Big Money

Taking off more long exposure, adding to shorts

2009-07-22T06:06:00.000-07:00

Pretty clear bounce off resistance. Took off another 1/3rd of index longs near the close yesterday. Adding to index short exposure as the S&P bounces of 960. Not enough in the way of divergences for me to go fangs out here, just adding a bit of index shorts.

Taking something down here

2009-07-20T12:54:00.000-07:00

Selling 1/3rd of the SSO right here. Put on with a basis of 24.75. Nice move, no need to be greedy.

Unbelievable the hate I got over this on some of the doomer boards. I got my buy points within 2 - 3% on a whole slug of individual stocks, caught absolutely nothing but crap over it. For the record, here's what we got. I wanted you in:

S&P at 890. Intraday low was 880, now at 951.

T at 23.75. It went to 23.19, now at 24.42
WMT at 48. Intraday low was 47.35, now at 48.82
RTH at 76. Intraday low was 74.24, now at 80.52.
AAWW at 21. Intraday low was 19.84, now at 23.47.

All I got for myself was the S&P. Cha-ching, doomer fuckheads. Things go up and down within the context of a bull or bear market. I happen to believe 5% is worth playing for.

Nothing anyone will ever be able to prove, but this whole market move over the last 4 months has felt like a massive pump job. I would hate to have been short it, which I suspect is exactly the point the PTB are trying to make.

Looking at the long side

2009-06-28T07:03:00.001-07:00

Well, let's take a look at the general markets. The S&P and Dow charts, to me, are in conflict.

On the bull side, both show a Golden Cross right here, where the 50 and 200 SMAs crossed. Also, there was a good bounce off the high 890s area in the S&P and that 8250 area in the Dow, from an oversold condition.

On the bear side, it's still a broken trendline that measures to a top around 950 S&P, 8800 Dow. Also, index put/call ratio comes just below 100, starting to get a little more bearish despite the oversold. Quarter-end games tend to end early rather than late.

Still I'd say the next 5% is up. I took some SSO on that bounce off support. Also covered the PM short, need to get a little long here.

Strong groups this past week were transports (rails have been on fire – can’t find an entry point though), telecomm.

I am not enthusiastic, but I guess I could take:

- T as close to 23.75 as you can get
- WMT looks good to enter as close to 48 as you can get.
- If you want an ETF, RTH as close to 76 as you can get.

One real flier among the transports. I probably won't do this:

- AAWW, as close to 21 as you can get him.

Some physical silver around 13.50, if he comes back.

Covering a little something

2009-06-23T10:10:00.000-07:00

Both silver and gold continuous contracts at the 50DMA right here, about a 50% retrace of the last move, at support.

Let's declare victory and cover a third of each of them. Tried, but failed to get long some silver at the 13.50 level on the physical metal.

S&P did a credible bounce off support in the 890s. Taking 800 SSO at 24.75 on the long side.

Bucky taking a buckwheat up the green chute as well, Euroland making tightening noises. Why am I continuously thinking '1931' ?

Trendline breaks

2009-06-15T09:05:00.001-07:00

All three indices seeing multimonth trendline breaks today.

Looking like a trendline break in the VIX as well.

I think you want to hold off until later in the afternoon to see what the invisible hand of JPM will do for a stick-save.

Good entry on the short side right here.

I already lost my energy and PM longs to trendline breaks over the last several days, leaving me with shorts on the S&P, gold and a REIT.

I'm trying to add on the short side with about 7% of the account, being stubborn waiting for my price. I think you'll get another chance over the next several days as it tries to flirt with the trendline.

Got short some silver via ZSL, but that was it.

Charts I'm watching

2009-06-07T07:04:00.001-07:00

Mostly on the long side...

Purely anecdotal on my part, $USD is a crowded short. I would look for a bounce, with concomitant commodity weakness. I don't know that I'd extend that to say "and treasury strength" since the two have been decoupling for a few days.

However, a stronger dollar would tend to mitigate against the export/heavy industries on this list:

Insurers: HIG, making a pennant, stochastic just crossed, MACD turned up from down low.

Aerospace: BA, like to see him fill that gap at 50, since he's overbought here. Not buyable right now, just a watcher.

Midstream pipelines: APL, inside day after a breakout. Overbought here but, in my ideal world, he'd make a pennant right here.

Tires: CTB on a breakout above 12.

Industrial metals: AA

Personal care products: ACV.

On the short side, taking a shot at a little gold short, playing for 4 - 5%.

Update: Got no longs at all, got some gold short via DGP.

Lots of trailing stops hit

2009-06-03T18:29:00.000-07:00

Lost all the golds, all the energies and part of the treasury short to stops today. Every one of them was very profitable. Too many positions to detail right now. I could see the confirmations streaming in starting in over the mojo wire around mid-morning. End of the week, I'll detail what's *left*.

Bigtime in cash, with maybe 25% of the account committed, mostly on the short side now.

For as many weeks as I can recall, though, exercising good trading discipline has been an exercise in futility, as the market seems to have no memory from one day to the next.

Rate issues come to the fore

2009-05-29T09:12:00.000-07:00

I took a look at the TLT chart, where it looked like 90 was powerful 2-year support. I wasn't willing to stand in front of a steamroller to pick up a few nickels, so I covered 1/3rd of the bond short on Wednesday afternoon late.

Debt issues back on the table

2009-05-22T16:11:00.000-07:00

I came into the week net short, which, of course, was painful on Monday. I think we hit an inflection point with the crushing Cali referendums, then the Japan sovreign downgrade and Britain being place on negative watch. Of course, the killer was that the language in all those S&P analyses applied directly to the US's situation. It's hard to see a scenario that's bullish for treasuries in all this.

The ultimate outcome in California's situation might be a reverse-Okie phenomenon. Given the shabby treatment bondholders have received lately, it wouldn't shock me to see muni debtholders get crammed down. So, of course, Cali muni debt is up over 1% today.

I was up to 60% cash from the trailing stops that were all hit last week. I put some of that back to work in some golds. I picked up the second half of a position in BVN at 24.50. So now I have on 800 BVN with a basis of 24.73.

I picked up another microcap I'd traded in the past - AGT. It did a bull wedge back to support at 0.40. I put in a bid at 0.39 and got hit for 12K shares. That .50 level is really important, going back a couple of years.

Longer-term, I do like the way MEE is forming up here again - pennant with a base at 18. Many coals and coal-related stocks have a similar pattern - CNX, BTU, ANR - but MEE is the most prominent. But at the same time, natural gas can't get out of its own way and it's diverging wildly with oil. So, at best, we're getting some mixed signals in the energy space.

Pretty good week

2009-05-16T05:26:00.001-07:00

Lost a lot of things to trailing stops.

MEE, out at 22.10.

BHI, the last half of that's gone now at 38.25.

SU, the last half of that's gone at 31.40.

HL was setting up some negative divergences and got turned away at its 200DMA, so that tiny speculative position is now gone.

Where I sit right now is long some PMs (DGP, BVN, GBG), short real estate (SRS) and treasuries (TBT), short indices (SDS). 57% short, 43% long, but around 60% cash after everything I sold last week. I'm in the hole on the index short, but up 6.1% for the year right now.

Major indices are getting into slightly oversold territory. S&P should find some good support 850-ish. Nasdaq getting pretty oversold, but still overextended. The rule has been that the upside and downside have both gone on further than I've expected, every time. Still, some weakness on Monday would be a good place to start unwinding shorts.

I don't know if you'll see it, though. LOW earnings Monday are probably going to be interpreted as more green shoots to smoke.

In a quick chart review, the the defensives played well this week, but the only real long-side setup I see is MO's nice ascending triangle with a base around 17.45.

On the short side, one that I missed last week... utes getting killed here. I don't know if it's the same bond rollover issues that got them last year, or some political nonsense about cap & trade. SDP did a nice double-bottom at 40.

Lots of retail looking tasty on the short side. Of the trendline breaks, I guess I like JWN best on the short side. AN and CHS are also like this.

Trendline breaks

2009-05-14T05:59:00.000-07:00

Looking at the markets simplistically, every index has broken a multimonth trendline. Naz, you could really have gone short it on Monday. It fiddled with the trendline resistance for a couple of days; now it's decisively broken.

A caution, though... In thinking about this last night, I re-read Magee's chapter on channel lines and discovered an interesting observation. The amount (of points) by which the chart fails to reach the top of the channel by (in Nasdaq's case it's about 40 points) is usually the amount by which it falls from the lower trendline before having its first snap-back rally.

In the present case, we broke the channel at 1700 and closed last night at 1664 so at 1660 we'd be pretty close to that 40 point target.

Expiry week, so be careful of the snapback. I'd still be a seller of the snapback rally.

I lost all my remaining (small) energy positions to trailing stops the last two days.

Still have on the gold... played in the microcaps GBG, NXG. Lost NXG to a stop yesterday. GBG still hanging in there. The ETF DGP is still hanging in there.

I got a half-position of 400 BVN on at 24.96 the other day. Still have him with a stop at 24. Some foreign golds (South Africa) are the best charts I see on the long side - not saying much.

What I'm watching - a couple of bad days from now, could get a primo entry short TLT around that 100 resistance.

This jibes with my intermediate-term theory about municipal debt guarantees. Short story, Cali (and a number of other states) are about to have a funding crisis. I suspect the FDIC will wind up guaranteeing its debt, as it did for banks and financials. If one state's debt is guaranteed, then all states must be, else there will be capital flight. So you might as well go long the junkiest muni debt from Inland Empire GO bonds or Detroit Sewer bonds over short the long end of treasuries and reap the coupon. This could be a double-digit trade for years.

Weak CRE stocks

2009-05-03T06:20:00.000-07:00

Noting the weakness in a number of the REITs after their big (possibly artificial) runup over the last 6 weeks.

One that jumps out is the trendline violation on big volume in CLI. Other REITs - SPG, AKR, HOT, BXP - confirm the same pattern.

I put on a position in SRS starting from the 22.50 range last week. This thing trades like nuclear waste, so stops are in at 24.

On the long side, the coal group generally looks strong. Still like MEE best in this group, have some on, put some more on Friday to bring me up to 2K shares with a basis around 11.45.

Also on the long side, I want to put a bid in on gold around 850, playing for something in the mid-900s.

Yay for stops!

2009-04-22T07:35:00.001-07:00

Got nearly all the juice out of that SKF trade before it tanked.

The Geithner speech really juiced things.

Today, looking like the financials will give something back on the horrible COF numbers. YHOO inline, Bartz doing a good spin-job.

Oscillators *way, way* overbought here. S&P oscillator at +9, I would be a seller at +5. No new longs here, peel 'em off if you have 'em.

Looking at SRS just below the all-time low, around 25.50. Again, these instruments are to be held no longer than green bananas.

But the market has a distinct squeeze-y feel. Keep those stops tighter than a fist and positions small.

Wedgie in the indices

2009-04-21T05:20:00.001-07:00

I took off half the SKF yesterday and moved stops. Because (repeat after me) We Never, Ever Let a 25% Weekend Move Get Away. Plus, the double-short products are just a pure shit ripoff. They're intraday-only.

All three indices look to me to be at the bottom trendline of a wedge. A break of that downtrend line could mean a lot of downside for the markets. A bounce could be a big move up.

I went back to the bible, Edwards & Magee's "Technical Analysis of Stock Trends," and looked up the pattern of a wedge.

Tell me how well their comments have held up:

Rising wedges are common in bear market rallies. Magee says that it is so typical that frequent appearances of wedges after an extensive decline bring about questions as to whether a new bull trend is in place. Does that sound familiar?

Another item of note is that it normally takes more than three weeks to complete. We've got that. And once prices break out of the wedge to the downside they usually waste little time before declining in earnest.

We're still somewhat overbought, not as bad as it was a week ago.

I would lean to the short side here, with the caveat that it's hard to make money during earnings season either way.

Geithner speaks, or rather obfuscates, late morning. Last time, it was worth a 100 point Dow bounce. The plan is to stay neutral until he speaks. If you want to be long, some oil might be good on a reversal.

Fading the rally

2009-04-20T04:45:00.001-07:00

Rally looks artificial and long in the tooth by every measure I look at.

Got hit at 56.75 on 400 SKF for a green banana trade. Want to stress, there's no technical reason within the framework of my methods to do this here.

Turned loose half the SU at 25.75, basis was around 18 off that double-bottom. That was a pretty clearly an intraday triple top at 25.90. You really want to be shedding longs here.

Also, half the BHI, again, bought off that double-bottom weeks ago. This has been a very disappointing position.

It's basically been the overlevered junk leading this rally off the bottom.

Actually, I am thinking this will be a buyable pullback. You see this kind of move frequently on the Monday after expiry.

Builders look good on a pullback... XHB at that 12 support, I think, is where you want to enter. I like the composite ETF chart better than any of the individual charts.

As a rough guide, I'm thinking in terms of a 50% retracement of the whole move since early March. This would be, very roughly, S&P 750/Dow 7250. Some reasonable support there as well.

I think very precise technical levels are nonsense to try to trade by. Stocks in the real world come up a little short, or go over just enough to rape you. I think in terms of scaling in, in 2, 3, 4 trades, then put a stop on the whole basis.

Couple of moves in the last few weeks

2009-04-14T05:57:00.000-07:00

OK, a quick update... the strategy here is short the S&P, long oil, short treasuries on the long end.

Got some oil... full position each in SU and BHI. The former has done fine, the latter is sitting still.

I'd sold gold on that spike above 1000. Bought it back last week as it came down to the bottom of the channel. You could argue it's making a bull flag here. I'd be a buyer close to 850, playing for 10% or so.

Pull out the chart on XLU to any duration you like. Last year, I caught that H&S on the short side, covered it late last year. Now, it's back at resistance, having barely participated in this rally. Bigger resistance at 30.

Nobody's going to bail out ute debt.

Chart work for the weekend

2009-03-22T07:42:00.000-07:00

Oil stuff I've been buying over the last few weeks has played pretty well. I'm thinking we're in a mode where you want to buy weakness in these and trade around a core.

General market and most stocks I see are very overbought. Wouldn’t commit much money in on the long side here. But there's the potential for new Treasury scam this week, so I think it's important to have some long exposure, even if it's token.

Metals and materials charts look good to me right here, but stochastics are uniformly in the overbought range. Some charts I like on a pullback, and the (loose) entry points I'm looking at:

HL, around 1.90.

AWC around 2.75. The whole aluminum group looks pretty good.

TCK, around 4.50.

For a consumer staple, CL around 55. From some work I did a couple of years ago, this stock has the best inverse correlation to the $USD of any S&P component.

On the short side, the whole insurance group has come back to resistance. TWGP on the short side.

Once you get away from the major indices, I think the double ETFs are a total scam and a thorough bitch to trade. That said, take a look at EEV a little closer to that 43-and-change low.

Canada

2009-03-16T19:06:00.001-07:00

Suddenly liking everything Canadian I see.

ECA, CNQ, SU, MUR.

The Canada ETF itself, EWC.

Oil should've fallen off a cliff after the OPEC no-call this weekend.

Watching some OIX components

2009-02-22T17:38:00.000-08:00

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.

A good day to sell some gold

2009-02-20T06:51:00.001-08:00

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.

Scalped some lunch money

2009-02-19T05:55:00.000-08:00

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.

Gut-check time

2009-02-18T05:57:00.000-08:00

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.

TGBBGDDD!

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.

Everything worked today

2009-02-12T15:44:00.001-08:00

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.

Watching the fireworks display yesterday

2009-02-11T06:28:00.000-08:00

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.

Fulcrum

2009-02-10T06:08:00.000-08:00

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.

Didn't get hit on anything

2009-02-07T05:29:00.000-08:00

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.

Triangles, triangles everywhere

2009-01-31T06:34:00.001-08:00

And not a thing to buy.

Just to be contrarian, I have to ask where there are *any* good long-side trades out there? Emphasis on "trade." Everything is a batch of green bananas in this market.

Here's my best idea: UGA, the gasoline ETF. Breakout above that neckline at 23-ish measures to 30. Want to see him a little lower, but that looks like a 1-down/6-up situation.

Physical gold chart looks OK. Give it a chance to pull back to that neckline. I don't care much for any individual miner chart, though. GDX looks kinda toppy, not confirming gold's move. It could pull back 10% easily before any support.

I always start with the indices/ETFs and work down.

Almost all the broad indices and larger industry sectors look like triangles to me. S&P is a good example, lower highs and lower lows. If it breaks down, it targets to around 250, and we're not even remotely oversold here.

On the long side, Dow Transports look like a promising double-bottom around the 2920 level. RSI and Money Flow divergence but nothing else confirms. None of its individual component charts confirm the pattern either.

A couple of its components are truckers. If we look among those, we find maybe 2 out of 10 that look like this. Watching CNW, maybe HTLD around 13. Not very excited about these, though.

Dow Utes, until Wednesday, were the only group up for the year. I see a triangle with higher lows since October. Breakdown would give you a target of about 230. Breakout above that multitop, 390-ish, would be very bullish. Call this level 30.50 on the XLU. UPW about 37.50. SDP the other way.

XLP around 21.40 could be a good entry point. I don't like any of his components except, maybe PEP at 50. Setting up a trend indicator, oscillator and RSI divergence at that level.

Not seeing much on the long side

2009-01-30T05:49:00.000-08:00

Seeing Dow, S&P, Naz just above midline overbought. No compelling reason I can see to be long the indices this particular day. On a very short-term chart, S&P failed resistance at 875. You could make the case for being a bit short based on that, but I'm not playing indices today.

The thing that caught my eye this morning is gold. I see him quoted 921 as I write this. About 916 would be the right neckline of that squint-y H&S pattern. This would target to 1200.

The amazing thing is, this is happening in the context of a rising dollar. I think the dollar strength is an artifact of euro/GBP weakness and gold is acting as a reserve currency . CEO of Barrick talked about the possibility that China would divest its dollar holdings and convert to physical gold. Rumors of a bank holiday in Britain. Rumblings about problems with physical delivery from Comex - the usual stuff that outsiders like me can never really pin down.

Scanning the groups, not seeing anything to excite me on the long side.

Where I sit right now: Over half cash, biggest position is still TBT, DGP, SRS, a little FXP left. DDM on the long side as a balance. Hard to characterize in terms of long/short exposure... perhaps a better way to put it is "long nominal rates and panic."

The last week or so has sure had a melt-downy feel to it, like something big could blow up any second and the world would change forever. This has been disconcerting to watch for a couple of years now.

Did a little selling

2009-01-27T05:35:00.001-08:00

Sold the DIG into the strong open yesterday. In 24.99, out 29.20.

Took down another 100 of the TBT at 45.51.

Updated after the close:

Near the open, another 100 of the TBT got taken out by a stop. In at 36, out 44.75. That leaves me with 500 on. Talk that Bernanke would buy the long end to effect QE. I guess the good thing about it is it means he still has a shred of credibility left.

NXG hit a trailing stop, 1.17, looks like a reversal. 5000, in at 0.65, out at 1.17. I'd pyramided some at 1.06 like I talked about last week, took it out at 1.23 on that big up day. Not a lot of money, but a good trade.

Gold's worth watching here. Above 916, you can squint and make it a reverse H&S out of it that targets to 1200. But a lot of the charts I'm looking at seem to have reversals after their big week last week. I could see it going to the low 800s from here.

Gold pops his trendline

2009-01-24T05:14:00.001-08:00

Of all the stock groups, that seems to be big story of the day. It obliterated the downtrend line that'd been giving it trouble for weeks.

I sell the rips. I'd let my gold positions get up to almost 15% of the account. Nothing, never ever, for any reason, goes above 20% of the account. I sold down 150 of the 1000 DGP.

In my ideal little chartist's world, we'd see a low-volume pullback to that trendline, where I'd put on some more. But, a 20% move has to be taken in this market.

Got hit on 400 DIG, bid 24.99 for it just to be difficult. Pisses me off that I could've paid 24.50 a couple of days before for all I wanted. That wouldn't have gotten hit. He ran all day, got stronger and stronger. If there's a strong open for oil on Monday, I may have to take that position down... can't turn away 10%, especially with these worthless double long/double short instruments.

Took off another hundred of the TBT. 36 handle to 45 handle. Suze Orman's recommendation has me freaked. Plus, you know, WE'RE IN A FUCKING DEPRESSION where, you know, LONG BONDS ARE HISTORICALLY THE SINGLE BEST ASSET CLASS. I'd just feel a lot better taking a little something off the table.

I was really regretting not hitting the SRS bid above 70 last week, so when we had a weak open, I let 200 of my 400 go near the open at 67 and change. Of course, it fell the rest of the day. You have to take every little win you can get.

The only thing I'm really down on here is the DDM I've been using as a partial hedge. Have to decide what to do with that... hate to take a 20% loss, hate even worse to let him turn into a 40% loss.

Now, in reading over this post, it sounds like I'm playing like a cornered animal. Which, when I think about it, is really the case. The job is getting very iffy at this point. If it goes away, this is how I'll have to make my living.

Wrong, but in the right way

2009-01-23T05:57:00.001-08:00

Totally wrong call on my part off the oversold reading. Everything's lower since then.

This week, I felt like the bad news out of Britain (nationalization rumblings) drove the news flow.

Positions are playing OK here.

TBT, put some more on with a 39 handle, took it back off yesterday for 5 sticks, primarily because Suze Frickin' Orman recommended it on her show.

Gold is hanging in there. This morning, futures look like it's going to pop above trendline.

Added some SRS, so I'm up to 400 now with a basis of 59. Wishing I'd hit that bid above 70 so hard it rattled teeth.

Couple of the microcap golds are playing well. NXG popped a multi-top and held it. Time to pyramid a little bit there.

Literally tons of oil charts - NE, DO, BP -look like they're basing. I tried for some DIG at 24.50, but just missed it. Look like they'll be coming back today as well, so being patient with them.

What I did last week

2009-01-17T06:40:00.000-08:00

This is a market where I think you have to be happy with 5% in a position and you have to be willing to take profits instantly.

I got two big things right - the overbought condition and gold's trendline resistance.

On the first thesis, I took an additional 300 DXD with a 54 handle. I took it down into the gap Wednesday at 61 and change.

I had on 300 FXP on with a basis of 32.47. I sold 200 into the gap on Wednesday at 45.25.

So that left me imbalanced a little on the long side. I took 200 SRS at 59.50. Whenever I put out a lowball limit order that gets hit, it always makes me doubt that I really want the position. We'll see... expecting a bunch of retail BKs to lean on CRE. CRE isn't really TARP-able... bankruptcy there isn't systemic, it just transfers ownership to the bondholders.

AGT is playing really well. Just playing for pocket change, took another 20K at .18, flipped him at .24. It doesn't matter how big the trade is, the important thing is to trade it properly and have a winner. He's making a nice little pennant here between .18 and .24.

So, right now, I have 20K of AGT on with a basis of .18. 5000 NXG with a basis of .65, he looks like he's having trouble at that important 1.00 resistance. Chart looks very wedge-y to me. Give him one more chance to crack it from this oversold market, then turn him loose.

Gold generally doesn't excite me. The bear case is, you still have the same issue with that downtrend line around 850. Bull case, well, that's a stretch... if it recovered to 900, you could squint and make that a raggedy H&S with a target of 1100.

Not thrilled by the charts in any of the stronger groups. The one I'm smacking myself over is missing the move in MO off that 15 level, especially when it's sitting right there on my screens.

One thing I am noticing, even though the charts are raggedy, water stocks seem to show outperformance every time we come off a low. But, the big ETF PHO looks like shit because it's so weighted in GE.

MeanGene did a good piece of work on the long-term picture for silver, which everyone should read: http://upstarttrader.blogspot.com/2009/01/silver.html

All 3 indices back to oversold and turning up with oscillator buy signals in that reversal on Thursday... man, that happened quickly.

The S&P held and finished right at the pivot at 850. Therefore, my inclination here is to lean a little long. I'm 55% cash, 25% long, 20% short.

Did some selling

2009-01-09T06:40:00.000-08:00

Stop on SLW got hit at 6.25. In at 2.73, out at 6.25.

Bought part of the position back, 5.68. 2000. Out again on Friday at 6.15. This position is all done.

Held the SU, feeling like a fool, but got 24.01 for him. In at 18, out at 24.01. This position is all done.

Sold all 2000 of the GBG, the weakest of the golds. Just pocket change here, in at .91, out at 1.14.
Still way overbought, but encouraging how the S&P held that 896 level.

Going back to the overbought/oversold game to see if it works. Adding some index shorts, using DXD as a proxy.

Overbought - careful here

2009-01-06T18:32:00.000-08:00

General markets getting pretty overbought here. McClellan summation index, Moving average of A/D line, Williams oscillator as overbought as they’ve been in many weeks.

Very curious to see if the overbought/oversold game starts to work again.

No new buys into conditions like this, even though there are a lot of oil and gas stocks, basic materials, some tech, that looks pretty good.

Commodities generally acting oddly divergent. Oil starts the day strong, finishes weak, feels like a reversal.

In a mode where I want to take some profits, if for no other reason than to throw a virgin into the volcano. I don't have it on in this account, but probably start with some of the SU I have over in the long-term account, put on at 18 in December.

PMs started weak, finished fine. Almost lost SLW to a stop, actually felt kinda stupid hanging in there with it. Gold having trouble with its downtrend line (and its 200) since last June. Probably sell the weakest gold - GBG.

Be aware that I am frequently wrong, and often early even when I'm not. As a matter of general principle, perhaps just because it brings a sense of order and control to my universe to sell at a price of my own choosing.

Long time, no post

2008-12-31T20:14:00.001-08:00

Happy New Year to all two of my readers!

OK, it's hard to work full time, do the trades and think aloud in public. A lot of things kept me from writing... health and work issues.

I look at where I stood back in September and now, all those positions are gone.

Sitting here on the last evening of the year, the trading account is +26% for the year.

It's not really relevant, since I'm only writing about my trading account, but the gains don't come close to balancing out the ass-kicking my value-oriented advisors took on my behalf in a separately-managed account. The next time we sit down together, we are going to have to have a frank discussion about the value of trailing stops for winners and stop-losses for losers.

Let's fast-forward...

I went into October in pretty good shape. I was short basic materials (SMN) and gold (DZZ) over long Dow (DDM).

If you pull out a 1-year chart, gold was a head & shoulders top with the neckline at 850 that should've resolved to about 750. I had one batch on at that right shoulder in July about 950 and another batch when it broke the neckline. I put on a third batch when it pulled back to the neckline in August.

I took off the position when the physical metal hit 750, just a matter of discipline. This was a nice, tidy trade. It did just what it was supposed to do.

I had a lot of SMN on. That was my big, secular bet that the Chinese buyer's strike leading up to the Olympics wasn't going to end. If you looked at a broad range of commodity charts, you could see the world just fell off a cliff starting in early July.

It got up to 1150 shares at one point. Every day in the fall, just doing money management, I'd put what I thought were outlandish ask prices out there to take profits on the position. I'd put 100 out there asking +15, +20%... and get hit.

The problem was, as I took profits, I lost my hedges and started getting my ass kicked by the Dow longs. Should've taken them off at the same time, but I was still playing the overbought/oversold oscillator game that had worked so well for 15 months. It completely broke down in October.

I had two good trades in SDP (short utes) and EWV (short Japan).

If you pull out the utilities index XLU on a 2-year, they did a head & shoulders with a neckline about 36 and a target about 29. I couldn't figure out a thesis for it at the time, thought maybe they were predicting inflation? Of course, now we know it's because they're all debt monkeys and were going to have to pay much higher coupons for their paper. So I put on SDP in August. Same situation - as I took it off, I was left exposed on the long side.

Japan just had an ass-ugly chart. Nikkei broke longstanding support back in July. I sold this one really well into those gaps in October. Looking at it, Nikkei is trying to fill that same gap. Starting to look tasty on the short side right here.

The volatility all through late October and November was insane. At my best point, mid-late October, I was up 34% for the year at $202K, but I wound up taking off all my short-side stuff and giving back 10% of that in about a week in November.

I took a deep breath, got completely back to cash, and started playing for volatility. That worked for a week or so.

Bid on the long side -5%, ask +5; bid on the short side +5%, ask -5%, playing for lunch money. In the depths of November, I'd come in net long and get my ass kicked all over again. The newsflow seemed to be driving things. There wasn't a rational strategy you could play that didn't involve foreknowledge of events.

OK, so, where I am today...

Half cash. $95K

- After losing it once to a stop, long TBT, the double-short long bond. As manipulated as this crap is, owning TBT feels like walking up and slapping a cop. I have about $28K of this on. After yesterday, I'm basically flat.

I have no edge on what the Fed will or won't do. I'm just looking at TBT's inverse, the chart for TLT. Textbook exhaustion gaps. So I am long 800 TBT now at various points in that big floating island over the past couple of weeks.

- Long gold, watching that downtrend line very carefully, though. About $16K. Basis of 15.25 on DGP.

- Long a wee bit of gold microcaps (NXG, AGT). About $5K lottery ticket.

A few years back, I did some research on the gold bubble from '76 - 80. Until the final year, you were far better off owning physical metal than miners. The same has been generally true since 2002, due to extraction costs.

In the 70s, gold ran from 35 to 200, got cut in half to 100, then went parabolic at the end of the decade.

In the last year of its run, the best vehicle was stocks on the Toronto Venture Exchange, Canadian microcaps. It's hard to get good data from this period, but from what I've been able to piece together, the *average* junior miner on the TVE had a gain of 350% over the final year. If you could pick a single stock in the top 10% of performers, you had an average gain of 2800%.

A caveat: whether due to mergers, bankruptcy, whatever, not a single one of those tickers existed as of 2003. You have to be willing to take your profits.

So I decided on a strategy of building a basket of junior miners. They had to be cashflow-positive and have low or no debt. Any rate, I wound up with NXG from 0.65 and AGT from 0.18.

There were just some pretty, pretty setups in this group.

- Speaking of pretty setups, biggest (and best) position is long 4000 SLW from 2.73. I got interested because I'm aware of the difficulty obtaining physical silver. Watch how it behaves around that 8 resistance.

- 300 DDM, about 10K

- 300 FXP, about 10.5K.

Very little point in strategizing

2008-09-14T10:41:00.001-07:00

Sick the last several days... passed a kidney stone yesterday. I never trade or plan a trade when I'm sick.

Best to stand aside here. LEH is the elephant in the room at the open.

Outside of that, what I'm looking at: FXE makes an island. This is one of several indications $USD might be heading lower.

A little snap trade yesterday

2008-09-11T05:58:00.000-07:00

Trying to take advantage of all the intraday volatility plus the fact that LEH looks like a goner.

I got hit, surprisingly, on a lowball bid for some ITM Oct LEH puts, in at 3.30/out at 4.00.

If they're handing out hundred dollar bills at the door, might as well get in line...

Fannie Monday

2008-09-08T18:18:00.000-07:00

My catalyst - Ike entering the GoM - was predicted by the models before the open, so I closed the trade. In, 69.50. Out 75.01.

For a while, I've been watching the $BKX. 75.09 is the 38.02 retracement off the lows of July 15th. It also falls along a one-year trendline. 80 is the bottom of a channel that runs all the way back to 1991, violated in March of this year.

You really have to take a shot at an entry like this. I didn't know an appropriate level to bid for SKF, so I tried and failed at 90. I thought someone might throw theirs away in panic near the open, but it didn't happen.

Noting that RTH cleared a triple-top going back a year. A pullback would be a good spot for a defined-risk entry. I already have a half-position on with a much lower basis, will be looking to add to it.

Got hit, 100 more at 98.16. I arrived at that entry by looking at the 5-day. This would've filled the gap from Friday.

Green banana trade for Ike

2008-09-05T14:27:00.000-07:00

Several things were in my mind last night - this week's hedge fund redemptions, the dollar/yen cross, Hurricane Ike, Bill Gross' bitchslap.

Oil was down near important support at 100. This looked like as good a time as you'd get to put on a defined-risk trade, really, nothing but a bet with a couple of ways to win.

Sitting at 72 yesterday, DIG looked to me like 2 down and 10 up. With 70 as support and every divergence in the book, I bet on a little overshoot. I put out bids at 69.50, 69, 68.50, 68. Got hit on 250 at 69.50 early in the day.

2 PM runs of all 6 models show Ike skimming south Florida and entering the GoM as a Cat 3.

After the close, we get more Nice, Cheap Words from Treasury about a Fannie/Freddie bailout that ought to goose everything at the open on Monday. The question is whether the bounce lasts a month or an hour in the morning.

Of course, there's always that twinge for selling NLY up only 9% when it's going to pop on Monday. Never regret taking a profit, though.

Hasty post covering the last few days

2008-09-04T06:16:00.000-07:00

Haven't written due to vacation and lots of work-related, well, work.

One snap trade off the big nothingburger hurricane Gustav in WNR. In at 8.75, out at 10.76 for 1000.

Lost NLY to a stop. In 13.76, out 15. A little over 9%.

On the long side, considering the strength of the $HGX, liking LEN in this group as close to 10 as possible.

Many pennants in retail. GPS, KSS, even the RTH. EBHI.

Watching the reverse H&S in BA.

On the short side, lots of toppy-looking action in the transports. NSC looks like a nasty double-top with negative divergences.

There's probably more, but I'm forgetting them, whatever they are.

Saturday chart work

2008-08-23T06:26:00.000-07:00

Personal products group showed up again this week. On the long side, I see a couple of nice gap-ups and pennants in AVP and EL.

As a potential short, ENR making a second test of that gap near 85 level.

Builders rallid hard. If you look at it on a closing basis and squint a little, LEN has every positive divergence in the world with that first test of 10.

The week before Labor Day is usually quiet. It's going to be easy to get whipsawed.

Unless there's an announcement on Sunday about a Fannie/Freddie plan, that'll probably weigh on the open.

As tough and vicious a market as I've seen in, well, forever. It's made a believer out of me that you have to take even tiny profits when they're available.

My Moral Hazard play

2008-08-21T05:36:00.000-07:00

I had a lot of people asking me if it was time to buy the common in Fannie/Freddie. I couldn't recommend doing that at any price.

It sounds like the most likely outcome is for Treasury to buy a special class of preferred, wipe out holders of the common and make the bondholders whole.

A long play on this would be NLY, which borrows at margin rates to buy agency paper. There's not much to like in that chart, though. Risk capital only...

Update: got hit, 13.73 for 1000. This is over when the catalyst - F&F resolution - arrives.

Stopped out of DZZ and SMN when they broke their trendline as gold and commodities went on a tear today. 16% gain on the former, 19.2 on the latter.

Should have been more. Fuck, trading this market is a hard dollar.

Lost LULU to a stop. 5% loss.

Got hit... God help me

2008-08-19T08:11:00.000-07:00

Got hit this morning on some LULU at 20.50. Defined-risk trade.

I find myself struggling to try to find things to like

2008-08-18T05:58:00.000-07:00

Which is God's way of saying "Don't do anything."

Strong groups are apparel, retail, paper, med/pharma/biotech. Oil implosion rally in the airlines, travel and transports.

One the long side, I'm ticked at not having more retail on, when I was looking right at it. It just ran away so quickly that I never caught that perfect double-bottom in KSS. I guess I could countenance a shot at LULU a little lower, call it 21.75 just by eyeball. Double-bottom and 4 out of 5 divergences with a huge short interest in a strong group.

I like the flag in IP. Stochastics coming back to oversold here soon, might be a time to look at it. My eye keeps wanting to make something positive out of BZ, but I can't for the life of me say what it is.

On the short side, ENR has a good entry point where it's filled the gap at 85. I'd also take a shot at PCLN on the short side around 115.

Whipsaw week

2008-08-14T17:31:00.001-07:00

One trade today, sold 100 more of the DZZ.

In 24.65, out 34.25. I put an ask way out there today, just to see if it'd get hit and it did.

None of my other limits were hit.

I had figured on a violent commodity bounce soon, but yesterday caught me leaning the wrong way and without my stops moved. This market doesn't seem to want to stay with a thesis for more than a few days. My thinking is, if you have a quick 10% in something, don't screw around; take some profits.

The things I'm watching:

On the short side:

- Here comes FRO, just about where you want to try a short. Puts with any time in them are really expensive, which, of course, is information too.

Long side:

- Watching WTR. 18 is a very important resistance area. Water group has been strong the last couple of weeks.

- Retail/apparel has been strong on the long side the last couple of weeks too. COH is my favorite chart in this group. After its breakout, it settled right back onto that 30 support area. Still overbought right now.

Also in this group, APP would be good above resistance, call it 7.50-ish. I'd be willing to put on a half-position here.

One trade today

2008-08-11T17:19:00.001-07:00

Sold 100 of the 700 DZZ.

Gold looked way oversold, but very sleepy at the open. I'm always wary of, like the old guys say, "being short a dull tape, " especially one that's run as much as this one.

I stuck an ask way out there this morning, never thinking it would get hit. I had no idea gold would fall off a cliff late morning. I always love selling a breakout, though.

In 24.34, out 32.78. In sell mode with the rest of the position at this point.

I put out a lowball bid on COH, never even came close to being hit because retail ran away at the open. Oh well, wait for the next bus to come along.

The things I'm watching right now are:

- FRO on the short side as it comes back to the neckline at 60 on falling volume. Target would be 48.

- $BKX also on the short side as it approaches the 80 level.

As I mentioned last week, the .382 retrace level is about 75, the .50 is 83. There's also resistance from earlier this year at 75. If you pull the chart out to a 15 year view, you find that 80 is the lower channel.

As a vehicle for this, look at SKF around 90 (about 20 sticks lower) with the notion that it could go to the low 80s, which would mean scaling into it.

A belated introduction

2008-08-09T16:46:00.000-07:00

I've been trading almost my entire working life, almost 20 years. I've tried and rejected a number of approaches to reach my present state of thinking.

I started this trading blog to keep myself honest and doing only the very smartest things I can think of, transparently and honestly.

My methods... plain and simple. I reject no technical or fundamental (or, hell, astrological) arrow in my quiver. How you manage your positions is almost as important as what you pick. Dr. Elder's Trading for a Living and his subsequent works have greatly influenced me.

When picking a vehicle in a particular market, I tend to look for

a) divergences in oscillators and trend indicators in
b) stocks with a clear technical pattern in
c) groups that exhibit the same characteristics in
d) a general market likely to support the directional move I anticipate

I believe the most important rule for trading successfully is to limit losses. My elevator pitch on this goes something like this:

- In a bull market, which is 70% of the time, you must perform as well as or better than an unmanaged index. Else, there's no point in trading.

- In the 5 year bull market from 2003 through 2007, the S&P averaged 10.8% annual gains. The Dow was even better, at around 13.2%.

- In order to outperform the unmanaged S&P, you must have 60% winners with an average near 25% gains and limit the remaining 40% losers to an average of 5% or less. This performance would only allow you to have stayed *near* the Dow.

- In 2 decades, I've never encountered a trading philosophy that can consistently produce 60% winners.

- You have to make up any difference by outperforming during the 30% of the time the market is declining.

So, for me, a position risks no more than 1% of the account. 0.5% is even better. I might have a position that's 10% of the account with a 5% stop, for example. 5% stop isn't a hard rule. The tighter it can be, the better, but I'm going to put it somewhere that makes sense with respect to support/resistance.

I assume I will be stopped out fairly regularly. To prosper, I must hit lots and lots of singles with many small, winning trades.

Now, totally violating the Elder principles, specifically, the last year, I've always had a balance of long and short on between 60/40 and 40/60. When the oscillators reach a significant level of oversold, start covering shorts. When they reach a significant level of overbought, start selling longs and adding shorts. It's always a bit of daily gnome's work whittling down positions on one side and building them back on the other.

I usually use the double-long/short index products for this. DDM, DXD, SDS, etc. The way the last year has gone, the sharpest rallies always seemed to be in the things you had to hold your nose and buy the week before, for no discernible technical or fundamental reason.

I refuse to believe that anyone is that good. I think you have to try to steal a little bit of the move with index products, bought and sold by the oscillators and sentiment. And still be willing to take some pain.

About the title... I'm really not a crass person at all. It's merely a statement about avoiding distractions and focusing on making money.

I've been a regular at nearly every important internet financial site for over a decade now. Even among so-called professionals (I'm looking at YOU, RealMoney columnists), the emotionalism - cheerleading, pollyannism, apocalypticism, book-talking, what-have-you - tells you they bring an agenda to the table. I suspect it has cost many of them alpha along the way.

One thing I vow - you will never see me make a FIGJAM post ("Fuck, I'm good, just ask me.") like these assclowns. My own experience is, when I feel all warm and FIGJAMmy inside, it's time to take some money off the table.

At first, when I disagreed with someone, I'd respond with a coldly reasonable, defensible post. I realized quickly this was a waste of time. So now, whenever I think about responding to someone, I evaluate it by asking, "Will engaging in a difference of opinion help me get rich or make me more appealing to hot girls?" The answer is almost always "No."

Applying that more generally to life, I'm a lot happier after I vowed to ignore anyone who processes the world out loud through a prism of politics or religion or other mass delusion. I believe people have the right to hold whatever crazy-ass belief system they want, as long as it stays confined in the comfort and privacy of their own gray matter.

The ground rules here:

- If you trade anything based on anything I write, you're on your own.

- If I do anything with a position, there may be a lag before I write about it. I may not say anything about it at all, especially if it's something thin. I'm so paranoid I have to consider the possibility that there would arise a cottage industry in fading my picks. Realistically, though, I'm trading things with daily volume in the millions, so this won't matter much.

- I'll never write about economics or politics. If you want an econo-pollyanna, go to Kudlow's site. If you want to read about the coming apocalypse, go see Faber or Roubini. All you'll ever get here are buy points, sell points, stops, things I'm looking at.

The big hairy deal on Friday

2008-08-09T09:10:00.000-07:00

is that the Dow and S&P triangles both resolved to the upside.

I watched it, did nothing. The book says to be long it here, though. If you got a little pullback to 11.7, S&P to 1290, it'd be compelling to give it a shot. I have problems buying a market that's been such a whipsaw lately when it's already up 200. Looks like you could get a move to 12.1, 12.2 on the Dow from here. Dow looks like it has a little more room to run than the S&P.

On a decade chart, the Dow 11750 level was very important support going all the way back to the 2000 - 2001 timeframe. This support level was only broken in June. Keep this in mind as a very important long-term pivot.

Other things I'm looking at are -

1 - $USD is in breakout mode, broke above its 200 DMA for the first time in 2 years. My look at the charts says 85 or 90 can't be ruled out. FXE, conversely, broke below support and its 200 DMA. That chart looks absolutely ripe to try to fill its gap, then trade from the short side.

2 - The strongest group of the week was the clothing and accessories index, up 14%.

Ignoring whatever convictions one might have about the state of the US consumer, divergence analysis likes COH here. There's a MACD, Money flow, RSI and Williams oscillator divergence, off a recognizable double-bottom at 25. Reviewing the 3 year chart, the same support level held earlier this year and back in the summer of 2006.

COH is really a clothing supplier, but if you take RTH as a retail proxy, there's a double-bottom in that chart around 85. You'd definitely want to wait for a pullback here. No one has any business buying something up 20% from a base.

APP could be a trendline break in this group.

3 - REITs. Put the Dow Jones US REIT index up on a 3-year weekly and you'll note how it held support running all the way back to the fall of 2005. URE would be the vehicle, but it's extended now. Also, the only divergence with its lows earlier this year is RSI. That's too thin for me to trade, but I find it interesting that several consumer discretionary stocks plus commercial real estate can be viewed as forming bases here.

4 - Dow Water Index up 11.78%. These stocks are a mixed bag; some are utilities (a group I don't like), some are industrial water processing companies, others are tied to housing. I'm watching the trendline break in WTR and SWWC.

I didn't do anything yesterday. I thought about taking down part of the DZZ (double-short gold) position when gold touched the H&S objective of $851 during the day. But looking at the GLD chart, it looks like it gapped down under important support and took out its 200 DMA. With the dollar and euro and general commodity action the last few weeks, I made a decision to let the position run. On Monday I'll tighten the stop on about 15% of the position.

So, my best candidate on the long side is COH on a pullback, as close to 25 as you can get it. Maybe a quick trading position in some DDM if it turns out not to be a headfake.

On the short side, I'm looking at the H&S in FRO. I missed this when it broke through the neckline at 60. I also missed another shot at it on Wednesday when it came back above 58. What you'd like to see on the short side is if it comes back to the neckline on decreasing volume. The downside measures to about 48.

I don't see any need to force anything right here. I'm watching cautiously and leaning toward taking off some of my commodity shorts. I'm weighing the deep oversold levels in gold and materials against their breach of important support and moving averages. You have to expect an oversold bounce - possibly violent - in these at some point. Stops go really tight on these, almost certainly insuring that something gets sold.

Watching, not acting

2008-08-07T18:12:00.000-07:00

S&P and Dow are still in a triangle. Nothing to do here until it resolves itself one way or another.

Starting to watch the $BKX. On a 3-month, it's doing a beautiful bear wedge off the 7/15 lows. The .382 retrace is about 75, the .50 is 83.

Now, pull it out for the ultra-long view and you find that 80 is the lower channel on a chart going back over 15 years.

The fact that charts in all kinds of timeframes concur increases my confidence in the thesis that $BKX around 80 would be a good place to start putting on some SKF.

Of course, just as I was looking at it, the financials melted on this sleepy Thursday afternoon. It may be awhile before it gets there.

Other than watching and thinking, I didn't do a thing today.

Gold's H&S measures to about 851. Low today was in the 855s, so time to reset stops on DZZ. $USD did a breakout today, which aided this position.

Today's action

2008-08-05T17:45:00.001-07:00

Short-term, you want to watch Dow 11.7, S&P 1290. A close above those levels would be very bullish.

S&P 1250 is key on the downside. It's the first higher low, a bull doesn't want to see it get breached. If it does, I'd expect a retest of the July 15th lows.

Got hit for 200 SDP today. Looking at the 10-day hourly, I eyeballed an entry of 62.55, never expected to get hit, but it did during some post-Fed weirdness.

I judge the target for the H&S by the XLU, which I see at about 30-31, Alternately, I eyeball the DJU at about 405.

Things I'm thinking about today

2008-08-04T18:19:00.002-07:00

The things I'm thinking about...

- A big two-year H&S in utilities has just broken its neckline and also a long trendline. SDP is the vehicle. Tried to get some today, but didn't quite come back to what I wanted to pay.

- H&S in gold. Already have DZZ on. The H&S objective here is right around 851 gold.

I'll leave it to the philosophers to explain how both a recessionary and an inflationary vehicle can both be going down at the same time.

- Tried and failed to put on some BBH short today. It made it up to 198.16. I wanted 199.05.

- Support didn't hold in EWJ. Forget that one. EWT still has a chance at 13.

- Left KMB alone even though it got to where I wanted. It looked like the recessionary thesis took hold today. Consumer discretionary/recession stuff ran hard. Except, anomalously, the utes. I can't decide if I like the medical devices, stuff like LMNX.

So, let's see what tomorrow brings for BBH and SDP.

2008-08-02T09:39:00.001-07:00

Just like every Saturday morning... a big pot of coffee and review the markets. The only difference this time is, my inner monologue is going onto virtual paper.

1. Start as I always do, with the general markets, represented by DIA, SPY, QQQQ. All of them look completely meh to me, just hanging out here in the middle of nowhere.

I'd call both SPY and DIA 3 up and 5 down, but slightly oversold by most of the oscillators. Interesting how both failed at the January and March resistance levels.

I see nothing that compels action. The levels to watch are S&P 1200, Dow 10832 for support; 1290 and 11600 for resistance.

For country-specific charts, I still have Japan and Taiwan on the watch list from last week. Watch both EWJ and EWT for island bottoms. Some pretty good positive divergences setting up here.

2. Moving to industry groups. With no clear signal on the general markets, a group signal will have to be especially clear. Where I start is with the BigCharts industry groups, moving from the 1 month to the 1 week performers.

a) One-month groups (industry name and percent change):

DJ US Airlines Index 40.87%
DJ US Paper Index 23.89%
DJ US Forestry & Paper Index 23.89%
DJ US Banks Index 21.41%
DJ US Railroads Index 15.40%
DJ US Biotechnology Index 13.52%
DJ US Industrial Suppliers Index 12.75%
DJ US Recreational Services Index 12.14%
DJ US Recreational Products Index 11.79%
DJ US Durable Household Products In... 11.39%

Airlines (UAUA, LCC, NWA, DAL) all pretty much look the same to me. V-shaped move, presumably on the thesis that oil is coming down hard. These things are trading as a second-order inverse derivative of oil. So why not trade oil instead?

Rails: CP is a laggard in a strong group. NSC is strong, has a gap to fill. I already own a chunk of that in a separately managed account, so I won't be buying any more.

Biotech. This week, you could summarize the move as DNA earnings, IMCL buyout, BIIB blowup. I have no edge on these fundamentally, but what I do see is that BBH made an island top and looks like a short close to 199.

b) One-week groups:

DJ US Paper Index 19.06%
DJ US Forestry & Paper Index 19.06%
DJ US Travel & Tourism Index 9.38%
DJ US Personal Products Index 7.97%
DJ US Banks Index 6.90%
DJ US Reinsurance Index 5.11%
DJ US Specialty Finance Index 4.85%
DJ US Airlines Index 4.55%
DJ US Property & Casualty Insurance... 4.50%
DJ US Personal Goods Index 4.37%

Paper - IP, UFS look like potential reversals to me.

Personal products: There were a lot of big moves in this group last week. REV, AVP, ACV, CL. Most of the charts still look like mush to me. REV looks dangerous, but I won't mess with a 1.20 stock.

AVP looks like a nice gap up and starting a pennant. CL gapped on a nice quarter. One clear thing is that KMB is trying to fill a gap, 59.50 looks like a good short entry here with a stop up around 63.

All the financial groups - banks, reinsurance, P&C insurers - look like dead cat bounces to me. Long or short them, you could look silly in an instant. Why try to pick up nickels on a battlefield?

3. Now we drive it down to specific stocks. I'm not seeing anything that compels action this instant, so all these are for the watch list.

a) On the short side, we have these candidates:

KMB - We want to let this guy try to fill the gap. 59.50 would be a good entry. Stop around 63. That risks a little more than the 5% I like, so we'll have to keep the position size really small. Maybe something like the September 60 puts. I'll look at it when/if it gets there.
BBH - Looking at the hourly for 10 days, which spans this island top, it looks like it wants to try to fill that gap. I'd want to short this guy about the 199 level, stop at 206, risking about 3.5%. 7 up/20 down.
IP, but I'm not really interested in playing for 2 up/4 down.

b) On the long side:

EWJ, EWC could be nice long setups.
Also, in the pharma group, I like how PFE took out the 18.50 resistance area and seems to be wedging back to it on decreasng volume. I'd try to steal some in the 18.30s, 18.40s.
AVP... want to see him try to fill that gap, but he's not that compelling to me.

Here's where we start...

2008-08-01T20:45:00.001-07:00

Here's my baseline and what my sheets look like right now.

Nothing that came before matters. There's only tomorrow. Well, not in this case, since it's Friday night.

Current account value (08/01/2008): $171,339.05
Starting value (01/01/2008): $150,675.55

So that would be about a 13% return this year so far. I have a longstanding tendency to have a big first half then spend the second half of the year giving back a lot of my gains. At least now I'm aware of the tendency and actively guarding against it.

By lot, I have 53 winners and 21 losers so far this year. By symbol, I have 16 winners and 5 losers.

Biggest winners this year were FXP, twice and ABK puts. The biggest loser was CRZO.

My current positions (symbol, number of shares, current dollar value as of today's close)

- SMN (1000), 34720.00. Put this position on in mid-late June between 26 and 28.

- GSK (600), 27804.00. Bought it off the island it made. A lot of the drug charts started looking like they'd bottomed.

- DZZ (700) 19523.00. I started building this position when gold broke his trendline around 950-ish.

- RTH (100) 8725.00. Chart and several constituents look double-bottomy. I only have a little on because I wanted it closer to the 85 level.

- MO (800) 16720.00. All put on at 20.05 on a double-bottom with divergences. Scared the crap out of me yesterday.

- PFE (700) 13020.00. Gapped up above resistance, wedging back.

- WLP (300) 15471.00. Island bottom in this and several of the managed care stocks.