I heard a stock market pundit use this phrase, something like:
It is time to hold on to your nuts, like squirrels getting ready for winter, not a time to be aggressive.
For 2008, I have been making a fair number of trades, usually getting out with tiny profits at the first whiff of trouble. So far I am at break even for the year, only the broker is making money while I tread water. Yes, some folks are making money, however, far more are losing. It is a market that is very easy to trade in hindsight, not so easy in real time, with wide intraday swings, and more whipsaws than sustained moves.
I remind myself to stick to my knitting, meaning the kind of trades I do best on, instead of seeking the exotic, and high risk home run swings. I am back to flat with no trading positions.
Saturday, March 29, 2008
Friday, March 28, 2008
Cover VLO (buy back short calls)
Cover VLO buy back short Apr 55 calls
A break even profit. I am not understanding the reason for the rally. "When in doubt get out," especially in this up and down market.
Band predicts Dow 16000 by 2009
Richard Band is quoted as predicting Dow 16000 over at Marketwatch (article).
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Technical factors appear to have led Band to make such a bold prediction, which amounts to a 33% return for the overall market over the next 12 months.
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Most newsletter timers are bearish, actually net short according to Hulbert. As for myself, I think lower lows are the most likely course. Interesting.
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Technical factors appear to have led Band to make such a bold prediction, which amounts to a 33% return for the overall market over the next 12 months.
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Most newsletter timers are bearish, actually net short according to Hulbert. As for myself, I think lower lows are the most likely course. Interesting.
Thursday, March 27, 2008
Short VLO (sell calls)
Short VLO sell Apr 55 calls
News from Iraq gives this refining stock a pop. I am fading the move. A close above 52 would be cause for worry.
Wednesday, March 26, 2008
Sell NKE (buy back short puts)
I close out the NKE Apr 60 puts. Overall market is sliding. I am skittish enough to head for the exit, instead of waiting for the action to sort itself out. This puts me back to flat (no trading positions).
Meanwhile, GLD and GDX have retraced part of last week's steep decline. I still think that odds favor lower lows in the precious metals and won't try chase this rally. Too many newbies in the metals market, and almost none of them are scared. Of course, odds are never a guarantee.
Meanwhile, GLD and GDX have retraced part of last week's steep decline. I still think that odds favor lower lows in the precious metals and won't try chase this rally. Too many newbies in the metals market, and almost none of them are scared. Of course, odds are never a guarantee.
Friday, March 21, 2008
Another leg down for stocks, and metals
Stock buyers seem too sanguine for the low to be in. The market has been beat down, and certain sectors such as banks, and housing have been rallying. The rally likely has more to go, however, I do not think the ultimate lows for this bear move are in. As always be careful.
Same deal with precious metals. Silver buyers have bought up all the physical they can get their hands on, with many online dealers sold out, or having much higher minimums. When buyers are so eager to buy on the first dip, odds favor a second leg down, a lower low. That said, the three day smash may cause a bounce. Looking at the GDX one year chart, it has seen numerous three day smashes, and most of the time there are lower lows down the road. So it may be time to look to get in, but watch for a better opportunity and don't chase any rallies.
For those that celebrate Good Friday, and even those that don't, a peaceful day to you.
Hedged Long NKE
Same deal with precious metals. Silver buyers have bought up all the physical they can get their hands on, with many online dealers sold out, or having much higher minimums. When buyers are so eager to buy on the first dip, odds favor a second leg down, a lower low. That said, the three day smash may cause a bounce. Looking at the GDX one year chart, it has seen numerous three day smashes, and most of the time there are lower lows down the road. So it may be time to look to get in, but watch for a better opportunity and don't chase any rallies.
For those that celebrate Good Friday, and even those that don't, a peaceful day to you.
Hedged Long NKE
Thursday, March 20, 2008
Buy NKE (sell puts)
Buy NKE, by selling the April 60 puts
Stock is higher on earnings. Chart is supportive.
NKE is my only trading position
Stock is higher on earnings. Chart is supportive.
NKE is my only trading position
Tuesday, March 18, 2008
Green after St. Patricks Day
Wall Street celebrated the day after St. Patrick's Day with a monster rally and green plus signs every where. Financials led the way with LEH reporting good earnings before the open. Gold was one of the few losers on the day. The 3/4 point rate cut was less than the widely rumored full point cut and the dollar rallied and gold fell.
As I have been writing for a whole week, the Fed rate cut has been baked into the cake. Past Fed moves have been kind to gold, not so much today as gold got clobbered. The stock rally was more on the health of some brokerage stocks. Rumors circulated about MER, but even that could not do more than an hour of damage on this rally day.
It is painful to miss these big rallies. It is more painful to be short. For 2008, I am holding my own, despite all my trades being on the long side in the face of a steep market decline. I have been cautious, cut losses, and been lucky enough to avoid the disaster stocks such as BSC, HUM and others. My one losing trade, so far in 2008, ironically, was GDX, which had a miserable day today.
As always, what next? Hard for me to believe the coast is clear for the stock market, though with Good Friday coming up on this short trading week, lets see if the market can make it to the holiday without another crisis. Late March, early April, sometimes has investors selling to pay their tax bills.
As I have been writing for a whole week, the Fed rate cut has been baked into the cake. Past Fed moves have been kind to gold, not so much today as gold got clobbered. The stock rally was more on the health of some brokerage stocks. Rumors circulated about MER, but even that could not do more than an hour of damage on this rally day.
It is painful to miss these big rallies. It is more painful to be short. For 2008, I am holding my own, despite all my trades being on the long side in the face of a steep market decline. I have been cautious, cut losses, and been lucky enough to avoid the disaster stocks such as BSC, HUM and others. My one losing trade, so far in 2008, ironically, was GDX, which had a miserable day today.
As always, what next? Hard for me to believe the coast is clear for the stock market, though with Good Friday coming up on this short trading week, lets see if the market can make it to the holiday without another crisis. Late March, early April, sometimes has investors selling to pay their tax bills.
Monday, March 17, 2008
Growth vs. value - three lessons
From John Prestbo at Marketwatch (link)
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First, never rely completely on past patterns prevailing in the present or future. Lots of busy, distracted and lazy investors will do just that, which creates opportunity for those who take the time to observe market trends carefully.
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First, never rely completely on past patterns prevailing in the present or future. Lots of busy, distracted and lazy investors will do just that, which creates opportunity for those who take the time to observe market trends carefully.
Second, develop a keen appreciation of the interconnected nature of the market. Large and small, growth and value, industry-group and sector -- they all are entwined; anything affecting one will affect the others. Banks took it on the chin in the subprime mess, and look what that's done to large-cap value as a strategy.
...Third, when the market starts climbing again, don't assume the most-clobbered style will rebound the fastest. In the year following the market bottom on Oct. 9, 2002, the DJ Wilshire Growth Index did soar a stunning 39.87%. But that was only slightly better than the 38.61% gain for the DJ Wilshire Value Index. And value outperformed growth over the ensuing three years.
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Sunday, March 16, 2008
BSC to be bought for $2
Wow, what a turn of events. BSC shareholders get the big banana, all time high of 160 to 57 Thursday to 30 on Friday to 2! Yikes!
As of this writing SP futures, Japanese bonds, gold are all higher. I can't understand how the BSC take under can be good news for stocks, bonds and gold, so I expect this to sort itself this week. I dodged a bullet, because I saw those huge premiums on BSC options on Friday and was so tempted. Many times in my past, chasing those big premiums as an option writer has led to disaster.
My instinct is to sit out this dance and wait for more clarity. To quote Clint Eastwood, "a man has to know his limitations." Fast moving volatile markets are a dangerous place for relatively slow moving position traders such as myself. The baseball analogy would be to wait for my pitch instead of swinging wildly at the nasty slider being thrown at the moment. I may look to take on some positions, but they will be small with a decent margin of error.
As of this writing SP futures, Japanese bonds, gold are all higher. I can't understand how the BSC take under can be good news for stocks, bonds and gold, so I expect this to sort itself this week. I dodged a bullet, because I saw those huge premiums on BSC options on Friday and was so tempted. Many times in my past, chasing those big premiums as an option writer has led to disaster.
My instinct is to sit out this dance and wait for more clarity. To quote Clint Eastwood, "a man has to know his limitations." Fast moving volatile markets are a dangerous place for relatively slow moving position traders such as myself. The baseball analogy would be to wait for my pitch instead of swinging wildly at the nasty slider being thrown at the moment. I may look to take on some positions, but they will be small with a decent margin of error.
Friday, March 14, 2008
Panic, smoke and fire
Bill Luby at VixandMore (link):
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the ratio [VIX vs. 10 year T-note yield] is currently at levels seen only during extreme crisis or panic market environments.
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BSC options players (OptionAddict) were sniffing at the bad news and bid up the premiums way up before the news today. With the news, the premiums went to the moon, so high that I was tempted to sell some of the options, but reminded myself of the out sized risks of high premiums. The smoke is now full five-alarm fire, with the possible buyout or take under of BSC as the most likely outcome.
So with the high fear factor, is it time to load the boat on the long side? Especially, if we get a gap down open on Monday, I'll look to take a shot at the long side. The Fed meeting might bring a full point rate cut, and/or more measures like the $200 billion short term loan problem. Watching this, it feels like the Fed is trying to build a sand castle on the edge of a rising high tide. Each massive effort only lasts as long as the intervals between the bad news.
Yes, at some point the tide will turn and the bad or terrible surprises will end and the market will rally for real. As I have written many times, calling bottom is rarely a profitable game (same with calling top). It sure is exciting and fun, but it is difficult and high risk. I prefer something easier with the odds in my favor.
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the ratio [VIX vs. 10 year T-note yield] is currently at levels seen only during extreme crisis or panic market environments.
>>
BSC options players (OptionAddict) were sniffing at the bad news and bid up the premiums way up before the news today. With the news, the premiums went to the moon, so high that I was tempted to sell some of the options, but reminded myself of the out sized risks of high premiums. The smoke is now full five-alarm fire, with the possible buyout or take under of BSC as the most likely outcome.
So with the high fear factor, is it time to load the boat on the long side? Especially, if we get a gap down open on Monday, I'll look to take a shot at the long side. The Fed meeting might bring a full point rate cut, and/or more measures like the $200 billion short term loan problem. Watching this, it feels like the Fed is trying to build a sand castle on the edge of a rising high tide. Each massive effort only lasts as long as the intervals between the bad news.
Yes, at some point the tide will turn and the bad or terrible surprises will end and the market will rally for real. As I have written many times, calling bottom is rarely a profitable game (same with calling top). It sure is exciting and fun, but it is difficult and high risk. I prefer something easier with the odds in my favor.
Sell IWM (buy puts)
Buy back short puts on IWM for modest profit, so am back to being flat (out of market). ThinkorSwim Analyzer (my brokers software) shows 5% of closing before 63, then as the market slides, odds increase to 9% by the time I exit and more like 20% at the lows of the day. I take my modest profit following my rule: Never let a profit turn into a loss. Stock futures indicated a huge bump up before the open, but it didn't materialize and faded to a loss before the first half hour on BSC news.
/edited for typos: originally posted 9:49 PDT
Thursday, March 13, 2008
Gold $1000
Spot gold didn't quite make $1000 on the bid, but futures and the ask did, before settling back. The Fed has been kind of gold during the recent months. Let us see if that streak continues next week, with Fed futures traders betting on a 75 basis point cut. Long term, I continue to believe that there is plenty of fuel left in the gold rocket. Short term, a lot of fish have been hooked, with more and more newbies jumping in and buying when they didn't want any gold at $700, or $400 or lower.
With oil spiking up, airlines have been spiking down.
Positions: Long IWM hedged
With oil spiking up, airlines have been spiking down.
Positions: Long IWM hedged
Tuesday, March 11, 2008
Ben saves the Bulls
Fed chairman Ben Bernanke saves the bulls with a $200 billion liquidity pump to bail out weak financial institutions. By allowing them to use bad loans as collateral, one wonders what happens at the end of 28 days. It is a bit over my head.
What next? That is always the most relevant question. Schaeffer's (link) reports that Fed Fund futures are factoring in a 75 basis point rate cut at the Fed meeting next week. 75!? Wow.
Long IWM
What next? That is always the most relevant question. Schaeffer's (link) reports that Fed Fund futures are factoring in a 75 basis point rate cut at the Fed meeting next week. 75!? Wow.
Long IWM
Monday, March 10, 2008
Another banana
The market feeds the bulls another banana today, as the decline continues. I am getting hammered after dipping my toe in the water on the long side. IWM nearing my mental stop of a close below 64 (64.50 Monday). I was tempted to double up on Friday, and again today. Usually this isn't a good sign, so I resisted the impulse.
I remain mostly in cash with my toe in the frigid market waters, long IWM via short puts
GDX has a strong down reaction day, down 3.8%, even though the gold futures hold up fairly well, with GLD down only 0.23%
Random Roger has some thoughts about indicators and bear markets (link) see March 10, 2008 entry.
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Reading things like put call ratios starts to get tricky if you believe this is a bear market. This is a point in the cycle where it is easy to get fooled. The market is down almost 20%, I'm sure if you looked you could find an indicator or two to tell you the market is oversold
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Compelling as they may be, if it is a bear market all of these things will be wrong. Bear markets last longer than five months and on average go down more than 20%, closer to 3o% actually.
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Another 12% down would bring it into "average" bear market range. What if this is the "big" one? The way most pundits can tell is using their hindsight glasses.
I remain mostly in cash with my toe in the frigid market waters, long IWM via short puts
GDX has a strong down reaction day, down 3.8%, even though the gold futures hold up fairly well, with GLD down only 0.23%
Random Roger has some thoughts about indicators and bear markets (link) see March 10, 2008 entry.
>>
Reading things like put call ratios starts to get tricky if you believe this is a bear market. This is a point in the cycle where it is easy to get fooled. The market is down almost 20%, I'm sure if you looked you could find an indicator or two to tell you the market is oversold
...
Compelling as they may be, if it is a bear market all of these things will be wrong. Bear markets last longer than five months and on average go down more than 20%, closer to 3o% actually.
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Another 12% down would bring it into "average" bear market range. What if this is the "big" one? The way most pundits can tell is using their hindsight glasses.
Saturday, March 08, 2008
Carl Futia on Speculation
In the archives I found this interesting column by Carl Futia (article) from 2005.
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Sad to say, intelligence has little to do with success in speculation ...
What is really needed for successful speculation is not intelligence but what speculators call an "edge". An edge is a piece of knowledge or a reliable instinct which predicts the direction of market prices and that is not shared by too many other speculators.
You can't get an edge by reading the finance or technical analysis books you bought on Amazon or at Barnes and Noble. The information they contain is fine as far as it goes, but the trouble is that it is information that everone else has too! It can't give you an edge on other speculators. For the same reason you can't get an edge by attending a seminar that promises to reveal market secrets which will lead you to wealth.
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Sometimes friends or acquaintances tell me they have signed up for or already taken a seminar or class or bought some whiz bang software. For the reasons stated so clearly above, it rarely works. What I tell everyone is that there are a 1000 ways to make money, a 1000 different approaches to the markets. Find the one, two or five that work for you and fit your personality. Something that works for me, may not work for the next person because of their temperament and inclinations. Mechanical systems need to be adaptive, because there are now so many formula spinners testing their trading systems night and day.
It is the weekend so I will ramble on a bit. Investing is different from speculating. For the average person, diversifying into age appropriate asset classes, and dollar cost averaging will out do most would be speculators. Same when getting out, get out a little bit at a time. Making big bets is entertaining and exciting, but few folks continually take big risks and win enough to offset the losses. Readers know that my style is to cut losses, and hedge to limit risks. Again, with spring training upon us, the analogy is a singles hitter in baseball vs. the home run hitter that strikes out a lot. Both styles can be successful, a lot depends on personality and execution.
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Sad to say, intelligence has little to do with success in speculation ...
What is really needed for successful speculation is not intelligence but what speculators call an "edge". An edge is a piece of knowledge or a reliable instinct which predicts the direction of market prices and that is not shared by too many other speculators.
You can't get an edge by reading the finance or technical analysis books you bought on Amazon or at Barnes and Noble. The information they contain is fine as far as it goes, but the trouble is that it is information that everone else has too! It can't give you an edge on other speculators. For the same reason you can't get an edge by attending a seminar that promises to reveal market secrets which will lead you to wealth.
>>
Sometimes friends or acquaintances tell me they have signed up for or already taken a seminar or class or bought some whiz bang software. For the reasons stated so clearly above, it rarely works. What I tell everyone is that there are a 1000 ways to make money, a 1000 different approaches to the markets. Find the one, two or five that work for you and fit your personality. Something that works for me, may not work for the next person because of their temperament and inclinations. Mechanical systems need to be adaptive, because there are now so many formula spinners testing their trading systems night and day.
It is the weekend so I will ramble on a bit. Investing is different from speculating. For the average person, diversifying into age appropriate asset classes, and dollar cost averaging will out do most would be speculators. Same when getting out, get out a little bit at a time. Making big bets is entertaining and exciting, but few folks continually take big risks and win enough to offset the losses. Readers know that my style is to cut losses, and hedge to limit risks. Again, with spring training upon us, the analogy is a singles hitter in baseball vs. the home run hitter that strikes out a lot. Both styles can be successful, a lot depends on personality and execution.
Friday, March 07, 2008
Buy IWM fund (sell puts)
Buy IWM, sell Mar 63 puts
IWM didn't make a new low on the gap lower. I am buying closer to the highs than the lows for the day. Mental stop is on a close below 64.
IWM didn't make a new low on the gap lower. I am buying closer to the highs than the lows for the day. Mental stop is on a close below 64.
Thursday, March 06, 2008
Bottom or bananas?
Today stock market bulls got the banana. Is this event the big banana (a steep decline) or a bottom with a retest of the lows?
Fear as measured by the volatility index is perking up but not screaming yet (VIX chart). Newsletter sentiment has turned quite bearish so a tradeable bottom is getting closer (Marketwatch sentiment article).
Traditional chart reading says if IWM breaks below 64 (chart) the next downside target is the width of the recent range or eight points, giving a target of 56. Today's close just above 66. Another possible scenario is taking out the stop below the tick low of 64.19, and then a trading rally. If the market gaps to the downside at the open tomorrow, that might be a sign of capitulation and a good entry point for longs.
When in doubt get out, and that is where I have been and continue to be--out.
Fear as measured by the volatility index is perking up but not screaming yet (VIX chart). Newsletter sentiment has turned quite bearish so a tradeable bottom is getting closer (Marketwatch sentiment article).
Traditional chart reading says if IWM breaks below 64 (chart) the next downside target is the width of the recent range or eight points, giving a target of 56. Today's close just above 66. Another possible scenario is taking out the stop below the tick low of 64.19, and then a trading rally. If the market gaps to the downside at the open tomorrow, that might be a sign of capitulation and a good entry point for longs.
When in doubt get out, and that is where I have been and continue to be--out.
Tuesday, March 04, 2008
Retesting the low
I've mentioned several times that a retest of the recent lows might be a good time to buy. Today some traders were watching the SP500 closely as it neared the recent lows. The SPY is a proxy and doesn't show the retest as clearly (six-month-chart).
The way it happened makes me suspect. Another rumor about a much anticipated bailout of ABK. A similar rumor about ten days ago, launched a furious rally of four days and about 5%. This rally could fizzle before 24-hours with a much more modest gain off the low. The market doesn't look so good to me. Early March is a strong seasonal period. A good bit of IRA money flows in at this time, along with early tax return money. Those that have to write a check, tend to do it closer to deadline and may account for some of the traditional seasonal weakness in stocks in late March.
Precious metals had a hard down day. Certainly not a time to panic either way, after the gains that have occurred. A lot of fish seem to be biting on this move up. When enough little fish are in, the big fish will close the trap and take their money by shaking them out with some sharp and violent price drops.
I am looking at a lot of stocks, but remain flat for now.
The way it happened makes me suspect. Another rumor about a much anticipated bailout of ABK. A similar rumor about ten days ago, launched a furious rally of four days and about 5%. This rally could fizzle before 24-hours with a much more modest gain off the low. The market doesn't look so good to me. Early March is a strong seasonal period. A good bit of IRA money flows in at this time, along with early tax return money. Those that have to write a check, tend to do it closer to deadline and may account for some of the traditional seasonal weakness in stocks in late March.
Precious metals had a hard down day. Certainly not a time to panic either way, after the gains that have occurred. A lot of fish seem to be biting on this move up. When enough little fish are in, the big fish will close the trap and take their money by shaking them out with some sharp and violent price drops.
I am looking at a lot of stocks, but remain flat for now.
Monday, March 03, 2008
Silver $20
Wow, the parabolic move in silver continues. A double off the base takes silver to $26/$28. That would be where I would look to take trading profits, if I had a bunch of it. I don't have bunches and bunches, but do have a decent amount for the long term.
Still some skepticism on this move as a lot of silver coins are going for less than spot. When retail demand is high, the newbies will pay over spot because they want to get it. It probably is no more than an anecdotal indicator, but it is easy enough to watch.
Stock market recovers off its lows. Some of the buying might be beginning of the month inflows. I am not convinced that the bottom is in.
Trading positions: none
Still some skepticism on this move as a lot of silver coins are going for less than spot. When retail demand is high, the newbies will pay over spot because they want to get it. It probably is no more than an anecdotal indicator, but it is easy enough to watch.
Stock market recovers off its lows. Some of the buying might be beginning of the month inflows. I am not convinced that the bottom is in.
Trading positions: none
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