I have many interests, and among the strongest are history, sociology, and cultural trends. A number of months ago, I bought the book Richistan. I didn't buy it to read; thumbing through stories about how super-rich people waste their lives on self-indulgence sounds like a complete bore to me. Instead, I bought it as a memento of the age we were living in. The obsession with wealth was pervasive. You couldn't open a paper without hearing stories about Stephen Schwarzman's birthday party, the hedge fund managers in Greenwich, or - - the one I hated the most - - how there were eight zillion cranes in Dubai.
Now, look, I don't have a problem with money. I live in a nice house in a nice town, and I enjoy making profits in the markets. But I find ostentatious displays to be grotesque. One of the men I admire most is a billionaire - - the only one I know well - - who for the longest time drove around in an ugly blue Vanagon.
In any case, I find it utterly unsurprising that the publication date of this book coincided almost exactly with the market's top; indeed, I think this is a market top that will not be surpassed for many, many years. So the cultural saturation reached a maximum with the publication of this best-selling worship of the "new rich".
I wonder to myself what kinds of books will be sold at the market's bottom (in about 7-8 years, I think). What would be the opposite of the book above? Books about the virtues of piety and self-sacrifice? Survivalist guides? Worshipful biographies of Karl Marx? I really have no idea.
Unless something (else!) happens over the weekend, I imagine this will be my last weekend post.
Regular readers are acquainted with what I call the $SLIX indicator, which is basically the readership of this blog. The old saw was that spikes in readership marked market bottoms, because all the folks that don't have the good sense to read this blog daily are so rattled by a given day's drop that they read the bearish blogs for a change. So in a way, the popularity of this blog became a pretty good contrary sentiment indicator.
I'm not so sure it works anymore. Readership has recently been growing steadily. I'd like to think it's because Slope is just so danged good, more and more people are (finally) discovering it. It's also probably because the market's downward grind has become much less of a one-time drop down and more of a regular way of life.
If you didn't watch the video I did on Friday afternoon, please do so. All I've got to say is that I think we're in store for one of two possibilities. One, the market wrings out the last of the sellers (for now) and brings the S&P down to about 1077 and the Dow to nearly 10,000; or, Two, we have an honest-to-God crash, bringing the S&P down to about 942 and the Dow to about 8,850.
No matter which of these take place, I think we're in position to have a good, sustained bounce higher, and I will spend the entire time with the word "Patience!" tatooed to the inside of my eyelids, because once the bounce is finally done (and I'm bound to jump the gun a few dozen times before it does..........) we're in for an amazing time.
Even though the very soul of technical analysis is that history repeats itself, I actually don't get that sanguine about comparing, say, the chart from 1929 to now, or the chart from 1987 to now, no matter how many "eerie similarities" (that's always the phrase used.........) appear. I do, however, want to offer an interesting comparison between the last bear market (about 8 years ago) and this one. First, the old one:
I've put a circle at about where we are at this point in time (assuming these falls are similar, which they probably aren't!), and I've tinted in green the true bottom. Now let's look at where we're at........
I've taken the liberty of hacking out what the market would look like if we replayed the 2000-2002 bear on top of this one. We'd bottom out a little below 800 on the S&P, and we'd had a couple of amazing retracements to play beforehand. The green arrow I've drawn is sort of my life's mission at this point............that is, wait until we've retraced, wait until people are calm again, wait until the VIX is in........I dunno..........the mid 20's or so...........and then completely pork out on my (much larger) warchest, buying puts and shorting stocks like crazy.
I'm torn as to what this week holds. People are obviously incredibly nervous, and with the failout package out of the way, at least we don't have to wring our hands over Nancy Pelosi anymore, now that Congress has totally sold the country down the river. I guess if I had to pick between the two scenarios, I'm inclined to look for just a little more of a drop, but I've got to say, a couple of sources whose work I really respect makes a strong case for a true crash by the middle of the month. America, we all know, will never be the same. I would suggest to Slopers that they make as much cash as they can out of this catastrophe for the sake of themselves and their own families. See you Monday.
Video tip! If you're having trouble watching this, do the following: (a) click on Play (b) then click the Pause button in the lower-left (c) let your computer sit until the progress bar is all filled in white (d) click Play again. Sorry if you have to go through this, but for some folks it's necessary.
In spite of my blowing it on the bullish side so much lately (QLD........twice.........) I'll say that OIH looks fantastic to me with a stop at 125.40, yesterday's low.
Perhaps you thought that shorting a stock at its top was something you could only do a year ago? I don't think so. Witness JP Morgan (JPM). My idea is to buy puts at current levels with a contingent stop at today's high, 50.63. I already owned puts, but I supplemented this position. This is the megaphone of megaphones.
I guess the powers that be couldn't let us have a normal close today. The bill is finally out of the way (Thank. You. Jesus.) and the markets are just losin' it. If the IWM breaks yesterday's lows, all hell is going to break lose. Just sayin'.
The bill passed and the market fell. How about that? I sold my NDX calls for a profit near today's top. I sold my $RUT calls just now for a small loss. I have played it VERY safe today. My three accounts are very, very steady. I'm glad this stupid bill is out of the way. Let's wait for some of the dust to settle.
I dumped almost all my precious metals puts/shorts yesterday based on the $XAU hitting both its Fib fan and its Fib resistance. This is another beautiful example of technical analysis in action. I've tinted the convergence area. So what to do now? I'm not sure, but I might consider getting back in on the short side if this retraces to $128.70. As ridiculous as the bid/ask spread is on the XAU, it turned out to be a fantastic trade.
I have taken half the OIH trade (calls - bullish position) off the table. It was a very good trade, and it may have more to run, but today's nearly 6% pop is bumping up against a possible resistance zone, so I'd rather bank some profit now.
I am returning to my original hypothesis that we're going to see a strong rally which, in the end, will represent a superb shorting opportunity. Looking at both the Fibonacci fans and retracements, this seems like a good entry point for a bullish play on the $NDX.
Obviously I closed out my Russell put position first thing this morning. I imagine the House will pass the bill, the markets will finally surge, the VIX will get more reasonable, and we can be bears again. Until then, I'm going to wait.
The jobs report just came out from the Labor department, and the figures are somewhat worse than the consensus predicted. The losses are the greatest seen in over five years (since March 2003). Looking at my streaming charts, the immediate reaction was (a) the EUR/USD taking a quick tumble {that is, a stronger dollar}; (b) the equities as measured by @ES0812 pushing a little higher, from about no change to positive 7 points as of this writing (a little less than an hour before the opening bell).
My core wish is that this house vote gets done before the market closes today. I think we're all sick of waiting. Of course, there's no guarantee at all this will happen. But this entire Congressional thing is like a psychosis on the entire market, worse than all the FOMC announcements and earnings seasons combined.
I see the S&P is now higher by low double digits now. It's going to be a weird day, I can tell.
It's late and I need to get a few hours of sleep. Tomorrow (Friday) is obviously going to be huge in terms of anxiety and importance. I have lost track of how many weeks we've all been on this ridiculous roller coaster, but it almost makes me miss the bad old days when we have to scratch around for a decent opportunity or two in the midst of bull-land. In any case, I'll do a post in the morning after the jobs number comes out. Good night.
I laid out my strategy yesterday. Go partly bullish to play the retracement. Bag the profits on the way up. Reverse the position. Bag the profits on the way down to lower lows. Brilliant, eh?
Not so much. Every single long position I got into today was a loser. GGP was a particular gem! (I'm, um, no longer in that one). I guess for a bear to be a bull in a bear market is pretty bulltarded.
Not to say that it wasn't a sensational day. The sick thing, though, is that I've got a pretty severe case of the "couldas" going on, because I keep track of my former positions, and many of them have moved up hundreds of percent in price higher. Looking in the rear-view mirror is largely useless, but I do it anyway, just to torture my beleaguered soul.
At this point, I am positioned for the mother-of-all Russell 2000 collapses. If the market explodes higher tomorrow, I'm pretty much in for it. Well, not totally. I've still got a ton of unallocated cash. I've got a big OIH call position. And I've still got eighteen long positions on equities. But having a big $RUT put position with the $VIX at nearly 50 gives me the jitters.
I am going to go offline for a while now, since I am hosting a party at my house for the Biden/Palin debacle debate. I've dubbed it the Electile Dysfunction Party, and it should be interesting. I'll do a post very late tonight. But let's face it - - - the real fireworks are going to be (a) the jobs report tomorrow before the open (b) the House vote, which will take place God-knows-when (c) the reaction to the House vote, which, frankly, no one can predict.
This market is grinding all of us into hamburger. Go get a little rest.
It's only half an hour until the close, and only just now did I glance at the Dow Transports (tells you what kind of day this has been.............) My God! Down nearly 10% At this point, we're either at a triple bottom or about to break a major support level which would confirm the Dow Theory bearish signals in a big way.
OK, there is one thing I refuse to do. I absolutely refuse to be long calls when the wipeout comes. No way. No how. I have waited too long for this market and worked too hard to get here.
I have sold my NDX calls for about a $4,000 loss. I have acquired a substantial Russell put position. I am not thrilled with this, because (a) the VIX is ungodly high; (b) we still could be set up for a big bounce; (c) it's impossible to tell what the reaction will be to the House vote, and whether the bill will pass or not.
But I cannot stomach the notion of having my only index position be bullish and seeing the Dow blow up by 2,000 points. That's a nightmare scenario.
Setting aside all this emotional nonsense, I will point out that the Russell ($RUT) has broken a massive, massive neckline. This isn't a perfect H&S pattern, but it's pretty good, and it's gigantic. People, we could be looking at a wipeout on Friday or Monday. I hope I don't keep hoisted up by my keister by chasing a phantom here.
Add to my thick book called "Sold Too Soon" my SDP position. $UTIL has continued to move down, although it hasn't violated the 281.6% retracement which was the basis of my (somewhat hasty) sell. Anyway, I'm looking for it to bottom around here and move up to the pink oval I've drawn. Should this happen, I'll gobble up SDP again and hang on for a much bigger drop.
I will mention my "knife-catching" exercise with long positions isn't going great (although the gains elsewhere are so good today it doesn't even matter). I bought GGP and got distracted so I neglected to set a stop. A couple of hours later, it was down about 40% from my purchase price! Ouch! In any case, this waiting-for-a-bounce is anxiety-producing. I'm not sure how strong I'm going to hold on to these NDX calls. Things still look terrible out there.
Technical Analysis: I Love You! (If you haven't fallen in love yet, you should buy my book about the topic.) I am just printing money these days, and it's all thanks to ProphetCharts. I am getting incredible exit points! Here are just a couple of examples.
I am getting more and more nervous about disaster striking. Things simply cannot go this perfectly for this long. But, as always, I am updating my stops and keeping my position size sensible. I am heavily positioned for a bounce at this point, especially in the world of energy.
I've made a ton of profits on going short energy and gold. I have closed out these shorts and am reversing my position. OIH looks particularly compelling for a bullish play.
OK, I sold my SPX puts this morning at a profit (obviously) and my QLD at a loss (obviously); although the gain outweighed the loss. The huge winners for me today, of course, are my energy and gold shorts.
It's painful to lok at the index puts I sold a month ago. They're up several hundred percent at this point. Ouch! Oh, well. If any of us could see even one week ahead with certainty, we'd soon be richer the Buffett and Gates.
I am carefully examining my puts/shorts and, although I am closing out virtually none of them, I am tightening up stops quite a bit. I have also gone long a variety of issues. I intend to reverse these positions later after I ride the (hoped-for) push upward. Here they are, along with their stop prices.
But, I don't want to push my chips forward and go out and meet
something I don't understand. A man would have to put his soul at
hazard. He'd have to say, "O.K., I'll be part of this world."
As you may recall, my planned strategy for this month was pretty straightforward.
Close out short/put positions that seemed to have fulfilled their potential, and tighten up stops on all the rest;
Go aggressively long issues that I felt would ultimately retrace to excellent shorting levels;
Once those levels were reached, reverse the positions and wind up making profit in both directions.
All that sounds marvelous, but the action in last night's market's has my confidence rattled. The Senate overwhelmingly passed the bill, and the markets fell. There's been a lot of commentary on this in last night's post, but I'm still surprised. I mean, if the House passes the bill, will the market fall even further? (And I think we all are pretty sure what will happen if the House rejects the bill again.............or are we?)
Setting all that aside, let us at least respect the sound judgment of our Senate. Out of a population of 300 million souls, these are the 100 wisest and most intelligent among us. Many commentators (including everyone's favorite, Jim Cramer) have said that there are times when the will of the people must be ignored, since the people don't really know what is best. Flexible democracy, if you will. Judging from what I've seen in the Senate, I'll trust my fate to them after all.
I am shocked (and kinda disappointed) that, in spite of an overwhelming approval by the Senate on the failout bill (wooden arrow makers.........unite!) the futures have dropped.
I was hoping to be a total pig and ride equities up to the retracement levels and then back down again to new lows. Ugh! Where's a rally when I need one?
Anyone, as comments are approaching the 200 level, I figured I'd do one comment cleaner post. I'm off to read books to my beloved chillun'.
This will be the last post of the day. I am increasingly inclined to take that huge list of stocks I have which I believe will ultimately retrace and collapse and buy them. In other words, play both sides. Buy them now, ride them up, and then reverse the position. So if you see a lot of buying in the near future, don't worry. You're not on the wrong blog.
(Side note: congratulations to holds of ag-related puts; MOS is getting destroyed after-hours, and many other issues, like AGU and POT, are along for the ride).
I have two accounts. In one, I have a good-sized SPX put position. In the other, I have a very substantial QLD position. So this is a "can't lose" and "can't win" situation. Both portfolios are very bearishly tilted, but just in case, I wanted to be in QLD. Strong arguments can be made for a very serious bounce higher at this point, and I'd at like to have at least one winner on my hands!
But this is more important........and I said this yesterday, but it bears repeating.........I have a huge, huge list of stocks that would be amazing shorts if they would retrace. For this reason, in a perverse way, I would love to see a tremendous rally. It's a tough thing to wish for for two reasons. First, I've already got many bearish positions, and obviously a big rally would be painful; and Two, I'm not the most patient chap on the planet, and waiting the amount of time required (weeks? months?) for these retracement levels would be pretty hard on me. I confess cash burns a hole in my pocket, and I've got a ton of it right now.
In any case, let's watch the Senate. I sure will be glad when this Congressional obsession is over. But we must live with it for now.
In spite of some gurus suggesting COH being a fantastic stock that was "on sale" when it was $50 per share (it's less than half that price now, about a year later..........), I think this is a dynamite short candidate. Look at the size of this head and shoulders pattern. Traditional measured targets would be, errr, about $0, but - - -we'll see.
I'm not sure if I saved a busload of nuns from disaster recently, but the Big Bear in the Sky is looking after me. Virtually every trade I am placing is almost perfectly timed. I'm buying puts when the stock is at a top. I'm selling them when things are about to reverse. And it's happening repeatedly. Even just today, I sold a huge SPX put position when the Dow was down 220, and then I bought an equally sized put position when the Dow was (briefly) in the green. Now the Dow is down 100 again. I feel like I'm surfing from Indonesia to Monterey without falling off the board once.
Anyway, keep an eye on my watch lists. That's the best place to see what I'm into. This Congressional nonsense is wearing on us all. It'll be nice when it is history. Please check out the NoBailout site to offer support to those opposing the horrible bailout legislation. Defeating this legislation is a vote for our democracy!
Phew, I'm glad I got out of those SPX puts. The timing was almost perfect! I've identified a few interesting long (bullish) candidates with these contingent stops.
My one and only index put (.SZPWE - SPX NOV 1225 Put), purchased yesterday, I have sold off. I usually don't have such a microscopic lens on every little wiggle in the market, but the fact is that this Congressional vote is sort of like monkeying around with the markets around a big Fed announcement - - fraught with risk!
I made a nice profit on my put, and although obviously I'll be disappointed if there's a surprise in the voting tonight and the S&P plunges tomorrow, I don't want to risk my money on guessing games like that. I don't feel very safe shorting broad indexes right now, nor do I feel safe going long them. I confess, I'm not the sort who does well with a ton of cash sitting around in his account yielding 1% annual interest, but there are times when it's best to just sit tight. I'm going to try......
I think I'm going to bring some of the "old Slope" mojo back and be issuing individual ideas with more frequency.
I'll kick off the morning with this one - BIDU - which has broken a major trendline. I am buying puts on this with a contingent stop at 254.64, which is quite close (and a small gap-closer).
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!
