,000!!
ReplyDeleteIt's a sign of the future(based upon previous experiences), now you know exactly where to set your trailing stops! ;)
DeleteYes!
DeleteMore realistically though, your broker was probably just using your account briefly to launder some blood money.
DeleteTVIX - This one is starting to look attractive again, but if the FED were to make another "positive" comment then we might see new highs?
ReplyDeleteSeems like such a crap shoot, although SPX banged into the upper BB and the whole nine-yards.
DRAMmit!
ReplyDeleteA pause at old highs to give the perception of a double top....maybe we get another pause day tomorrow or a few days. Traders remain skeptical and are calling double top. This is the time to buy if you're out in my opinion.
ReplyDeleteSaut's take is short term weakness followed by strength...a great way for managers to hedge themselves. The market goes down then its "see I was advising caution". The market goes up then its "I was too cautious but I did see things going higher".
ReplyDeleteDecided maybe it is good to make a couple of sales in case we do get a more serious pullback:
ReplyDeleteDD - bought way back as an ag play, but looking at it here, it's not that cheap or growing that well, so I'm sure I can find something better (WMT is much better if I want a large cap)
CAM.TO - is up 70% this year, so may be getting frothy, so sold half
ITP.TO - up almost 60% this year and 700% from my purchase, and getting near a 10 year high and needs really, really good housing numbers to move up from here.
BB - Good stuff. Did valuation and valuation relative to historical valuations of those stocks come into play?
DeleteAlways. When I buy, I look for stocks that are undervalued relative to the market and their historical trading ranges. Sometimes I sell just based on hitting normal valuation levels, but I also look at their growth prospects and try to figure out if they have the opportunity to grow profits at an above normal rate which would usually drive higher earnings and a higher p/e since the growth rate is better.
DeleteITP.TO was really valued quite highly relative to it's past because of its better growth prospects, but it's price had gotten to a point where I don't see much upside and I don't try and get the last dollar on a sale.
CAM.TO is fully valued (but not overvalued), but they have smart management and used the downturn to pick up some good assets on the cheap, so I suspect that they will be able to drive a higher earnings number this cycle and I don't think this is fully recognized. Having said that, there is execution risk here (they make steel girders for bridges, stadiums, etc.), so I figured sell half, reduce my risk and see what happens over the next few quarters.
In general, it really is getting hard to find obviously undervalued stocks these days.
ReplyDeleteThat's why I am looking to Europe, but it's still hard there as you only get the large guys on ADR's, so you have to trade over there for smallcaps.
In the U.S., I think you are at the point where you can try to buy fairly valued stocks with better than average prospects through the economic upcycle, or take on more risk going after cheap stocks with some warts.
Random thoughts...
ReplyDelete"It's deja vu all over again: The S&P closed at all-time highs. Ditto for the Rusty. The Quack closed at decade plus highs.
And again, the market is making new highs. As a trend follower, you can't fight it.
Many sectors that looked like they were running out of steam coming into Monday turned right back up.
So things continue to improve. Does this mean that you should jump on mid-stream? No. The market remains overbought and due to correct. As I have been saying lately, overbought environments create a damned if you do and damned if you don't dilemma. If you buy, the market corrects, if you don't, the market becomes even more overbought.
Since the overbought market became even more overbought on Monday, nothing has changed. Therefore, considering the above, I still think keeping your hands in your pockets is still the best course of action for now. If you feel like you really have to do something, maybe put one hand in your pocket and with the other, make a peace sign (Isn't that ironic? Don't You Think?). The good news is that since the methodology requires a pullback, there aren't many meaningful setups at this juncture. Wait for setups. When they occur, wait for entries. Once triggered, honor your stops. These simple techniques will help to keep you on the right side of the market and take you out when you are wrong. See recent webinars and columns on portfolio ebb and flow."
I hate to say it but I think this guy is a closet bear. I've read his posts from time to time for a while now and he basically says the same crap the perma bears say when it comes to his opinion regarding the Fed etc. Let's take 7/12 for example:
Delete"If you’ve been reading my web based commentary for the last decade or so, you know that I avoid news and especially politics at all cost. So, I don’t want to get into rants about the Fed. There are plenty out there fighting that good fight (e.g. my brother from another mother Gary Kaltbaum, keep up the good fight Gary!) I do feel that I’d be remiss if I didn’t say a few things. I am frustrated that they did some jawboning and then came back with never mind. This can really muck up the markets. With this sort of “just kidding” type of action, they will eventually lose credibility (I know, “credibility”, LOL). The other problem I discussed in yesterday’s webinar. Quantitative easing has been akin to a drug (borrowing the analogy from Rob Hanna). At first, it just took just a little to get the market moving. Subsequently, it has taken more and more to move the markets.
So, why am I’m bothering to get this off my chest? Yes, I’m miffed that my perfectly good shorts were decimated. It’s bigger than that though. I am a champion of free markets. No one is bigger than the markets longer-term. Sooner or later it is going to end badly. And, this would be must worse than if the markets were allowed to trade more freely.
It’s now time for me to stop thinking too much and get back to the trend following moron you’ve grown to love and respect. Other than dropping an F bomb or two about the aforementioned manipulation, it’s back to the charts for me. I don’t really care why the market is going up-as long as it can follow through.
As discussed in yesterday’s webinar, I’m concerned about the action in the bond market. The rate of change in rates is alarming. When a bond market implodes return of capital becomes more important than return on capital.
The Ps closed at all-time highs. Ditto for the Rusty. The Quack closed at decade plus highs.
As a trend follower, I can’t argue with new highs. So, do we jump in with both feet? Settle down Bevis. The market is very overbought at this juncture. As I have been preaching, overbought markets are difficult to trade. If you buy them, they correct. If you don’t, they become even more overbought. I think the best action remains to continue let thing shake out. If this is the beginning of a longer-term rip roaring bull market, then we’ll have plenty enough time to get long along the way. Also, because the methodology requires a pullback, I’m not seeing many meaningful setups just yet anyway."
Why did he bother having any shorts on as of 7/12 if he's a trend following moron?
DeleteSo you're saying we should just jump in at new highs? Go for it.
DeleteAs he says, the methodology (there is a METHOD) requires a pullback. We buy pullbacks, period.
We don't guess. It isn't bull or bear, it is FOLLOW the trend, but enter on pullbacks.
We don't LEAD or guess the trend. There WILL be pullbacks.
We don't flip around from method to method. We learn one method and stick to it. All successful trading requires a trend, either up or down. Right now we have an uptrend and open long positions. We don't have any shorts, we got stopped out. How is that bearish?
As I've written a thousand times, we don't guess, the market decides.
Because the market had rolled over and we let the market decide. If it had retraced and then continued to roll over, our half positions would have paid off. As it was we caught the roll over early and we took half profits on our short positions and then we were stopped out on the remaining shorts at break even.
DeleteThis is so simple, I don't know why you have so much trouble understanding it.
No one knew what the market was going to do. Not you, not me, not anyone.
No one knew the Fed would come out and jawbone the correction when it did. No one.
So we were stopped out with half profits on the shorts and our longs continued higher. Bummer.
I've said several times that the market has behaved exactly like someone that is a trend follower would want it to. I don't understand the continued caution he has had. When the market came back to 1,550 it was doing exactly what the trend followers wanted after a breakout. He keeps saying buy a pullback after a breakout. That is EXACTLY what it was. Why wasn't he bullish if he's a trend following moron that doesn't have opinions?
DeleteDon't take it personally man, I'm just questioning why he wasn't doing exactly what his methodology says it should be doing on a pullback after a breakout. I'm just speculating but I wonder if his opinions did take over a part of his objectivity.
"So you're saying we should just jump in at new highs? Go for it."
DeleteHasn't that worked for a while now? I've heard the same caution for several years. I remember someone asking the very same question of me back in 2009 at the old blog. I think it was after we ran up to like 900 off the bottom (can't remember). I think the exact phrase in response to my post was "only a moron would buy after a run up like this".
Maybe the hard part is I can't post the service picks so you don't see what's in the service unless I post a trade or two. The other thing is we trade individual stocks, we don't trade the indices except those who don't have margin accounts, who are tied into the ultras if they are going to go short. So the service is really about individual stocks as the indices aren't as easy to predict, being that they are well covered and analyzed.
DeleteSo in the pullback we already had shorts on because they triggered at the start of the rollover with bowties (pullbacks). As the market's rolled over we got long picks because they were pulling back and we trade pullbacks. So when the Fed jawboned the markets the longs triggered and the shorts stopped out leaving us net long.
Sold a chunk of the DRAM at $5.50.
ReplyDeleteYeah, I'm unsure if that early May spike counts as part of the flag pole but if it does the formation target would be ~$7, best I can tell.
DeleteThey really move when they finally get rolling, huh?
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