First off, we need to boast a bit( ;-)). We made nice money the previous week and caught the jump out of the window on monday-wednesday and the escalator up on thursday. Friday, we sat back and enjoyed a good week. We are actually pinching ourselves that we were so dead on.
As for our trades, we used sds, SSRI, GG, (L) and short DTO, MS as our trades. Our course, we bought and sold some UNG to reduce our cost basis (though we are still in the red on that ;-().
Anyways, more important stuff, our charts which helped us catch the action and our reasons for doing it. The chart we used is of the SPY above. We had called for the bounce from july 15 to not go all the way to the 200d/upper trendline because there was this staircase like trendline, which every tom/dick/harry was watching. When such artifacts emerge, you betcha the market would love to destroy it. That is exactly what happened. We hit the bottom of the channel and bounced. We did not expect the violence of the bounce ofcourse and this explains why we sat out on friday. Since after thursday's huge rally, we closed our longs and only had a few shorts on.
About what's next - Everyone will be watching the green line which is the first descending trendline resistance. As of now, we are betting that we are going to break that line to the upside. Our reasons are below:-
1) That line coincides with 20d, 50d and a bevy of resistance lines, we are going to pierce it
2) The momentum indicators are showing a bullish divergence from an oversold condition, as they should given the viciousness of the bounce.
3) More importantly, longer term this market is going down. There are no two ways about it. This is not the bottom in our opinion. So, if our experience with reading charts suggests anything, we expect to see a period of long sustained decline in the indices, not a sudden -800 pt decline. This decline will be much larger and will take the dow possibly into the 9000 and beyond area. Now the reason, why the green line has to be broken is because the line is too steep. For such a sustained move to occur, the ideal pace would be the blue line on top. Wicked, huh?
4) There are of course, psychological indicators, e.g. news on TV etc, Markets don't crash after the front page shows a lady clutching her head in agony.
What next?- We expect the market to hit the 200d in this iteration and even pierce and stay above it for a little while. We absolutely need to pierce it, to get people to change their bearish stance. It is essential for the next leg down.
How long till we hit it? - Our guess, is about 3-4 weeks, until the stochs becomes overbought. The 3-day RSI is overbought. We are also guessing, this up move is going to be choppy and grinding like a staircase, not the elevator rides of the last week. Since, this is going to be choppy it will be time consuming. It will be choppy, suggesting we are running in the direction opposite to the major trend. E.g. look at the down trends from oct, 07 to jan 08 and other downtrends. They have been swift, the uptrends have trended to grind their way upwards, suggesting further downside. We are expecting similar grinding action in the coming weeks.
If it not choppy, we will have to redraw our charts and look at them in a different light, possibly a bullish light.
33 comments:
Clarke,
Based on what I am reading this weekend the next 6 months is bullish...1400 S&P.
A pullback is in the cards maybe to 1225?
This has been my best week ever and I owe it all to stocktock and
caldaroew.spaces.live.com
stocktock guy was totally wrong. his wave labels are wrong imo.
1400 on the S&P is too rich imo.
I will be happy seeing 1330.
the guy on caldorew also got it wrong on the oil correction. I will rather wait for the market to tell me.
He says, he is long term bullish. If we break my blue line, I will reconsider.
Here is a link on whether this is a bottom.
Link on is this the bottom
Rather than whine, as another blog does, about all these interventions into the market, I'm going to play the hand the market, and the interventions into the market, deals me. Is it a bottom? Sort of feels like it for a while, these experts suggest.
I agree hil, cribbing about a market makes one no money. It does feel like a bottom at least for a month or so. This will be a period where the market will rally on bad news, saying it is already priced in. I am fine with that. The only problem I have is I think we had the majority of the move in 2 days, with the 1000 pt burst. the next 500 dow points imo will be a real struggle. Lets see.
It's not just there opinions..it is everyone that gives there opinion/analysis of the markets...
Are there any ETF's that short the dollar? And which ETF's do you recommend buy Gold?
UDN shorts the dollar and GLD tracks gold. I was in UDN a week back, but closed my position when the dollar hit 77.6. I believe there is alot of support around 76-77 region, vice versa for gold.
How is it going folks. My short DTO is reaping me huge benefits. Looking to cover today/tomorrow/ this week/ trailed stop.
The market today is acting like a couple of people whose careers were on the ropes so they got drunk, partied hard for several days, got married in Vegas and sobered up in a cheap motel in a small town in the middle of nowhere, looked at each other and said, "What have we done?" We aren't so sure we want to go through with this new partnership." So they drive back into Vegas and check into a quickie divorce and they don't like that solution either. They go to a cafe to get a bite to eat and the price of eggs and bacon has gone way up and they notice that the price of gasoline across the street is way up. They ask the waitress why and she says, "Don't you watch CNBC? The price of oil is up over $107 this morning."
hahaha nice one! I knew this was coming. I even think will make a run for 125 or 130. I hope Mimi is safe though and got out of DTO, I am still short DTO, riding it till it takes me out. My target on DTO is around 33. Got in at 45 and change.
I really these turning points in the market, when it doesn't know, which way to turn, it always makes me big moolah.
I got out with a loss...DANG!
I need to stick with airlines..they make me money.
My MOO was doing fair so I sold it and bought some other stuff that was doing terrible. We'll know in a couple of days if that was smart or stupid. Everything else I had was doing awful. My portfolio is like a yo-yo. But I'm not worried. In email I got a message today from Sister Eveline. The header says: "Donation from Sister Eveline." She's a religious person, right? So it must be true. And another email from the UK claim office says I have won. Alright. And another email says they can sell my timeshare, if I only had a timeshare to sell. If I keep reading, maybe another email will give me a timeshare that I can sell through that other email service. And another email that came in today is going to help me get a government grant. Why not? They are giving about 700 billion of them to Wall Street, so why not me? And another email today tells me I can earn a higher salary with Google. Yippee. The first email in my Spam box says, "Want to win $5,000?" Who doesn't? So why worry about a bad day in the market. All these people are going to give me loads of money.
mimi, let me take a guess.You are an air hostess right?
yea why not? who doesn't want free money hil. BTW, I am stalking SGG(sugar etf). The only problem is it is a low volume affair and needs loads of patience. I am sure hil knows what I am talking about.
I think the market will bounce shortly, have your fingers on the trigger, 1300 here we come. SSO,DDM but I'd stay away from the financials.
Low volume ETFs. Here's the scoop.
1. Don't use market orders. Only use limit orders.
2. Try very lowball buy orders at the open. Sometimes they fill. I've had a few.
3. Try very highball sell orders at the open. Sometimes they fill. Not much luck for me there, except one minor strike.
4. Watch the bid/ask, not just the last tick. Check the bid/ask before the end of the day and the NAV before you plot your strategy for the next day, because the bid/ask and NAV may be a dollar or more separated from the last tick, up or down.
5. Using stops can be precarious if you base them on the last tick, since the bid/ask can run for a dollar or more without a buyer or seller getting together, so if you use stops, you'll probably need to base them on the "bid" and not carry them overnight. Reset them in the morning. I don't use them on low-volume ETFs.
6. Many of these ETFs trade an extra 15 minutes extended trading and not during premarket or afterhours.
Instead of a sugar ETF, look at DBA.
Hope that helps.
Will definitely use that strategy hil. I need to look at the other components of DBA. I think sugar is prime for a correction and usually follows oil with a lag. I am not sure about the other softs in DBA.
To illustrate my previous points about using limit orders on low volume ETFs, not market orders, and setting your attempted buys at a low price and sells at a high price, this is wise due to the extreme volatility of trading with these ETFs. At the open this morning I was following UCC. In the first 5 minutes of trading UCC suddenly went from the previous day's close of $37.85 downward to $36.13 as someone got some really cheap shares and within seconds another order filled for $38.94. That's a 7.5% swing in five or ten seconds. I had a sell order in for $38.99, hoping to take some profits on some shares of UCC I bought a couple of days ago. Darn. Missed by 5 cents.
And on the danger of stops, that opening drop in price might have been somebody on level 2 taking out someone's stop. Something similar might have happened on UGE, another of my holdings. It closed yesterday at $58.41 and opened at $57.15, probably someone's pocket getting picked with their stop being taken out due to the very low volume. The bid ask, as I type, is now $59.53/$60.04. Whomever bought those shares at $57.15 can now sell them for over 4% profit in a less than 15 minute trade.
There is an art to trading these low volume ETFs and I enjoy trading them. Hope my suggestions help, at least, someone avoid getting your pocket picked.
RIMM may be on sale cheap tomorrow morning.
What should you buy when/if the "rescue" package passes and the rally is over? Three experts on CNBC said to buy things that people in the USA are going to have to buy, even if the economy is sluggish -- consumer staples, food, health care, etc. One mentioned infrastructure. Another mentioned alternative energy, but more than one agreed on the basics of staples and health. For those I would suggest UGE and RXL. They aren't exciting, but in times like these, you might be better off owning JNJ, WMT, PG, KO, PEP, CL, BUD, MRK and MO.
UCC has some good holdings too like WMT, MCD, TGT, but the tougher the economy may get, other aspects of it like DIS may hurt as people still visit Wal-Mart but skip their vacation to Disneyworld.
Sound reasonable? What is your strategy? If the rescue bill passes and we get a good rally, I play to sell the rally hard and possibly follow the above strategy, although I am already partially there with UGE and UCC, plus LTL and LDK would sort of fit in there too.
I will probably buy some gold and energy and some index SSO. Not too heavy buying, since this rally is thus far on light volume.
We gonna get a gov't deal or is politics gonna get in the way and we get a market crash? I've refrained from buying the last two days and have sold off 500 shares. I'll continue to sell off as I'm able in case this thing goes South.
Mimi, you said that patience was probably needed in trading low-volume ETFs. Yep. LTL on Friday is an example. Check it out. Zero volume. That's right. No shares traded all day, so I didn't lose or gain any money on my largest holding. The bid/ask went as much as $1.50 below the previous day's price and at the close it was almost even money to the previous day's closing price, but nobody traded shares. It was typical of low volume days everywhere as people watched and waited. Now Monday morning will probably be different -- either absolute panic and terror as everyone heads to the exits, which will bring "gloom, despair, depression, agony," or money flowing in from the sidelines giving us a brief rally, during which I will "sell, sell, sell, sell, sell."
Someone on Snot's board suggested FRED as an uptrending chart. Check it out, Clarke. Whatcha think? Also, FDO?
No individual stocks, until the smoke clears. Way to hazy, I bought small amount of DDM on the lower trendline touch. When it was down 500. Still holding on. Lets see how much loss I will have to take.
The politicians are fiddling (trying to get votes and political advantage) while Rome burns (you don't need me to fill that one in; you didn't need me to fill the first one in). The Democrats blame it all on the failed policies of the Republicans, even though the problem started during the Clinton administration when sub-prime loans to anyone who was breathing were the in thing and even though they participated in the financial policies all the way up to the last few days. The Republicans blame the Democrats for sticking things like ACORN into the earlier draft and for this whole package being big government, even though the general idea of it all came from the Republican administration, aka Paulson and Uncle Ben.
I wonder why Congress has as bad or worse of an approval rating as Bush?
Yes, things looks bad even on the political front. I don't mind not passing the bill, especially people like Ron Paul have my utmost admiration. What I hate is they dilly dally for 10 days, and say they have a vote etc. and then they do it just before a jewish holiday leaving the markets in limbo for a longer time.
Sometimes it seems congress is another version of wall st. What do they care? there life is now guaranteed to be luxurious as a result of being elected. As for me, I am still sticking to DDM. I may begin shorting a few retailers soon.
There are some incredibly cheap equities out there when you look at fundamentals, P/E, etc. But not many buyers. One year or two years from now, we will look back and say, "That day was the day to buy." "That day" might have been yesterday. It might be a day next week or next month. That is what no one knows. What historic times and we are living through them. I wish I didn't have bigger fish to fry, so that I could study the situation more carefully, but whatever. I would probably only make worse mistakes. I've seen some strange things the last few days. The DOW was up over 4% and DDM, the DOW ultra was up only 3%. Go figure. I've see the bid on some things go higher than the ask. Yeah buddy. I watched T go over 4% when the DOW was up over 250 points and then when the DOW surged to almost 500 points T dropped to a little below 1%. Rats. T isn't a bank. I watched FDO, which has had an uptrending chart and it is a place where po folks can shop, and on this huge up day, it dropped 6%. I'm just sitting tight and holding for now and hoping that after the Jewish holiday Congress gives us a big rally.
Yes, I may need to quit my DDM tomorrow. I don't like the volume on this rally. If they pass the bill, there could surely be a huge rally, with nice volume.
But either ways, 1 year from now - I think equities will be cheaper than what they are today. This bear market has atleast 2 more years imo.
very sad action in DDM today.
If this bill gets passed and if it gives us a rally that lasts at least a week to ten days and if equities are comparatively cheap right now in comparison -- that is a lots of "ifs" -- then two good equity dividend plays are T and VZ. Check Yahoo Finance or other sources for the ex-dividend date and the nice dividend yield and your own research otherwise, of course. These aren't fly-by-night companies. Probably everyone reading this pays money to one or the other of them on a monthly basis. According to Yahoo finance, it is Oct. 8th for ex-dividend date for both of them and both are around 6%, so 1/4 times 6%, I believe, is what the dividend will be -- quarterly -- so 1.5%. But again, do your own research and beware of advice from some idiot posting on a blog.
Sure hil, will keep a lookout for that one. I think we will get a rally needless for a day or two, irrespective of the congress passing.
This market is very oversold right now. But once the rally is done, it can go lower.
I'm pretty pessimistic right now. The economy is freezing up big time. Even with the bailout, there may not be a rally. We went out to eat tonight at what is usually a very crowded restaurant -- catfish -- and it was 2/3rds empty. We then went to Wal-Mart and I've never seen it so empty. We couldn't find what we wanted so we went to Home Depo. More employees in the store than customers I think. We passed by one strip mall and half the stores were empty. The only business that had a full slate of customers was the funeral home where we also paid our respects this evening. I guess that is one of the few recession proof businesses.
yes, I am in NY and I can feel the change definitely. It is sad that the govt is still lying to us, saying the GDP is still positive and over 1%. Who knows? maybe some places are booming. I wonder where
On the stock front - there is light at the end of the tunnel. The last legs of the bull market are being taken out (the commodities/energy). This would mean there is no where to hide. This should also mean, we are only a week or so from a multimonth bottom. My estimate is around oct 15?
Post a Comment