Last week the DOW dropped 4%. Plenty painful for bulls. Transports also fell 4% and while not technically broken yet I am operating under the premise that they are broken. The shippers, strong for long, are now looking weak. Airlines suffered big losses. FDX looks like it could fall off a cliff.
That's nothing. The NDX dropped 6.5% last WEEK. All of the mo-mo darlings (GOOG, AAPL, RIMM, etc.) got roughed up. That's important for market psychology. At some point investors will realize that technology will not recession-proof a portfolio. I'm short the cubes and AMZN.
I'm short the RUT via IWM and was a touch disappointed with the relatively quiet 3% drop. But that index still may look the worst of them all.
The dollar continued it's freefall. Yen was up 3%+. All week I liked the look of FXY and all week I passed it by in favor of other opportunities. Gold was UP 3%, crude was flat.
I don't have a clear feel for gold here. Keep thinking that it will correct but it has yet to do so. The fact that the equity markets got pummelled this week and gold was strong is a potentially important development insofar as gold needs to show it can trade on it's own, uncorrelated to equities. That may take some time. It seems extended in the short term. Silver has broken out and seems likely to go to $20/oz., but could also be overextended.
You could make the case for a bounce in equities next week. You could make the case for a crash in equities next week.
Certainly no one believes equities will go down during the holidays. Apparently, it's some sort of eleventh commandment. Seems a bit cute to me. Everything is unravelling but the true pain will be polite enough to wait until after we've all opened our presents?
I remain net short, somewhat aggressively. Going through my extensive watchlist this weekend, I don't see much of anything I would want to go long here. Nor do I see many stocks that I would really want to run out and short. I have only five names that excite me enough to initiate a position. All shorts. I'm probably about 65% of the way through my list of like 600 stocks.
No time to be a hero.
One thing that did leap out at me was European financials. They appear to be rolling over and may offer some opportunities next week as well. Perhaps it's setting in that the toxic paper isn't contained to just every US-based financial. We exported a lot of it too. Seems like widespread acceptance of that fact would provide the dollar a chance to bounce.
We should know more on Sunday night after Asia starts trading.
Saturday, November 10, 2007
Friday, November 9, 2007
Morning Jibberish
Great market to be a bear. We're going lower again this morning.
Funny. On the big bounce off the lows yesterday I took a lot of risk of the table- covering profitable shorts. Smart to control your risk and protect hard "earned" gains. Thought we would get a bounce to retest 1490 on the SPX from below. Thing is, as I laid in the bathtub last night, I started thinking about the likelihood of a total rout in the indices. If we were ever to have some sort of crash-like event (and it's always a low probability) now would be the time.
We could literally fall off the edge of the table. I've had this anxious feeling all week in watching the tape. If the August lows don't hold watch out.
Now set to open lower (and with my decision yesterday afternoon not looking so smart) the question is how aggressive I want to get in chasing it down this morning. Have a list of about fifteen short candidates which I'll start nibbling at depending on pricing and I think I'll short the cubes (QQQQ) for the first time in a long time. That's really an opportunity I've been waiting for. Technology has been the port in the storm for the bulls. Once tech gets going to the downside we are in for some serious weakness. Saw the first signs of that yesterday. The mo-mo stocks were uniformly weak.
Speaking of mo-mo, I shorted AMZN yesterday. Small position affords me the luxury of not caring what it does in the next few sessions unless it approaches my stop price way overhead. Seems very unlikely. Meanwhile, if I'm right it's going to go much, much lower.
Just thinking out loud here but the point is that I would advise you to protect yourself. With the increasing volatility we are apt to swing violently in either direction. Even if we are going lower it likely won't happen all at once. Don't trust a wounded bull. It still has horns. Protect your gains!
But also keep in mind that if on one of these big down days we don't get the predictable afternoon bounce we could easily go down 500 points. Just something to think about.
Funny. On the big bounce off the lows yesterday I took a lot of risk of the table- covering profitable shorts. Smart to control your risk and protect hard "earned" gains. Thought we would get a bounce to retest 1490 on the SPX from below. Thing is, as I laid in the bathtub last night, I started thinking about the likelihood of a total rout in the indices. If we were ever to have some sort of crash-like event (and it's always a low probability) now would be the time.
We could literally fall off the edge of the table. I've had this anxious feeling all week in watching the tape. If the August lows don't hold watch out.
Now set to open lower (and with my decision yesterday afternoon not looking so smart) the question is how aggressive I want to get in chasing it down this morning. Have a list of about fifteen short candidates which I'll start nibbling at depending on pricing and I think I'll short the cubes (QQQQ) for the first time in a long time. That's really an opportunity I've been waiting for. Technology has been the port in the storm for the bulls. Once tech gets going to the downside we are in for some serious weakness. Saw the first signs of that yesterday. The mo-mo stocks were uniformly weak.
Speaking of mo-mo, I shorted AMZN yesterday. Small position affords me the luxury of not caring what it does in the next few sessions unless it approaches my stop price way overhead. Seems very unlikely. Meanwhile, if I'm right it's going to go much, much lower.
Just thinking out loud here but the point is that I would advise you to protect yourself. With the increasing volatility we are apt to swing violently in either direction. Even if we are going lower it likely won't happen all at once. Don't trust a wounded bull. It still has horns. Protect your gains!
But also keep in mind that if on one of these big down days we don't get the predictable afternoon bounce we could easily go down 500 points. Just something to think about.
Wednesday, November 7, 2007
Arrogance
When trading, have a plan. Trade that plan. Don't trade outside of that plan.
In my case, my plan is not to daytrade. Period.
But...when my plan is making me lots of money, over an extended period of time, I think to myself, "Jeez I must be a frickin' genius..."
That's when the trouble starts. Daytrading equals trouble (in my case). Then... to amplify my mistake I'll trade a position that's way, way too big. Just broke another rule.
So when the trade goes against me a touch...I'm gone for an unnecessary loss.
Ofcourse had I held a bit longer the trade would have been wildly profitable. But that's beside the point.
Now written in black pen at the top of my trading notebook page: YOU ARE NOT A DAYTRADER!
In my case, my plan is not to daytrade. Period.
But...when my plan is making me lots of money, over an extended period of time, I think to myself, "Jeez I must be a frickin' genius..."
That's when the trouble starts. Daytrading equals trouble (in my case). Then... to amplify my mistake I'll trade a position that's way, way too big. Just broke another rule.
So when the trade goes against me a touch...I'm gone for an unnecessary loss.
Ofcourse had I held a bit longer the trade would have been wildly profitable. But that's beside the point.
Now written in black pen at the top of my trading notebook page: YOU ARE NOT A DAYTRADER!
Speaking of Gold
My only son had his first birthday this weekend. We had a nice little party here.
He received lots toys and clothes from our friends and family. What did daddy give him? Gold ofcourse.
He's getting richer by the day. Too bad the country in which he lives is becoming a banana republic.
He received lots toys and clothes from our friends and family. What did daddy give him? Gold ofcourse.
He's getting richer by the day. Too bad the country in which he lives is becoming a banana republic.
Hope You Bought Some Gold
Dollar Falls to Record on China's Plans to Diversify Reserves
By Stanley White and Kosuke Goto
Enlarge Image/DetailsNov. 7 (Bloomberg) -- The dollar slid to record lows against the euro and the Canadian dollar on speculation China's plans to diversify its foreign exchange reserves will involve selling U.S. assets.
The currency slumped after Cheng Siwei, vice chairman of China's National People's Congress, told a conference in Beijing the country should improve the structure of its $1.43 trillion of foreign reserves by favoring stronger currencies. It pared losses after he later added that doesn't mean buying more euros. The dollar also slumped to a 26-year low against the pound and a 23-year low against the Australian dollar.
``Cheng Siwei, a China adviser, apparently said China should diversify into strong currencies,'' said Lee Wai Tuck, a currency strategist at Forecast Singapore Ltd. ``This is one of the comments that triggered the buying of the euro and selling of the dollar.''
The dollar slumped to $1.4666 per euro, the lowest since the 13-nation currency debuted in January 1999, before trading at $1.4615 at 11:31 a.m. in Tokyo from $1.4557 late yesterday. It fell to $1.0975 per Canadian dollar, the lowest since Canada's currency was floated in 1950.
Against the pound, the dollar declined to $2.0947, the lowest since May 1981. The currency slid against the Australian dollar to 93.75 U.S. cents, the lowest since April 1984 from 92.87 U.S. cents. The dollar may fall to $1.4700 per euro today, Lee forecast.
China Investment Corp., which manages the nation's $200 billion sovereign wealth fund, said last month it may get more of the nation's reserves to invest to improve returns.
By Stanley White and Kosuke Goto
Enlarge Image/DetailsNov. 7 (Bloomberg) -- The dollar slid to record lows against the euro and the Canadian dollar on speculation China's plans to diversify its foreign exchange reserves will involve selling U.S. assets.
The currency slumped after Cheng Siwei, vice chairman of China's National People's Congress, told a conference in Beijing the country should improve the structure of its $1.43 trillion of foreign reserves by favoring stronger currencies. It pared losses after he later added that doesn't mean buying more euros. The dollar also slumped to a 26-year low against the pound and a 23-year low against the Australian dollar.
``Cheng Siwei, a China adviser, apparently said China should diversify into strong currencies,'' said Lee Wai Tuck, a currency strategist at Forecast Singapore Ltd. ``This is one of the comments that triggered the buying of the euro and selling of the dollar.''
The dollar slumped to $1.4666 per euro, the lowest since the 13-nation currency debuted in January 1999, before trading at $1.4615 at 11:31 a.m. in Tokyo from $1.4557 late yesterday. It fell to $1.0975 per Canadian dollar, the lowest since Canada's currency was floated in 1950.
Against the pound, the dollar declined to $2.0947, the lowest since May 1981. The currency slid against the Australian dollar to 93.75 U.S. cents, the lowest since April 1984 from 92.87 U.S. cents. The dollar may fall to $1.4700 per euro today, Lee forecast.
China Investment Corp., which manages the nation's $200 billion sovereign wealth fund, said last month it may get more of the nation's reserves to invest to improve returns.
Sunday, November 4, 2007
Bernanke "Is A Nut!"
My aim here is not so much to link EVERYTHING Jim Rogers says and mentally masturbate over it but more to express my own viewpoint through the words of others. Again, Rogers hits the nail on the head. Here is an interview from Bloomberg.
Highlights:
Rogers on Bernanke: "This man is a nut!"
On the secular bull market in commodities: "3rd or 4th inning..."
On gold: "I know I'll buy more."
On the Federal Reserve: "If I were Bernanke I would abolish the Fed and resign. It would be the best thing for the country."
Could not have said it better myself.
Highlights:
Rogers on Bernanke: "This man is a nut!"
On the secular bull market in commodities: "3rd or 4th inning..."
On gold: "I know I'll buy more."
On the Federal Reserve: "If I were Bernanke I would abolish the Fed and resign. It would be the best thing for the country."
Could not have said it better myself.
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