Daily Archives: August 13, 2010

Climb in UltraShort Crude ETF (Mike Paulenoff)

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From a near-term perspective, the August advance in the UltraShort DJ-UBS Crude Oil ProShares (NYSE: SCO) has climbed sharply to and actually pierced above its May-August down trendline today at 14.85/90. Perhaps more impressive is that the price structure is consolidating (so far) above the trendline, which is a potentially bullish sign of still more upside directly ahead, that projects to 15.25, and then 16.25/50 thereafter.

Should such strength emerge without much if any pullback, then the intermediate-term picture will morph increasingly into a multi-month accumulation (base) pattern that is propelling prices towards a confrontation with significant resistance at 17.50-18.00. At this juncture, let's not be surprised if a bit of profit-taking occurs that corrects the near-vertical August upmove into the 14.60/20 area prior to the resumption of strength that propels the SCO considerably higher.

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Originally published on MPTrader.com

The Lame-O

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This has been a very good week for me, but one instrument I've struck out on repeatedly is FXE, which matches the Euro/US Dollar movement.

I entered a very large long position on FXE yesterday, and as the Euro climbed last night, I thought this was going to be a winner today. Unfortunately, it's been a dog – – and it has repeatedly been so quite a few times this week. The only person happy with my trades on FXE this week has been my broker.

Here's what EUR/USD has looked like recently:

0813-eurshort

And here's a longer-term view, with the portion shown above highlighted with the red rounded rectangle:

0813-eurlong

So I've dumped FXE……..yet again……at a loss. I currently have 8 small long positions (BYD, CPX, CSR, CUB, LCC, PGN, WL, and XEL) and 182 shorts, although I'm snipping those here and there. I am trying to lighten up to some degree, since I confess Mondays have me a bit freaked because of their past behavior.  

Moral Hazard Comes Home to Roost

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Back in the days of the bailout, there was a lot of talk of "moral hazard" – – that is, by bailing out investment banks that had taken oversized risks, the federal government was simply encouraging them to do the exact same thing in the future since there was no real consequence to their action. The government went ahead and bailed almost everyone out anyway, as the notion of moral hazard was brushed aside as a nettlesome, academic inconvenience.

But moral hazard is real; we humans tend to notice social norms, be they right or wrong, and ape them ourselves.

I was reminded of this yesterday when reading this article from the New York Times. It discusses how the vast majority (like 95%) of people badly underwater on their home equity lines of credit are simply choosing to walk away from these obligations.

Now I realize there are a few bad apples in every barrel, but what shocked even me about this article was how universally shameless the Americans were in the article. It stated that in the rare instances that a lender bothers to take legal action, they can get about ten cents on the dollar (if that), and that a firm which buys loans from lenders is paying about $500 each, irrespective of the size of the loan ("Anything over $15,000 to $20,000 is not collectible…..Americans seem to believe that anything they can get away with is OK.")

Why do the borrowers…….people who supposedly signed their good name to a stack of papers committing them to an obligation……..feel it's OK to dismiss these obligations?

+ "They are simply rebuilding their ravaged lives";

+ "Banks were predatory in making loans";

+ "Banks were bailed out";

+ "I am not going to be a slave to the bank…….maybe (the loan) will just go away"

And, my favorite…….

+ Since the lender made a bad loan…a 10 percent settlement would be reasonable. "It's not the homeowner's fault that the value of the collateral drops."

Read that again. Read it a few times. It's not……..his………fault.

So let me get in touch with the douche they quoted and borrow $100,000 to buy a speculative stock. If it soars in value, I'll return his $100k. And if it collapses……..well……….it's not Tim Knight's fault that the collateral dropped, is it?

Well, is it?

I must say, I'm disappointed in my fellow countrymen. This is just wrong.

Jerking Back and Forth

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There's a new version of ProphetCharts (a product you can learn so-much-more-about here!) and I wanted to point out a couple of spiffy new features.

First off, there are "Previous" and "Next" buttons, located to the left of the symbol entry. These let you thumb back and forth through charts you have seen before. For instance, if you enter ten symbols, you might want to "flip back" to see what you were just looking at, so these buttons let you move back and forth through your symbol history, much like a browser.

0813-forwardback

We've also added Sectors, a new module. This is really terrific, not only because the sectors and sub-sectors have individual symbol components, but also because the sectors and sub-sectors themselves are chartable! I had great fun last night looking at 10-year daily line graphs of these various groups. "Top-down" traders are going to love this!

0813-sectors

I hope you enjoy these new ProphetCharts goodies; there are more on the way all the time.