My "two hours of sleep a night" bit is getting to me, so this won't be an especially long post. Let me just hit the highlights.
First, I'm intrigued by the newfound strength in the $IRX. It is very near the top of its range since the 9/15 gap, which suggests a (relative) sense of calm and ease is returning. Now, with a VIX nearly at 40 I realize that people aren't kicking back in their lounge chairs. But, let's face it, the Dow shooting up nearly 500 points probably calmed a lot of very nervous bulls out there, and as I've said repeatedly, a big surge is precisely what we bears need to see.
I'm not optimistic that we're going to get another turkey shoot where the VIX is at 18 and everyone thinks a full-blown bull market is back. But give me another day that's similar to today, and it'll be time to load the rifles again.
I've see a lot of smart folks pushing for a bull market in gold. I don't get it. Gold looks really sick to me. I have a reasonable number of bearish positions in gold, although I did close out my bearish silver positions today in order to wait for a hopefully better entry price.
As for oil, this is a bit of a tough one. The topping pattern is pretty huge, but the prospect of a large, very time-consuming right shoulder on this pattern is very real. It could be months before we see a real collapse. So I trimmed way back on my energy-related shorts, taking profits and stocking up on cash for our next golden opportunity. (Those following me on Twitter will recall that on the 19th I declared it the "selling opportunity of the year." Boy, was I right about that!) Anyway, if the $OIX got back to, say, 750-775, that would be pretty intriguing.
Looking at the equity markets, I'd say they easily covered at least half the ground they need to cover in order to create some great bearish opportunities. I actually got into a respectably-sized SPX put position near the end of today, although I might be early on that. I was dead spot-on getting QQQQ calls last night (and, thank God, getting out of my index puts yesterday), although, as is so often the case with my bullish positions, I sold them way too soon.
The view from the $XAU is a head-scratcher. $130 seems to be an important support level. I think it's possible we just noodle around this area for a while. There's a pretty big range from 130 to 155, and as you can see for 2006 and most of 2007, XAU just boinged back and forth within that range.
I've tinted in green the progress QQQQ made today back to its retracement line. Like I said, we're a little more than halfway there is just one trading session. I think what would goose us up to the victory line would be the passage of the government failout.
As for the $SPX, it could be argued that we've already achieved the retracement. That bold Fibonacci line is a major one. If there's more strength to be had, I would think 1205 would be about the next stopping point.
Let me be clear. Nobody wants a rally more than me. Nobody. I would love to see another 1000 points tacked on to the Dow. I have a huge list of stocks that, if they can retrace, represent the shorting opportunity of a lifetime.
However, I'm wondering if today's rally is "feebing out" on us. I have closed my QQQQ and SPX calls for small profits. What I see is today's rally bumping up against some pretty big Fibonacci levels.
I'd be sort of flabbergasted if the entire countertrend rally was over, but just as an FYI, note that the $INDU has stopped short at its 78.6% retracement level. In fact, the high today matches this level virtually to the penny.
I am making no rush to the exit after all. In spite of the Dow being up over 200 points early in the session, my positions are holding strong. I am watching $UTIL in particular to see if a full exit makes sense, or merely half the position.
We are living through insane times, but I think this is generally what's going to happen over the next month:
ONE: The markets will bounce higher. The reasons for the bounce will be an extremely oversold condition, the eventual passage of some kind of "bailout" bill, and the sense that the worst is finally behind us. I imagine indexes would spring, for example, back to the area I've tinted below.
TWO: There will be a huge, huge supply of charts which had been severely beaten which do a substantial retracement back up to either broken horizontal support or, more commonly, broken trendlines. I am already amassing so large a watch list of these prospective "bounce backs" that it's ridiculous.
THREE: The new catalyst for a downturn will be Q3 earnings, as those start to emerge in earnest three weeks from now. It's going to be sort of like RIMM (although not necessarily to that extreme) for hundreds and hundreds of different stocks. At that time I plan to go hog-wild buying puts on or shorting the aforementioned "bounceback" issues.
Having said all of the above, obviously I intend to scramble out of the majority of my present positions. As of this writing (more than two hours prior to the opening), there is no "big news" yet. There's no surprise interest rate cut, although that could change at any moment, and the GLOBEX on equities have been in the green all night. I am (with the usual caveat - "as of this writing") relieved to have closed out my index put positions. I am hoping that at least the initial bounce isn't so big that it takes too meaty a bite out of my current profits.
We are living in an absolutely unprecedented era, so laying out what I think is going to happen over a month - - which in current market conditions is like predicting what's going to happen over the next fifty years - - is highly speculative. But that's the general theme I'm running with for now.
As regular readers know, I've been ga-ga over the short position in $UTIL.
I have examined this chart with fresh eyes, and I have decided it is time to take profits on this position.
The head and shoulders on this pattern has always been a bit sloppy. The retracement back to 8/29/2008 is my new neckline (shown as the purple horizontal line, below). The math is pretty simple. 8/29's high was 486.64; the ultimate peak on 1/8/2008 was 555.71; the difference is 69.07. Subtract this from the neckline value, and you get 417.57, the new target price.
Today's low was 420.25, which is extremely close to the target.
Importantly, I took a fresh look at the long-term chart back to 1929. My retracement goes from 4/28/1942 until 4/20/1965, and the extensions of this retracement are pretty remarkable. The 261.8% extension and the high price reached in December 2008 are virtually identical at the value of 418.25.
So, as you can see, there is a convergence at these levels. I will probably re-enter this trade on a serious bounce higher, but I am planning on liquidating my entire SDP position which has provided a nearly 20% return in a very short amount of time (and constitutes my entire retirement account right now!) I also intend to sell my XLU puts in the morning.
I hope you made a lot of cash today. I think the collective group here has helped each other so much. I am especially grateful to Evil Spectulator (molecool), Moon Trader, Gary, Gagelle, and Master Shake - - I'm probably forgetting some names, but this is just a quickie post.
September 29th was said to be the "biggie", and I'd say we got what we bargained for. I have a couple of important appointments I need to attend, so I won't be doing a post until tonight. But I will share a few quick thoughts:
The risk/reward on my index puts got so extreme that I sold all of them a few minutes before the close.
I believe the indexes have been pushed to such deep levels that the opportunity for a substantial bounce is before us. Being the type that puts his money where his mouth is, I bought 100 November QQQQ calls shortly after the close today (you can get these for an extra 15 minutes after the regular closing time).
I think the juiciest bearish opportunity is actually in the future; perhaps weeks out, or perhaps months out. I'll talk about this more tonight.
Today was the best trading day of my entire life, and, again, the terrific community here is a major part of that. I hope that, in turn, millions of dollars in profits were made amongst the audience here. Thanks, everyone, and I'll write more later today!
As great a day as it is, there are certain areas where taking partial profits makes sense. I have many options whose gains exceed 100% and that are nearing support levels. Take MOS for instance, below. I am closing out half my position and have a tight stop on the remainder. That way I get to have my cake (the prospect of additional profits) and eat it too (realize a portion of the profits here and now).
As high as VIX levels are, and as "oversold" (I hate that word..........) as stocks are, I have entered a massive new short position on the $RUT (mercifully, before the latest breakdown that took place, so I'm already well into the green, just minutes into the trade).
How far could this thing fall? Let's go into fantasy-land a moment. Let's say the (somewhat malformed) H&S pattern completes. What's the measured target? Hold on to your boot straps - - it's nearly 40% below current levels. Ain't that sumfin? I think the odds of this are mighty slim, but............
I sold my SPY puts (bought only on Friday......). The bounce at the 50% level on the S&P is slightly decent. I am in the process of tightening up stops across the board, and in the case of some ags, taking partial profits.
Well, Hank. You tried to kill me, but you couldn't do it. Not last time. Not this time.
In the past, I would offer up specific stocks that seemed choice for shorting. Sort of like picking out needles in the proverbial haystack. But, as observant readers know, last week I adopted the "Short Everything with a Ticker Symbol" strategy, and, to add to that, "Hold On Until the Value is At Levels You Cannot Fathom." Like $0.
So here I sit. Who knows..........this may even be "the crash" today. I would remind everyone that today is September 29th, which valued reader MoonTrader has pointed out numerous times in his own blog as being important. (Thanks, Moon!)
Hold on to your bootstraps. We're descending into Hell.
It's 2:30 in the morning; the S&P on the GLOBEX is down "only" 20 points now, having been down 30. I'm pretty amazed. I thought it was up the same amount, provided the bailout passed.
This post is mainly a comment cleaner, since the number of comments being posted is alarming. I'll see you later this morning!
Things are seldom what they seem, Skim milk masquerades as cream; Highlows pass as patent leathers; Jackdaws strut in peacock's feathers.
I imagine the bulls are thrilled to pieces that the government has whored itself out to Wall Street in the grandest way possible and saddled future generations with yet more debt that can never be repaid. The bulls probably think it's party time.
They're wrong.
Even some of my most beloved readers think I have overstayed my welcome in the bear's land. But let me tell you my point of view.
If the government, to date, had the political courage to have done absolutely nothing, the bear market would already be over. We would have seen the Dow a couple of thousand points lower, there would be sweeping financial damage. And we'd be done by now. And this delicious market, which I've been enjoying so much, would have left town, and I'd be faced again with trying very hard how to be a bull.
But............
The government has interfered, and interfered mightily. At every possible turn, they have stuck it to the taxpayers so that Henry Paulson would line the pockets of his golf buddies. And, having done so, he has handed me a gift. The gift of a bear market that is going to go on for another six years or so.
It won't be all down. And it won't always be easy. But, instead of getting all the pain out of the way, Paulson has created a situation where I'm going to get to wallow around in honey for years to come.
I think what is happening is a complete disgrace. But the perverse irony here is that the bulls are about to get smacked worse than ever, and they're not going to know what the hell to do next.
The consensus seems to be that a watered-down version of the $700 billion boondoggle is being drafted and will be sent to the House for a vote on Monday. So much for the will of the public!
The big question, of course, is what will happen to the market? Will it.......
Plunge at once? (I doubt it..........this is the "good news" people have been waiting for)
Enter a new bull market? (pfft! ha!)
Soar, like it did September 18th and 19th, and then resume the fall, this time without the benefit of a huge new government program looming as a great new hope? (this is what I'm thinking will happen)
Many has tsk-tsk'd me for getting into my index puts too early. They may be right. But I've still got ample cash to increase my position at better prices, and I will view any surge as yet another shorting opportunity.
There are few things one may count on in life, but on this one point I can assure you: Monday will be interesting.
I intend to start a new national craze with the Slope of Hope Bailout Drinking Game. Here we go:
Whenever a politician uses the term "Wall Street" and "Main Street" in the same sentence, take a shot of beer;
If the phrase "preserving the American dream" is uttered, take a shot of beer;
Whenever JP Morgan or Bank of America takes over another failed institution, take two shots of beer (or one shot of the hard liquor of your choice);
If a politician mentions "caps on execution compensation", apologize to the photograph of Hank Paulson on your wall and take three shots of beer;
If President Bush declares that this crisis is no time for "partisan politics", clean your shot glass;
If the Dow Jones net change for the day is up or down triple digits, mix yourself a martini and drink it;
If Gary Savage tries to moderate Tim's trading with cautious admonishments, drink a cup of black coffee;
If Ned does a post, take a bathroom break;
If "progress" or "a breakthrough" on the bailout is announced and, within twelve hours of such announcement, there is still no deal announced, mix yourself a drink with a tiny umbrella in it; remove the umbrella, then consume beverage.
Until Sunday evening, there isn't much left to say. If a bailout plan is hammered out and agreed upon, I suppose markets will rally - - maybe even rally big. If there is stalemate, I suppose markets will be soft.
The chart of the DIA sort of says it all: (1) a decent bullish engulfing pattern today, pushing the Dow up triple digits after opening down triple digits; (2) and yet absolutely anemic volume, day after day, since September 18th's madness.
This was a good week for me; my portfolio hit a new peak at today's close. I am vulnerable, absolutely, to some kind of bullish shock on Monday (I'm saying this mainly for the benefit of those bulls that grit their teeth when they've been reading about my profits lately; some have actually complained via email). But you want to know the funny part? If a bailout is announced, I will view it at a selling opportunity, and if a bailout stumbles, I will view it as a buying opportunity. How's that for being a contrarian?
In any case, there's just no visibility right now with all the political hijinx. I'm going to enjoy the debates tonight and will be watching what happens in D.C. with great interest this weekend. I'll probably do a post Sunday night. See you then.
As frequent readers know, I started the day with 70 SPY puts. I sold 20 near the open. Then I sold 25 more. However, I re-purchased 25 (and then 20 more, bringing me back up to 70) near the highs of the day, and I once again have 70 puts on SPY (I have trimmed here and there, but by and large by positions are unchanged).
I realize there is a risk of the fine public servants in D.C. annoucing on Sunday God-knows-what and the market spiking higher. I am willing to take that risk, and I am willing to ride it out. The whole world is going to be on pins and needles this weekend, and if there's no deal, what's going to start to dawn on people is that the world still hasn't ended yet, and maybe we don't need to screw with things.
I see a lot of folks talking about going long RIMM, getting RIMM calls, and so forth.
You might be right. And you might make hundreds of percent on the trade. And I won't. Because I'm not going to do this.
I ask myself the question, particularly when tempted by a "sure fire" thing like this...........is there a technical basis for this trade? Yes, it's fallen by over 25%, but is there firm support at this level? Looking at the chart, I don't see any. Again, this stock might move ten points higher next week. Or not. But the way I trade, I want the chart on my side, and there's nothing that tells me whether this stock is going to be down or up another ten points. It's simply falling, and that's all I see.
It's amazing to watch the SPY go flying up and down based on every little word the politicians are uttering today. We are in that most uncomfortable of places..........the no man's land between the upper and lower extremes. I've trimmed my SPY puts by about 2/3rds and my OIH puts by only about 10%. Otherwise, I'm holding strong. You can refer to my watch lists on the right at any time to see all my positions.
The big question, of course, is whether to hold over the weekend. Because on Monday, it's either Deal or No Deal, with the implications thereof. I'm inclined to stick with my SPY position until a possible wipeout on the SPY.
A good morning so far. OIH is one streaming chart I watch constantly, and - - in spite of gold's strength - - it's terribly weak. In fact, it's down more than any of the big equity indexes. As long as we hold below 171.54, I am staying with this short. A break below 143.65 (the horizontal line you see below) would mean a big break down. I also accept the possibility that we may just be starting to form the right shoulder of a gigantic head and shoulders pattern, and if so, the breakdown of this chart won't happen until next year.
I was up again early this morning, just to be fully prepared for the day ahead. Equity futures have been down pretty hard all through the night, with the S&P down about 20 points as of this writing (90 minutes before the opening bell). It was only a week ago today that the same market was up about 60 points based on the excitement over taxpayers getting saddled with a trillion dollars in debt to forgive Wall Street's misdeeds. Time and events sure do move fast in these markets.
In fact, that swift movement is probably is what is making things so interesting right now. Congress, bless its heart, chose not to rubber-stamp a 2.5 page memo handing the reigns of the country over to Paulson. So now it's a game of chicken. On one side you're going to continue to hear the breathless warnings about how the economy will collapse into a protracted recession unless the plan is passed; and on the other, you will have those who want to consider alternatives first (while nervously eyeing daily events, such as the collapse of the largest S&L in history last evening).
Comments reflect the rapid deterioration in focus. We used to talk about individual stock picks; then we started talking about politics (since that dwarfs earnings these days in driving stock prices, RIMM notwithstanding); and now we're talking about what kind of containers can be purchased at Target to store cash. I'm just waiting for folks to break out in discussion about the right ammo to buy.
The challenge, as always, on mornings like this is whether to take profits or let things run. I am feeling very good about the positions I am in, so I have no intention of making an exit. I have only one index position (70 in-the-money November puts on SPY) and perhaps I'll sell 20 of those early just to take some profits off the table. Anyway, I'm going to take advantage of my early awakening and read the paper. Good morning to you all.
As if there's anything else needed to encourage me to sell into this rally, it's the ridiculous multi-hundred percent runup in FNM and FRE. Absolutely astonishing. Think anything interesting will happen when that gap finishes fillig?
There is a lot of strength in equities right now. Good! The bulls need a chance to climb up the mountain some. This is a much-needed rally.
Some people have been writing asking if my prior post was suggesting short positions. Well, yeah. I figured the "Freshly Washed Shorts" would kind of tip you off. Look, if I ever have a bullish idea, I go out of my way to make it clear, usually putting words like call and buy in boldface, and often saying stuff like "this is not a typo" or "I am not kidding." Anyway. The items below are new shorts I am entering, with corresponding stop-loss prices.
ABFS 43.29 AGO 20.65 BBD 18.01 BAX 68.91 BDX 84.82 CAM 45.67 CNI 54.88 PSS 21.01 BVN 25.73 BAP 75.04 DRQ 58.72 DRE 27.59 EP 15.01 KGC 18.19 MCK 60.46 MMR 29.89 PRGO 39.95 GOLD 47.15 SII 69.56 SU 51.01 SYNA 31.90 TNH 135.99 LCC 9.23 AUY 10.96
I've been terribly conflicted about the near-term direction of the market. The chartist in me sees plenty of opportunities for a meaningful near-term bounce. The shell-shocked human in me, who has watched the past couple of weeks, is just waiting for some other gigantic "shock" that makes the market plunge without warning.
The rational thing to do, of course, is to pay heed to the chartist instead. Given what I'm seeing this morning, bulls have reason for some short-term optimism. Because this morning.......
General Electric announced some pretty bad financial news (their stock is down nearly 5% pre-market)
Durable goods orders were far weaker than expected; the lowest in seven years, I believe
Unemployment was higher than expected
And in spite of all the above, as of this writing, both the S&P and NASDAQ (as observed by electronic pre-market trading) are up decent amounts. Indeed, when the durable orders came out, the S&P (@ES0812) halved its gain from +12 to +6, but then it quickly pushed back to +10.
The date that I keep seeing mentioned is September 29; I am avoiding getting too attached to "turning points", since I know nothing about them and shouldn't base decisions on blind faith. But I do think that, given the success of what I've seen in the past, it is worth keeping those dates in mind as potentially important.
At the moment, I'm holding strong to my bearish stance on oil and gold (both of which look a little weak going into the open), whereas I'm more skittish and indecisive about equities in general.
Just a quick "one chart" post to reiterate how bearish I am on gold. Everyone keeps asking me questions like, "What if we attack Iran and gold goes to $2,000 an ounce?!?!" Good grief, how should I know? I am using the charts and charts alone. Some people really do overthink this stuff.
One of my (few) pleasures in life is the newspaper. Every morning, way before the sun comes up, I stumble out to my driveway (puppy clenched under one arm) and pick up the New York Times and the Wall Street Journal. Thumbing through the paper, totally alone, while eating my breakfast is usually the high point of my day.
Over the past ten days, however, I've had the same situation with papers as I've had with Slope comments - - - I haven't had time to read any of them. They've just been stacking up.
I officially threw in the towel today. I got a big cardboard box, wrote "Financial Crisis 2008 Newspapers" on it, and shoved all the papers inside. Maybe in the year 2035 I'll crack it open and reflect on the recent insanity with a different perspective.
Comments, on the other hand, I still haven't sacrified. Although it'll probably take me hours, I want to go through them all. Why? Several reasons.
It's a great source of ideas
I enjoy looking at the links and articles people mention
Most importantly, it helps temper my disposition; I find the opinions here give me a much broader perspective. Did you think about this? What about that? Have it looked at it this way? I'm much rather challenge my thinking that just plunge ahead.
As for the market, it's tough right now, because it's not in the "slam dunk" state that I like. Energy (and the EUR/USD), for instance, strike me as a no-brainer. Same with gold. The indexes, however, could go either way. If they decide to go up, there's a huge amount of "up" that could happen. That scares me. Any "down" left would probably come with a short, sharp drop as opposed to more day-by-day bloodletting.
But, as Colonel Kilgore says, "Some day this war's gonna end." In a way, I'm going to miss it.
The attempts by buyers to establish a short-term base have failed. I got out of my QLD and SSO positions (the former at a small profit, the latter at a small loss) and at once again 100% in a bearish position.
If anyone's interested in buying puts on GS (because Lord knows it's a criminal act to short it now), the stop price I'd suggest is 152.35. Quite a ways from here, yes, but that's what the chart is telling me. I picked up a couple of November puts myself.
John D.
Rockefeller, Sr.: "Believing that fundamental conditions
of the country are sound and there is nothing in the business
situation to warrant the destruction of values that has taken
place on the exchanges during the past week, my son and I have
for some days been purchasing sound common stocks. We are continuing
and will continue our purchases in substantial amounts at levels
which we believe represent sound investment values." (Oct.
30, 1929).
Warren Buffett, commenting on his $5 billion investment in GS:"Goldman Sachs is an exceptional institution. It has an unrivaled global franchise, a proven and deep
management team and the intellectual and financial capital to continue
its track record of outperformance." (Sept 23, 2008)
For the record, here's how the sound common stocks worked out for the Rockefellers:
This is just a quickie post. As you know, I rarely watch CNBC, but I was curious about today's testimony. I'm watching Ron Paul rip Bernanke a new one. Thank God for checks and balances in our system.
By the way, I am a very weak hand with respect to my SSO and QLD long positions. I am willing to exit those like a shot. These are strictly day trades. I believe the next big plunge is coming within the next couple of weeks. The LunaTicks blog has some interesting things to say about timing, and I appreciate the time the writer has put into his blog.
The target is the pink zone. And I am taking advantage of this by means of XLU puts as well as the relatively thinly-traded SDP, of which I own 2000 shares.
Although it seems to me that the act of posting a comment is very straightforward, I've received more than a few emails from people asking how to post a comment (and even where to read comments!). So, a few quick tips and remarks:
(a) To read comments for a post, simply click on the title of the post itself (in this instance, the hyperlinked subject at the top, "A Comment on Comments"). You will see the comments at the bottom of the post, if there are any (and there are usually a bunch).
(b) To participate in comments, you need to be signed up with Disqus, which is free, of course. You can sign up at their web site in just a few moments. Please take the take to give yourself an avatar (the little picture that appears next to your name) to give you a bit of street cred.
(c) Also, take a moment to read my page on comments and community. It will help you and everyone else here. Thanks!
Well, I guess the big news after hours is that Warren Buffett is buying up $5 billion of Goldman Sachs stock. After-hours on the GLOBEX, equities markets are being pushed higher (not "crazy" higher, but the equivalent of "someone had good earnings" higher).
It was a really good day, and my oil/energy/gold bearishness worked out decently. My day trades on index puts were where the real gravy was, though. I ended the day with only one index position - - a relatively modest block of $NDX puts. I also trimmed quite a few positions including, importantly, my SKF holdings.
What's amazing to me is how much the battered "near-death" stocks have been doing. I haven't traded them at all, but those who have been doing so nimbly DWARF any gains I've got going. These stocks have gained hundreds of percent in a matter of days!
What's interesting to me is how uncertain so many folks are, including those who are usually drenched with certitude. Even Elliott Wave International (at last reading) was essentially saying "it could go up or down at this point!" I agree with Gary Savage that the potential gains to be had from a crash are outweighed by the potential losses from a steady surge higher, which is why I'm doing something I normally don't do - - - confine most index trades to intraday.
Looking closer at the S&P 500, we can see that about 2/3rds of the Thursday/Friday surge has been eliminated, but the risk here is that Congress works something out with Paulson. Isn't it funny how trading has stopped being about earnings flow from corporations and now has almost everything to do with politics? As the old saying goes, don't confuse a stock with a company.
I had a short, wild ride on QLD today. I'm out, obviously. What's mildly interesting about the QQQQs right now is that they are beneath a pretty important Fibonacci level. Indeed, with all the tumult it's easy to forget this, but the NASDAQ 100 closed at the lowest levels of the year, with the exception of last Wednesday.
Regular readers probably have gathered I'm a bit of a movie nut. Let's relax a few minutes and enjoy some of the hilarity from the start of Annie Hall. Good night!
Perhaps Paulson and his gang of thugs can be stopped. Perhaps America can save itself. Perhaps the United States Congress, having been cowed by Bush for most of his administration, has finally learned to shove back. Maybe there's hope.