Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

Intraday Snapshot

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Just some quick thoughts from me:

  • Gold's reversal today is important;
  • The fact that AMZN is up something like 25% (they added 33% to their market cap; and this isn't some local brewery; this is a $50 billion market cap company!) and all the major indexes are down, including the NASDAQ, is hugely encouraging.
  • Breaking yesterday's /ES low of 1070 would be the best news the bears got since………..well…..at any time this year. We must close beneath 1070, or else we're just trapped inside this 1070 to 1100 range.

150 minutes to go, everyone. Hang in there, use sensible stops, and don't get carried away.

Anatomy of a Trading Blowout (by Biffermas)

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I'll never forget 2002, the year I began trading.  Initially I
followed very simple chart patterns based on William O’ Neill and Investor’s
Business Daily (hey, a cup and handle!). 
For several months I did pretty well, averaging a 2-5% gain per month
taking short-term position trades on individual stocks.  It didn’t seem too difficult
consistently making small gains.  At the
time I was reading every book on trading I could locate and rapidly adding an
array of indicators and methods to my plan. 
One book I read covered the business cycle, and it seemed that steel
stocks and the economy were ripe for a rebound after the crushing bear market.  Another book I read covered options, but I
didn’t read beyond chapter 1: calls and puts. 

Blowup

I watched
American Steel carve out a double bottom with a bullish divergence in
MACD.  It’s long, declining trend line
was breached, and like a good trader I waited several days before buying to
avoid a potential false break.  My account
at the time was $45,000, and I used it all to buy front month call options that
were out of the money by $2.00.  I
initiated this trade near the top click of the range, and within 5 minutes I
was down $2000.  I’d never lost more
than $150 on a trade until then, and I became oddly paralyzed, unable to sell
and accept such a hit.  A week later my
account was below $20,000, I eventually sold the options when it hit $3000.

Blowup 2

The worst
part wasn’t losing the money, it was losing hope that I could actually trade
successfully, something that I absolutely loved doing.  I didn’t trade again for two years.  As you see, American Steel took off nine
months later, quadrupling in short order, but I was not aboard.

With
every market defeat lessons are learned. 
Roughly half of my current trading plan is geared towards avoiding a
repeat of that awful trade.  Here are
some of the lessons I learned:

  1. When
    faced with severe losses, it’s nearly impossible to objectively evaluate your
    position.
  2. Leverage can be a killer.
  3. A trading
    plan should be simple, not based on the collective opinions of 15 financial
    authors.
  4. Never buy
    front month out of the money options, they are strictly for crazy
    speculators.  If you're going to use
    these, sell them to crazy speculators against your longer-term positions.
  5. Bullish
    and Bearish divergences fail frequently.
  6. If you
    want to arrive early to the party, be prepared to wait a long time for the
    action to arrive.
  7. Those funny
    Greek names, Delta and Theta, actually mean something!
  8. It’s not
    acceptable to have multiple blowups like this. 
    Many great traders have suffered a crushing capital blow early in their
    careers, only to return stronger and wiser. 
    Others, like Jesse Livermore, ended his career (and life) after one too
    many detonations.

 Thanks
for reading, and trade safe!

We Got To Move Those Refrigerators…..

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For those fascinated by financial history, like me, there is an excellent blog summarizing the day in news from 1930 (http://newsfrom1930.blogspot.com/).  One of the notable aspects of news from the fall of 1930 is the amount of cautious optimism about how things are turning up.  It sounds quite similar to this fall:

F.
Purnell,
 Youngstown
Sheet & Tube Pres.: “There are plenty of evidences that the steel industry
is looking up. We have passed through many months of depression but that is all
behind us. … Industries consuming steel are increasing activities.” (10/16/30)

Many of the Q3 earnings reports so far have been “fair reading,” especially in
light of the pessimism going into earnings season (10/22/30)

One fact I found interesting is the parallel in the decline in rail car loadings, 2009 versus 1930, which I have put in a table below:

Rail Car Loadings:  First Week in October

 

Current Year

Year Earlier

Change

1930

954,874

1,179,540

(19.0%)

2009

273,429

330,228

(17.2%)

For those who might think this is irrelevant, given the diminished role of railroads in our modern society, take a look at one of the better measures of "real" economic activity — Port of Long Beach container statistics.  The story is quite similar:

Port of Long Beach

Latest Month

Container Trade in TEUs*

 

September

Fiscal Year to
Date***

 

2009***

2008

%Change

2009***

2008

%Change

Loaded Inbound

224,924

279,137

-19.4%

2,612,227

3,337,717

-21.7%

Loaded Outbound

109,337

129,630

-15.7%

1,331,872

1,782,298

-25.3%

Empties

106,103

146,070

-27.4%

1,338,286

1,616,741

-17.2%

TOTAL (T.E.U.)

440,364

554,837

-20.6%

5,282,385

6,736,756

-21.6

Is this information "tradeable.'  Not really, unless you are looking into companies like UPS and UNP, both in a tailspin due to earnings I believe.  But does this information add some big picture conviction to my conclusion that the current rally has gone too far, too fast? No question.

Man on Wire – Take Two

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A few days ago, I put up a clip from one of my favorite movies – Man on Wire – but no one seemed to react to it. Sorry, folks, this is required viewing. To make it more alluring, this time I'm showing the conclusion of the film – – Phillipe is already on the wire, and the police are starting to figure out how to deal with this man.

This movie is exhilarating, breathtaking, and mesmerizing. We must celebrate those who live their lives with passion and courage.

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