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Wednesday, September 30, 2009

Market Thought... 'shoulder shrug'

At the moment, all I can do is shrug my shoulders. Last week (as I posted on 9/23) I got into a boat load of very short-term trades. Going from virtually all cash to 40-50%. By Monday end-of-business day, I was (and am) at 80-90% cash. (Keeping positions in PWR and JPM.)

Needless to say, I am a happy trader, but I shrug my shoulders because I do no see short-term market direction with any real confidence.

IMO, the key is in the 10yr yield. (That is why I highlighted it the other day in 'contradictions'.) This will tell us when the Fed will start aggressively raising rates. When the 10yr yield begins to jump, probably reaching around 3.9-to-4% I will expect them to start becoming aggressive.

The economy has stabilized, as Buffett already told us, and my most unsophisticated economic barometer (ie a noticeable increase in road Traffic) tells me. With some growth, banks will lend again, businesses will hire or increase pay, and the economy will enter a positive self-sustaining cycle.

Hopefully this leads us into a relative sweet spot in 2010. Initially there should be a market shock to the aggressive rate increases, but the positive cycle should overcome this. The combined factors should also facilitate the strengthening of the US dollar.

Right now some internal weakness can be seen within the SP500. But I am hard press to argue that the market will go below 1030 w/the consolidation, unless the 10yr yield breaks down hard.

With a continued SP500 consolidation, I will take on similar trades as the showcased in the 9/23 post.

Sunday, September 27, 2009

Market Thought... contradictions

The Fed issued their statement to keep their policies in place, and then one of their Governors produced an op-ed WSJ suggesting a very fast pace of rate increases which was contradicting his vote to keep policies as they were.

My personal opinion is to strengthen the dollar that could cause a major market correction. But my opinion means jack-shit, and I rely on what the indicators are telling me, so I am not convinced we will see a major correct just yet.

The 10yr note yield appears to have entered an interesting position. On one hand it is on support. On the other hand it is being capped by the golden ratio SMAs (38 and 62 SMAs).

The money question is whether or not support holds or it enters another down trend. If it enters a down trend, this would suggest the economy will have a 'double dip'. It will signify a deflation and a weaker economy that does not merit higher interest rates.

If it bounces, and the breaks from the golden ratio capping, then it would indicate the economy is moving, meriting higher interest rates.

Is the economy in a position to see reduced 10yr rates? The decline in the Baltic Dry Index may suggest yes, but the indications of the BDI were not translated to commodity prices.

As of now, all the indicators (that I can see and follow) are moving lock step w/the market. Basically they are not telling me more then what the market itself is saying.

Thursday, September 24, 2009

No steak sauce for me

Do not play AONE. At the moment the business model is simply not there. The costs are too high, and the margins are way too small. The real play in the Li-Battery makers is Li. IMO, the best way to play Li is through SQM.

I have done an analysis on AONE (in my previous blog location), and do not like what I see regarding the fundamentals.

Previously, I posted an article on how the massive push to hybrids and battery fueled cars will transform the auto industry over the next decade, and that SQM will benefit. Li is the only real choice for the autos (for now anyway) as it has the highest energy density of any battery.

Trades - potential w/the (slight?) pull back

Everywhere I read, everyone says the pull back will be slight. With the horrifically low dollar, and my assessment of the economy getting better, despite the Baltic Dry Index weakness over the last few months, 'they' maybe right. (But I still will have an itchy trigger finger w/the market at these levels.)

With that, below are a few names I am looking at (in order)... AAPL (Jan Calls 175 @ the 10SMA), CHK (common stock around low 27), FCX (common), GOOG (Jan Calls 490, preferably around 480), GS (Jan Calls 170 @ the 14SMA), JPM (common around 42) and PBR (common around 43):

Wednesday, September 23, 2009

Trades - Cover MCO, FCX

MCO - If you shorted MCO, now would be a good time to cover. It is very over sold, and no question the fundamentals suck, but the stock is down some 15% from when I indicated to go short. Translate that decline via the options, and your sitting on a huge ass gain.

It can keep going down, but I don't like being greedy.

FCX - If a hedge against a week dollar is desired, look to play FCX w/today's weakness. There are a few benefits w/this play... 1. The weak dollar hedge, 2. The global infrastructure play and 3. Global Inflation hedge. (This is the miner to be in, but i'm not looking to go very heavy in the name at this time... basically a hedge position.)

Tuesday, September 22, 2009

Trades - NVDA, PWR

This is purely technical, but over the past week there are individual names that have consolidated enough to merit purchase. (I already indicated ORCL and F.) NVDA and PWR are in this position now.

NVDA - consolidated, and hitting a light support via the 20SMA. And if the PC market is recovering, IMO, this is the best semi to be in.

PWR - it too is consolidated, and sitting on support. I really like this name, as I view it as the Alternative Energy contractor. And has a great position in Nat Gas. If/when there is a push for this fuel, PWR is the winner.

An FYI... I'm still scared of the tape, and if/when I get a solid bounce from any trade I take, I will not hesitate to sell. (For instance, with the names above, I would sell if they approached their Sept highs again.)

Market Thought... economy

The Baltic Dry Index has been steadily declining over the past few months. So much so, that we are approaching the April level.

This concerns me. Just looking at the chart, you can see it is very volatile. The pricing is subject to sharp swings, but over the past few months it saw a steady decline.

This pretty much contradicts some of the bullish of the bullish commentators, as this is the purest evidence of economic activity. IMO, this adds credence to the theory that the current market rise is purely due to the dollar collapsing.

Monday, September 21, 2009

oil... break out or down

The resistance on crude is undeniable at mid 75, and has been in a very tight trading range for some time. So where can it go?

It most certainly can stay in the tight trading range, but fundamentals suggest a target price of approx $50 a barrel. Or so I have been consistently reading. However, that pesky problem of the dollar declining has allowed Oil to stay a float. The interesting fact here is that the dollar collapsed (since July) and oil has not made new highs.

The inherent dollar/oil correlation allows us to now beg the question... why?

I do not have an answer, frankly I do not have time to fundamentally research it to the extent that I would. What I do know is that it represents weakness in the oil market, and I would not be surprised to see oil come down to the low 60s (or the 90SMA on the weekly chart).

If this was to happen, that is when I am looking to enter heavy positions in PBR. (That is despite PBR's need for oil to stay above 65 to keep their fields economically viable.)

Trade - Ford

Ford looks interesting here as an entry point. It is oversold, nicely consolidated and approaching a long term resistance SMA (which now is a support SMA).

The euphoria from 'cash-f0r-clunkers' has obviously ended, but Ford is a turn-around story, not an economy-turning story.
I am still a big fan of what Mulally is doing, and entered a position.

Sunday, September 20, 2009

Market Thought... short... JCG, MCO

I want to short the market so badly, it hurts. But I can not because I do not know which way the dollar is going, and that is the only thing driving the current rally. Instead I am looking to short individual names. MCO (Moody's) being one, and JCG (J. Crew) is a short I plan on taking on. (I took a short on JCG after they reported their earnings, but subsequently covered when it hit my top line consolidation point.)

JCG is very over extended, and it is soo very pricey. I plan on entering the short position in the account where I am long BKE. Basically acting like a pair trade, but will cover JCG when it consolidates.

I explained Moody's short the other day, and now it is around a fairly solid support level. It may get a bounce from here, but ultimately I believe it will break down and begin to trade into the teens. (The biz model of this company is fucked when the institutional investors are questioning their existence, not to mention the lawsuits that will take place after the courts ruled they are not protected by the 1st amendment.)

IMO, these are names that will get exaggerated moves to the down side if the market goes down, due to the dollar rising, because individually they are due to go down.

Thursday, September 17, 2009

Interesting stuff...

1. Regarding SQM - This article about the new wave of cars to hit the road in the next 10 years pretty much sums up why I like SQM so much. Not to mention it is involved w/agriculture, the other high growth sweet spot place to be. (At the moment it is too overbought, and had to unload the position.)

2. Looking to enter Jan 2010 Puts on MCO (Moody's) - Many are taking this trade on, including Einhorn. With the market rise, MCO rose w/the tide, and now the big boys are questioning their authority. (In a WSJ subscription article that I can not link.) This is the nail in the coffin.

3. ORCL declining after earnings. This may become an interesting trade off the lower end support. (remember I do not plan on holding long position for more than a few days w/the market at current levels)

Wednesday, September 16, 2009

Market Thought... adapt

Traders do not bitch, they adapt and take advantage. My market post 'save the dollar', was me bitching. (although i do strongly believe a stronger dollar is very very needed)

The market has entered a price action period to which I do not agree with. Looking at the charts in the previous post, the fact that the dollar decline facilitates the current leg up in the market is hard to dispute. A closer look indicates that the Sept rise in the SP500 (the 8-9 day rally we are currently in) is directly linked to the decline in the dollar.

To trade this market, I have to adapt to it. So until there is policy change or the Fed starts raising rates (as the inflation and economic data suggest to do) to support a stronger dollar, the economic equation of 'weak dollar/strong market' will not change. This renders the overbought condition useless, and the market becomes a ticking time bomb to sudden and awesome collapses.

My adaptation to the current market action will be primarily that of a day trader. Playing mini pullbacks within the confines of the current move upwards, and taking profits as soon as a bump up (from the mini pullback) is seen.

For these type of day trades I will primarily be playing AAPL, GOOG and GS options. I will indicate the trades when I take them, but these type of trades are extremely risky and dangerous.

Market Thought... save the dollar

There needs to be a serious saving of the dollar. As per the data, I can argue the recent leg up in the market is purely due to the collapse in the dollar. This scares me. Its the same bullshit economic equation America has been on since the early 80s.

Decline our dollar, and watch our market rally. (This is the only reason why multi-national industrials are breaking out... because a shit load of their revenue is from overseas. period.)

The rally since July started taking place in concert with the collapse of dollar support.

Looking at the UUP (etf of dollar in relation to a basket of other currencies), the dollar broke down from support around the same time.

A look at the UUP directly confirms it.

Looking at this scenario, I have the same level of fear and worry as I had when the markets were on a free-fall. We need to stabilize our dollar, ASAP!

NOTE... the previous dollar strength was purely psychological, as it was a flight to safety from the threat of complete economic collapse. (Money simply entered the 'big swinging dick' for protection, nothing more.)

Market Thought... sold

The run up has caused me to pretty much sell out of the market at the moment. My only positions include BKE (just too cheap here), and short CHK.

I forced myself to cover the market short position. Will wait to see stresses in market psychology before I short the market again. There is simply too much positive sentiment at the moment. Nothing seemingly wants to have a healthy correction, and when this happens there is too much 'blind buying'. I do not like trading in these conditions.

In the mean time, I am patiently waiting for the right conditions to develop.

IMO, top side is limited here, and I do not fear lost upside as I have profited very nicely these past couple of months, and from last year monsterous decline. So I don't feel the need ride the current rally. Once the favorable conditions (or at least conditions I understand) are present, I will not hesitate to enter.

Tuesday, September 15, 2009

a short-short trade

CHK has risen from 21.50 to 28.30, approximately 31.6% in 7 trading days. I was long from 21.5, and sold at 25, so this post comes w/that bit of a bias. (and the fact that I am a fan of Nat. gas in general, which is a paradox onto itself)

CHK is very overbought, seriously overbought.

Then there is the weekly chart, which suggest a resistance area from before the collapse.

Because of the extreme condition, I am playing the consolidation that needs to take place. This will be a very short trade, as I am fundamentally bullish on nat. gas, and look to cover on that consolidation. (At that point, I will most likely go long CHK again.)

Could pull back to mid 25, or even 23 (if looking at the 20 SMA from the weekly chart)


I don't always get annoyed when I make money. I am usually very happy.

In previous posts I indicated I wanted to hold on to KMP for a few months, but it has gotten to such ridiculously overbought levels, I have to sell and buy back upon a consolidation.

Make no mistake, I am thoroughly annoyed by this.

Below is the chart. When the Slow STO reaches such extremes, the probability favors a decline or prolonged consolidation time.

BUT, and I stress BUT... this is the trader in me talking. I am still a fan of Nat. Gas, and think it will settle around 4-5 by year end. KMP will benefit. So they will be fine if anyone plans on holding for the dividend over the next few months.

Monday, September 14, 2009

Market Thought... not interested

All I see is an ocean of overbought conditions, yet the market does not want to let up. This is the first time in a while I am truly not interested in any new position or adding to current positions unless things consolidate.

I am ultimately bullish, make no secret of it, but I just have a problem blindly jumping into things. Or when stocks run up in such a short period of time, I hesitate.

Currently I am still short the SP500. I will mostlikely have to reposition the trade (maybe even close it out) depending tomorrow's price movement.

Market Thought... conspicuously enough

The three main indicators I am using for the current psychological state of the market are not functioning today. (real-time SP500, Vix and 10-yr yield)

Its a real pisser.

Been trying not to get too annoyed, but it is quite frustrating. Every time I try to access them, its data from 09/11. (I have tried everything on my end w/respect to cookies and individual files that may be fucking it up, but it looks to be a issue.)

My trading set up suits me more than fine when everything is working properly, especially since it allows me to keep a day job (and under the radar). But when things like this happen, and they happen very infrequently, I wish I was spending the big bucks getting the pro-terminals and trading for a living.

Right now, things obviously look bullish. I can not make a clear assessment until the day ends, but I am so uncomfortable with the market at these levels.

Thursday, September 10, 2009

Market Thought... leading

The market is so very excited, climbing that 'wall-of-worry'. But at current levels, the more the market rallies, the more I will be selling my holdings while maintaining the market short position. (Then I will buy the sold positions back on a pull back.)

Individual stocks are overbought, with a market that seemingly will not quite, is triggering my selling. For instance, I sold PWR today. I love the name, especially after it purchased Price Gregory. Also, I was shocked to get my limit order filled with CHK at 25 filled today. (I do not pass up 17% moves in 4 trading days. But I will definitely buy it back after a consolidation, do not care if it consolidates higher, so long as the risk of sudden collapse is gone.)

At the moment, a key leading indicator (the Semis) for the market are very bullish, but very overbought. And now they are in the position to have run up, too hard too fast, not justifying their current valuations. Basically, IMO, a pull back is imminent.

As a leading indicator goes down, the market will follow.

Something I found strange today, was the 10yr yield. It declined today. With such a market move, the yield should not have declined. It declined so-much-so that it is in the position to break down from its support and enter a negative trend.

This goes against the theory of entering riskier assets. With greater stability, money should be moving away from treasuries (safe investment) and into the market (riskier investments). Unless anyone believes we are getting a free lunch w/low interest rates and a rising market, while the global economy is still in fairly rough shape. If you do, you are wrong... we are not in an economic sweet spot.

If the support breaks, and it looks like it will, the market should be moving lower.

Then there is the VIX. It is now oversold (complacency), and sitting on support.

Usually, as the Vix rises the markets fall.

Wednesday, September 9, 2009

Obama's Healthcare...

Holy crap was that a great speech. He put to rest pretty much every attack on his plan... clearly, and blatantly stating his truths. It was simply awesome.

Quite frankly it made the republican rebuttal a complete and utter joke. As the rebuttal tried to use (the now obsoleted) attacks.

The republicans really need to step up, and if the strategist fail to see this, the party is fucked.

Trade - SPY short

I shorted the SPY (SP500), via 105 SPY Oct Puts, for the pull back as stated in the previous post.

Tuesday, September 8, 2009

Market Thought... interesting

A broken clock is right twice a day :)... on 8/24 my market thought ('a trade') post indicated a market move to approx 1000 in the SP500. Then on 9/1 ('the fear') I stated the SP500 could go down further.

In the short-short-term, looks like that 1000 level was nice support and the 8/24 post was fairly correct... but I stand by the 9/1 assessment.

At the moment, the market could keep rising, but I think the upside is fairly limited.

There is the top-end resistance on the SP500, but also the VIX eased nicely from its overbought condition, and is almost back to its support. (And this support is what I think is the low end of its potential channel trading.)

I would not short the market just yet, as it is not as overbought and the 10yr yield suggest further very short-term upside. The move is evident in the pre-market SP500 futures.

But as the VIX becomes oversold, and the SP500 gets overbought, I will look to short/protect. (But I think the SP500 maintains its bullishness, just has more consolidation ahead of it.)

Side note fyi... I have gone long Nat. Gas via CHK and KMP... irrespective of where I think the market is going.

Tuesday, September 1, 2009

Market Thought... the fear

'the fear' is a great song by Lilly Allen, and I was singing it as I was watching the market go down...

i want to be rich, and I want lots of money
i don't care about clever, I don't care about funny
i want lots of clothes and fuck loads of diamonds...

blah, blah, blah, then chorus... [the market is] being taken over by the feeeeaaaarrrr...

([the market is] = my speck of creativity :)

Man-oh-man, was the market scared today. First time throughout this recent rally where the overwhelming majority of commentators I have been seeing, in the vast sites I read, were negative, and telling people to short. Quite fascinating.

The obvious is that the VIX spiked today, and spiked impressively. Today's spike made it overbought, but changes its trend.

I do not believe the VIX will start an uptrend. I think it will top out at approx. 33, and channel for awhile. Once I see 33 or so, I will go heavy in the stocks listed below.

Such a level of fear would suggest the SP500 could very well retreat to the 62 SMA.

Another aspect of the market not really seen in the above charts, are the internals. Individual stocks are not as oversold as I would expect w/such negativity. Because of this, and the above charts, we will go lower... for now.

Waiting to go heavy into the market via the following:

AAPL - 160
GOOG - 445
GS - 153
PBR - mid 36
SQM - 32-33 (but oh so tempted to add today)
FCX - 54-55
FXI - 36 (but its so oversold and tempting at current levels... but I have discipline)
F - mid 6
BNI - around 77