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.
Saturday, August 23, 2008
Thursday, August 21, 2008
My Moral Hazard play
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.
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.
Tuesday, August 19, 2008
Monday, August 18, 2008
I find myself struggling to try to find things to like
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.
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.
Thursday, August 14, 2008
Whipsaw week
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.
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.
Monday, August 11, 2008
One trade today
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.
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.
Saturday, August 9, 2008
A belated introduction
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.
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.
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