Sunday, February 22, 2009

Watching some OIX components

Some of the oil services index look pretty good here from a risk/reward.

Liking BHI, 9 days down at support.

DO maybe has the best divergences.

RIG looks OK here too.

Didn't get hit on any of these.

The rest of the DGP is gone to a stop. Gold is increasingly looking like a big double-top, with the trendline down around the 850 level.

Noting that there's been call-buying in the VIX, all the way up to the 90 strike. This should push treasury yields back down.

So, right now, for the longer term, I'm kicking around the idea of a paired trade... long munis over short treasuries, reap the coupon. Later in the year as tax revenues fall off a cliff, the states will encounter funding problems and their debt will blow up. It will wind up being backed by FDIC/treasury.

It will be immaterial which debt quality you own. If you fail to back one, there will be capital flight. So you may as well own the worst of it, stuff from the sand states. I'm thinking something like long PCQ over short TLT. You don't want to use TBT for long-term trade because the Greeks get involved in the double-shorts. If these two classes of debt return to historical parity, you'll be looking at a 60 - 70% gain.

Friday, February 20, 2009

A good day to sell some gold

or at least move up the stops. No excuse for letting a 50% move get away.

Doing some selling into this morning's spike. Got hit on half my remaining DGP position. Pulled up stops on the rest so a good move doesn't get away.

Got blown out of the tentative little long-side trade I made Wednesday - lost the other 250 DDM right away. Terrible call on my part. Well, you have to take a shot at something that looks like it could be a double bottom.

C, BAC trading today as though they're in FDIC hands on Monday. I can't decide if something's leaked, if their "stress test" (what total bullshit!) isn't going well (GS being up supports this thesis) or if it's just Geithner's disappearing act.

Tough call for policymakers. Keep feeding the zombies, it'll be a black hole for otherwise useful capital for a decade. Let them die, it's like 10 Lehmans, an ELE (extinction-level event).

I think you have no choice but to let it go, try to think in terms of shaping the society for the post-mortem of Western finance.

Thursday, February 19, 2009

Scalped some lunch money

I did just what I said yesterday, took 500 DDM around mid-morning, scalped half of them when I saw it wasn't going to make 24.

Bid way down low on some gold and missed. It had a nice reversal yesterday.

So I come in slightly long today. It's hard to think of my portfolio as being either "long" or "short".

SLW reports today. Could be an opportunity if it has a miss. But the run in the PMs is looking a little long in the tooth to me - straight up from 750 to 950 is a helluva move, and you want to take some chips off, if only as a matter of good money management.

A piece of anecdotal evidence for the long side:

AAII today showed 21.64% bulls and 56.72% bears. The last time bullish percentage was this low was about a week before the July lows; prior to that, about a week before the March lows. The last time bearish percentage was here was - shocker - at the November low.

Jobless claims probably won't move the needle today.

Position here is cautiously long. In Toddo's nomenclature, 1 leg in the hoofy suit.

Wednesday, February 18, 2009

Gut-check time

So, we come into the day after a close 0.11 points higher than the November 20th low in the Dow.

Gut-check time. If it bounces here, is it a double-bottom?

Start with the bad news…

- We’re nowhere nearly oversold yet. It’s not even close to the levels of oversold in January. Maybe 20% of the way as oversold as last November.

- At a very macro level, the transports made a new low. If the Dow also makes a new closing low, that’s a Dow Theory sell signal.

- Ratio of Bank index to S&P has rolled over and died.

- Moving average of volume has been climbing into the decline.

The good news…

- Looking at the Dow between yesterday and November 20th, I see positive divergences in 3 of the 5 indicators (oscillators and trend indicators) I look at. Usually, I don't trade a pattern like this without at least 4 positive divergences.

- The index put/call ratio is above 1 for the first time this year. Today, it sits at 177%, which should be pretty bullish. But the moving average of the put/call ratio is still in its lowest 10% of the last 5 years.

To me, the biggie is:

- From the 13-D filings this morning, Uncle Warren pukes, blowing out franchise positions in UBS, JNJ, COP, PG at multiyear, sometimes multidecade, lows.


I try hard never to editorialize here, but this pisses me off: taking out full-page ads in major newspapers exhorting us to "Buy America" while at the same time selling his US stock holdings makes Uncle Warren a pump-and-dump scumbag. Instead of a convincing writing style and cross-posting around the internet, he used his bully pulpit and the major newspapers to accomplish the same thing. He really deserves to lose his ass for pretending to wrap himself in the flag when he was really talking his book.

So, gun to head, I’d say: tradeable Dow rally here. It probably takes out the lows mid-morning, just enough to freak everyone out. That retest has to be terrifying. I’d put some stops a little below where it trades to around 10:30-ish this morning. It should be a fairly precise thing.

I plan on putting on a little more than I really want, maybe 500 DDM, with a notion of scalping 200 intraday.

Thursday, February 12, 2009

Everything worked today

Really thought the indices were going to blow up today. Dow fell out of that triangle, it looked like a stop at that 7450 intraday support, then into the abyss to 4200.

Nice stick-save by Congress. Of course, the bill is crap, just like everything before it. It just shows you that the sentiment is so bad, even a non-bad news item can move the needle.

There's a t-shirt slogan I love - "Don't believe everything you think." I understand exactly what it means. Over the years, I've learned to read my own mindset as a guide. Whenever things feel blow-uppy is a good time to cover some shorts. Whenever I feel all smug and arrogant about a good position, means it's time to take some of it off, or at least throw a virgin into the volcano.

You can always reload on a position. Mr. Fidelity won't send the Excessive Trading Police after you, and I certainly don't begrudge him the $8. But what you can't always do is get back a profit once it's gone to Money Heaven.

So I did some selling on my own terms. I never know if this is good timing or not, this is just my small means of exercising a measure of control. I aim never to be greedy and to have the humility to accept free money when it's being handed out. Thank you, great nation of America, for the opportunity to pay taxes.

Put out half of the GBG for bid at 1.70, got hit. Put out half the NXG at 1.37, got hit. Again, these gold microcaps are just tiny little trades, maybe a quarter of a normal position, and I'll never let them get bigger, but the important thing is to trade them well. Free double-digit percentages in a week is a good thing. It's time to move up the stop on the rest.

Put out half the SRS at 70, got hit. Moving the stop there, as well.

I figure, keep on hammering out 10%, 20% trades, it's hard to help making some money.

I predict I'll be unemployed in 6 months. Trading as though my life depended on it is about to become a very real exercise.

Wednesday, February 11, 2009

Watching the fireworks display yesterday

Just a quick note this morning.

Got stopped on another 100 TBT. Tightened my stops some more on another chunk. Reading from Miller-Tabak that the big note auction was well-received yesterday. Geithner didn't inspire a lot of confidence either. Yields on most of the notes are in a triangle here.

I keep trying to pay my price on some gold. Got hit on some NXG, put in an outrageous bid at 1.24 and got hit on another 1500. Also got hit on another round of GBG at 1.41. Gold looks strong into the open here, so maybe flipping some of that.

Triangle in the Dow looking ominous and it's the most bullish index. It measures to 4200 by my read. Got a bid out on some DXD into what looks like some opening strength.

So, position is basically long gold over short commercial real estate, long bonds and the Dow. Bonds are probably going to kill me today, gold looks like it's going to work.

Tuesday, February 10, 2009


S&P 875 is resistance here. Breakout, and it could measure to 940, breakdown and we could be back in the low 800s.

We're well into overbought range and the put/call is about 0.67, lowest since January, 2007. Not enough bears, not enough by half. That would be my bearish argument.

The only bull argument I could muster would be "Look, chart!" on a breakout, plus a desire to want to lean against everyone who wants to sell the Geithner announcement.

Dollar/yen bouncing off an uptrend line that's run since September. Could interpret it as a double-top, too, when it hits that 105 level. S&P has been tradeable by the dollar/yen for a long time. Someone, somewhere, really really wants the carry trade going again.

Reading back over these thoughts, I see a good argument for getting flat and delta-neutral.

Yesterday's action - got hit on another 2000 GBG yesterday at 1.45 near the open when he traded down.

Saturday, February 7, 2009

Didn't get hit on anything

I missed on everything I bid on last week. Still liking some transports.

China hit a trailing stop, sold the last 150 of the FXP last week around 44. China is running hard, as is the Baltic Dry index, a lot of the materials companies.

Half the SRS went at 64 in that big-spiky day on Thursday. Bottom fell out of that, I'm down on the other 200 now.

My inclination, and I guess everyone else's, is that TARP 2.0 on Monday at noon will be a sell-the-news event. Maybe worth it to add some long exposure just to be contrary.

My look at the S&P, we're either:

a) At the top of a trading range
b) At resistance that measures to the 940s on a breakout.

We're a little bit overbought, not too badly, though. That's multiple defenses of the Dow 7900/S&P 800 level, with divergences. I would be inclined to add long exposure here.

Haven't had time to look at too many charts this weekend. Went over the golds pretty carefully for something buyable. Many of them look like something you'd hold if you already owned, but I was looking for ripe charts.

One microcap that I've traded successfully a few times in the past looks pretty ripe here: GBG. If it breaks above that triple-top at 1.50-ish, it could have a full buck to run.

Barrick (ABX) has important resistance at 40.