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.
I am having trouble coming up with the words to describe how well
today is going. I just got out of a $300k QLD position (day trade) with
great profits on the quick upsurge in QQQQ, and I am now out. I have no
index positions of any kind now. Just trimming positions at this point
and tightening up stops.
A number of folks, including a colleague of mine, have gently chided me for providing incorrect information about Paulson. Apparently he was required to divest himself of Goldman Sachs stock in the summer of 2006 after all (he probably wasn't thrilled to see the price nearly double after that, but in retrospect, he got out at a pretty good price - - and with taxes deferred, no less!). Thanks Andrew, Rob, and Jonathan for letting me know.
In my defense, I got the information from the New York Sunday Times business section which, let's face it, is usually a pretty good source. Maybe I missed some fine print, but in gigantic type they had the $500 million figure underneath Paulson, representing the value of his GS holdings.
Oh, and here's some footage from the hearings today you might enjoy.
I've long held during the many months of writing this blog that the forces at work come down to a battle between Evil (Abby Joseph Cohen, Henry Paulson, Ben Bernanke, all the i-bank CEOs, etc.) and Good (clearing throat, pointing at self and fellow Slopers). For the moment, it's nice to see the bad guys get smacked around. My faith in this once-great nation will be restored if Congress sends those involved in the conspiracy (led by Paulson) out the door.
One thing I will not be doing any more is announcing "they're out of bullets!" In the past, I would naively think that Washington was out of bullets when they chopped interest rates, opened the discount window, and so forth. But last week I finally got it through my thick skull that there are unlimited bullets, up to and including executing or imprisoning those who sell stock short. They don't do it here, but there have been times in history in some countries where such things were done.
The ban imposed on short selling was desperate, but as the market continues to fall, who is to say what more desperate measures won't be enacted? It's a little nerve-wracking, since I'm not sure whether to take my (gigantic) profits and be safe or just hope they'll continue to grow.
I glanced at the IWM just now, and I am astonished at how volume has shriveled up in the market. I realize the day isn't over yet, but just look at the past ten days or so. There was a huge run up in volume, with explosive peaks on Thursday, and then it has just crumbled. Paulson and company have made people afraid to trade.
Something else I learned that I didn't know is that Hank Paulson has $500,000,000 in Goldman Sachs stock (at current prices; it was a billion bucks before). Ummm, help me understand this. Some poor shchlub in government can lose his job if he has a few thousand bucks in a company that represents a conflict of interest. And yet Paulson is permitted to own half a billion dollars of a stock whose fate he basically has utter control over? Jesus!
I'm somewhat conflicted right now, because the opinions of people I respect (like Gary Savage and Tony Caldaro) are starting to diverge quite a bit from my own. All the same, I have to bow down to my charts more than other individuals, although their opinion definitely factors into my thinking.
Gary has cautioned me on my bearishness toward gold and energy, in addition to equities. I agree that equities are dicey right now, although I have re-entered my NDX puts (at a fine price too, I might add, given this morning's earlier strength!) But I am resolute on my energy shorts. Look at this crude oil graph.
It seems to me the U.S. dollar is about to get some strength. Don't ask me why; I just look at the charts; it's not my job to explain why. Maybe the bailout plan won't get shoved down our throats after all. Who knows. Anyway............
Today is the first day of Autumn, and I welcome it with open arms. Autumn is far and away my favorite season. It means the end of summer, which I hate. I hate the sun. I hate the heat (although here in the Bay Area, it's not bad; what would possess someone to live in a hellish environment like Phoenix or Las Vegas is beyond me, unless you are so old your body's thermo-regulatory system is shot). And all the bad things that have ever happened to me in my life took place in the summer. So, adios, wretched season. {raising middle finger at the calendar}
And welcome my beloved fall. Welcome the cool air and the dead leaves. Welcome the Halloween costumes and anticipation of the ski season. Welcome to the shorter days and the longer nights. Yes, it's my favorite time of the year, and here we are at the very beginning of it.
Now, it took gonads the size of beach balls to be so screamingly bearish in the face of the two most bullish days in market history, but I did it. I did it, and I was right. So hurrah for me.
Having said that, after the close, it dawned on me that the S&P 500 was precisely at its 23.6% Fibonacci level (on a medium-sized retracement, from 5/19/2008 to 9/18/2008). I wouldn't be at all shocked to see a bit of a bounce in the morning, and I suddenly wished I had the chance to have lightened up on this position. Oh, well. What's done is done! So I'm balancing some pats on the back with some butt-kicks too.
What I'm less worried about is oil and gold. Now, I've already admitted that I sold gold/silver way too early. That was a fantastic trade (thank you again, Gary!) and I only enjoyed half the move, if that. But I feel very good about where I am entering these gold/silver/oil shorts right now.
The chart to watch is EUR/USD. This has had a gargantuan upward since September 10th. I think it is very close to turning downward again, if it hasn't already. (Note: for some reason, the day's bar isn't showing below; click on the Present tab to see it up-to-date).
In turn, there are a bevy of charts that "hang off" this which look exceedingly bearish. One of the best places to start is the one below, which is the basis for the DIG and DUG ETFs.
The same goes for gold and silver. I entered some gold shorts on Friday, and there were down hard today. I added substantially to those positions. Notice the tremendous overhead on $XAU which I have tinted.
I have a significant position in $NDX puts which I entered (thank God) near the peak on Friday. I held on to these tight and continue to do so. Here's a slice of that market, and this chart looks pretty sick to me.
If you want specific symbols, just look at my watch lists on the right column. I may not show any specific symbols for quite some time, because there are simply too many great things to short. It's just not worth the bother.
Let's hope for another good day tomorrow. I am absolutely delighted that the market is spitting in the eye of that traitorous son-of-a-bitch Paulson. It couldn't happen to a nicer guy.
Oh, I wish I had a chance to do a clip of my own from Team America. But I'm barely able to get my trades in. Those who know T.A. know the clip I mean. Anyway. Kaching.
By any normal measure, today is crazy busy. Compared to last week, it's hard to tell if the market is even open or not. Take a moment to drink in the wonderful Richard Burton and Julie Andrews sing from Camelot. Just play it in the background as you look at charts.
OK, confession time. I went bullish early last week on gold and silver, made nice profits, but I sold way too soon! My purchase timing was impeccable. My sell timing gets a "C-"! In any case, I do think the opportunity to enter the short side of these markets has come, with PAAS just one of many good candidates.
I bought a bunch of RUT puts on Thursday at the close and a bunch of SPX and NDX puts on Friday. I have sold off Thursday's puts at a loss (but a $7k loss instead of the $60k loss I witnessed Friday morning!) and a portion of the SPX puts at a fantastic gain. The NDX puts I'm holding, although I've tightened up my stop. I'm just a skosh paranoid right now, and frankly, the $RUT graph has become a distorted monster. It's getting too grotesque to trade, particularly with Friday's prints.
I just got an email from VoteNoBail.org, and I urge you to check it out!
Oh, how I just love seeing my quote screen with Communist Red warnings. What a brave new world we are in, when I am being told what I can and cannot do.
We've gotten to the point that things are moving so fast that people are unable to assess what it means (at least I'm not, anyway.....) Every day something gigantic happens. I was just reading how, as of last night, Morgan Stanley and Goldman Sachs are no longer investment banks, but simply "banks," thus, according to the article, "ending an era on Wall Street."
It's sort of like explaining my pup's breed to people. "He doesn't have fur, he has hair." And that's true. But it takes a bit to explain what the really means, and even I don't really understand what the difference is.
Looking at the pre-market (a couple of hours before the opening bell), the summary seems to be "oil and gold up big, equities down a little." One can at least conclude that the world has ascertained the U.S. dollar isn't exactly the most splendid place to be investing these days.
