Sunday, November 30, 2008

The Week After Turkey

Hope everyone had a great thanksgiving holiday with their family. I was in PA a majority of the week and therefore did little to no trading, a perk to working for yourself. This coming week is sure to be exciting following five days of positive closings for the markets. Here are my support and resistance levels for the coming week on the S&P. I'm ready to get back into thing much more this week and will be looking for short term shorting opportunities. See everyone tomorrow morning.

Thursday, November 20, 2008

Below Bear Market Lows of 2002-2003

I think this graph say's it all for now. I'll be back tomorrow for with a much more in depth post and commentary. I just want to see how we end out the week.

Tuesday, November 18, 2008

The Re-Re-Re Test of October Lows Successful

Okay I admit, I thought we were going to sell of going into the close today. But, I guess its better to be ready for a sell-off than a rally in this market. Nevertheless, I'm glad I didn't have any big index positions today with all the movement. The chart of the S&P clearly shows that we re-re-tested the lows of October again today. While this is a very good sign for the bullz, I still don't feel like everyone is ready for a sustained rally. If we can hold this level throughout the week then I would feel more comfortable going long next week and looking for a more sustained rally.

Member's know that one of my current FOREX positions is short the CHF which is way over-bought with the dollar. Surprisingly, this pair didn't adjust the last time the dollar weakened, so I have tight stops just in case it rallies.
I am starting to get a large position in UDN which is a dollar bearish fund from DB. Just another way these ETF's are helping us play in all the markets.
If we do start to see a rally, here are some stocks that are looking like nice setups. DRI was a former short that has been beaten down badly. I wouldn't expect this rally much (maybe to around $21), but enough to make a profit with minimal risk.
Still confident about my SMH long position to the highlighted level over the next month or so. Bollinger bands also suggest a push higher soon.
XEC is a great energy long energy play when oil turns around. Its sitting on Fib suport and has followed oil nearly in lock-step since its highs.
Here is very interesting long idea. Berkshire H. sported a very clean hammer formation today and is nearly $25,000 from its 200-day moving average. Remeber that Warren B. has never split this stock, but for those of you who have the money, now would be a great time to think about buying into Berkshire.
I hope tomorrow continues the rally we had a the close. I'm ready for the wave of buying to return short term so that we can get back to levels where we can short again. Trust me, even if we put together a nice month long rally, this bear market is not nearly over yet!

Make It or Break It Point

So, not much going on today for the markets, which is kinda of relaxing and allows all of us to catch up on work (for me that's looking at more charts). Just wanted to point out that the SPX is sitting right on support. From here its either up and away or down the drain. Be careful to choose a direction and keep the stops tight if you jump in...

Monday, November 17, 2008

Same Sad Story, Mid-Day Rally Erased At Close

I guess I was right to be skeptical of the rally this afternoon. After all, the mantra lately has been to rally mid-day just to sell off hard at the close, and today was no exception to the rule. While we did sell off hard at the close, we still didn't break below the October low support level on the graph. Maybe tomorrow we will break? Maybe we will rally higher? Really, I don't know which way were are going and still am reluctant to take an index position. Please take note of the support and resistance levels on the S&P. Also, the 1,000 level serves as a very important psychological level.

As far as currencies, the GBP sure showed some strength after my post today, increasing nearly 100 pips in a matter of minutes. I still think this pair is over-sold and due for a nice counter trend rally here soon. What we would need to see is strength in the equity markets for this to really be a winner. So, until we get clear direction, I would have very tight stops on this going forward.

As I've been saying for a while; the dollar will weaken eventually and all these commodities are too over-sold in the short term. Since I like to explore new ways to play the commodities and forex markets, I think that the XME is a great way to play miners and metals. I don't have a position in this right now but any weakness tomorrow will make me seriously consider taking a long position with a target around $35.

Continuing on the dollar weakness play, OIH is forming a very nice base on its Fib retracement and fan support levels. Moreover, the volume has been better than usual and the three lower shadows are forming a rough inverted head-and-shoulders pattern. Neckline confirmation would be around $100. I currently have a long position in OIH (JAN Calls) which I've had for a while. If oil keeps falling of a cliff this week, I will more than likely add to this position.

Seems like I say this all the time, but I hope everyone survived the volatility today. Just think, one day we will look back on this and think how crazy the times were. I'm actually getting bored with these 500+ daily swings. Where are the days when the Dow's range was less than 100?

NASDAQ Sitting on Fib Support

It looks like the Nasdaq is sitting nicely on its Fib support level after the lows this morning. Notice how we have been between these two Fib support and resistance levels for the last month and a half. If we can hold these lows and see some good volume, it would make a great case to start going long. A break below and well....disaster.

Futures Point To Lower Open...Dollar Weakens

Good Morning! I hope everyone caught my massive post re-capping last week. If you didn't its below and you really can't miss it. Pre-market futures are pointing to a lower open this morning as the bearz still remain concerned about a deep recession (big surprise right). Oil continues to slide as of this writing while the dollar is showing signs of weakening up. I have been long the GBP/USD since the lows on Thursday, which is now posting a nice bullish engulfing pattern following a hammer two days ago. I think that this pair is the most over-sold of all of them (though the USD/CHF, and USD/CAD are both over-bought too). Even if this goes lower, I will just add to my long term position on this pair.

Whatever today brings, I'm sure it will be exciting. Again just so everyone is clear, I currently have no index positions (either long or short). I am waiting for a clear direction before I jump back into these. Trust me, there will be plenty of money to make once we know the new direction. Happy Trading!

Sunday, November 16, 2008

Value Investing - Risk/Reward Starting To Look Good

I Just wanted to say a word about value investing at these levels since I have been getting so many emails and questions about it. True to my form, I have never really been a fan of value investing for various reasons. Mainly, I believe more in day to day market emotion than I do in the ability of people to buy based on valuations every single day.

Now, having said that, if we start to see the market tank next week, I think it's time to really start slowly buying up stocks for the long term. I am not say that this is the time to throw all your money in, but you should start to "nibble" slowly IF we go lower. Let's face it, you really can't make money shorting a stock, because the most you can make is 100% of it goes to zero. However, if you have a $5 stock that used to be at say $30, you could make nearly 200% over a couple months if it goes up to $15. Regardless of whether you think the bottom is in (which I don't) or not, its time to start thinking long term on some stocks...

Saturday, November 15, 2008

A Wild Ending To The Week - Where Do We Go From Here?

This week certainly lived up to its expectations of volatility. I still am amazed at how fast things can go up and down in this market day after day. Therefore, I want to try and explain the reasoning I have behind all the volatility.

Most people know that stocks are 70% driven by institutional buying and selling, whether that's hedge funds, mutual funds, etc. As such, these large institutions have the same exact charts to look at as we do. So, they are placing the same type of automatic stop orders and buy orders around the same prices that we do (just about anyway).

Now, when the markets hit these levels (either rallying up or sinking down) all these orders get triggered. The problem is that most of the orders coming in are not "limit" orders meaning that they wont take just any old price. Instead, the orders are "stop" orders which means that once they are triggered they become market orders and are filled at the next available price (bid or ask). So, when all these stops get triggered at once, they compound on each other and drive the market up or down very fast. This is one of the main reasons (not the only of course) we have been seeing such huge volatility.

If you take a look at the DOW over the last five days, you can see that there have been some huge swings and people have both made and lost fortunes just in these five days. Thursday and Friday set in a fairly important line of support shown below. A break below this would spell disaster for the bullz. However, it also serves as a support line being as its the mid-point of the bullish engulfing pattern from Thursday. Either way, it should move very quickly next week.

On the S&P we continue to be caught between support and resistance. I closed out of my SSO calls after the huge rally yesterday at very healthy profits and intend to stay out of any index ETF's until we either break below or rally above these lines.

Oil is still getting hammered on demand concerns, but it's getting a little ridiculous. Think back to the oil "boom" (if you even want to call it that) and how everyone was saying that oil was going to $200 a barrel. Well here we are all the way down below $60 and now everyone is saying that it will be at $50 or even $40 a barrel. Well, I think that its all a bunch of non-sense. I think in the short run (a couple weeks or months), oil will be back around $80 or higher.

The Morgan S. commodity index shows just how much things have fallen. These trends are not realistic and will break sooner than later at these levels. If a base is forming here, it could head back up to 600 over the next month or so. A break below would take it around 300 or lower.

One way to play the commodities is through the DBA powershares. Notice how there is a nice inverted head-and-shoulders pattern forming. If this breaks above the neckline around $27.50, it would be a great buying signal.

ADM still remains my favorite short right now. It continues to run up but has yet to close above the recent highs. Moreover, all the long upper shadows tell me that this stock is rejecting higher prices. My stop is above the highs from today and I'm looking for this to break its short term trendline and head to $20 or so. Also, in the context of the overall market, this stock has risen when the market falls and if we are in deed in for a rally anytime soon, this should be one of the first to fall.

CMI is shaping up to be a good long candidate. It's sitting nicely on Fib retracement levels and is way over-sold (for good reasons in this economy). Again, if we do get a nice rally, then CMI could enjoy a quick run to $30 before resuming the downtrend (which I think is the LT fate of this stock).

Finally, my CAL short call last week was great. I'm just upset that I sold out too early and left tons of money on the table. I bought puts the day of the blue oval and sold out at a nice profit when the stock was south of $15. Wish I could have held on longer...

Okay, that was an amazingly long post today. I hope next week is a little more clam but I'm sure it wont be. I hope everyone has a great weekend!

Friday, November 14, 2008

Did That Just Happen All In One Day?

If you blinked once you missed the market rally off its deep lows of the day into positive territory. And, if you blinked twice you missed the market give up all of that gain in the last hour of trading. I think we all need just a couple of hours (or days for some) to digest what just happened here. I'll be back later tonight with a big re-cap post.

Goldman Runs The World And Looks Cheap

Let's face facts on this company. As a former banker, I know first hand that Goldman Sachs runs Wall Street. It always has and it looks like it always will. At around $65 a share its basically stealing money. Just think, Uncle Warren B. invested Billions (that's with a "B") in Goldman around $120. Do you think he knows something we don't? I'm buying in here for the long term. Again this is not a short term trade. I am a shareholder of this company now.

Freddie Mac Reports Record Loss, Futures Decline

Good Morning! I'm hoping today won't be as exciting as yesterday was because I think we all need a little break, even if it's just for a day or two. Freddie Mac came out with horrible earnings and who didn't see that one coming right? Also, JCPenny's profit fell 52% which is horrible news for the retail sector considering they are one of the largest and oldest companies around.

The market put together a very nice bounce and re-test of the October lows yesterday. In addition, all the charts showed another huge bullish engulfing pattern (see chart below). From here I hope we just keep moving up, as I am getting whipsaw from all these daily moves. 9,500 should be a safe up-side target over the next couple of weeks.

As far as the GBP long play I have, I'm still holding on tight. It's just gotten creamed over the last month or so and frankly its due for at least a modest bounce. The hammer pattern yesterday I think set in the short term bottom and I'm looking for this to make its way back to 1.53 at the very least. Granted we will also probably need some upside moves in the equity markets to help, but if it goes lower I will just add to my position.

Keep a steady head out there and tighten those stops up. In this type of market you could make or lose thousands in a couple hours. So, if your not able to watch the movements, please make sure you have adequate stops on your positions. Happy Trading!

Thursday, November 13, 2008

Did We Successfully Re-Test The Lows?

Around 1pm the markets sold off hard, down to their 2008 lows. But since, it has had great volume and recovered a majority of its losses today. If we close up, this could be a great chance to buy up stocks like wild people. I hope all my members bought OIH today, when I called it at the exact lows of the day (the blue oval)! That is just plain, dumb luck to have my notices go out at the exact lows, but still a great call nevertheless.

Going Long GBP/USD

Okay, It's time to start shorting the dollar again. These straight shoots in one direction or the other is just ridiculous. In addition, there is a mantra in the market that the sky is falling. To me this has always meant that things are going to turn around sooner than later. Even if GBP goes lower over the next couple of days, I'll still going to hold on and will probably increase my position. As far as shorting the market, I still have puts and shorts which I have tightened up stops on even more than I did this morning.

Could Today Be The Break Point?

Good Morning! Pre-Market futures are mixed this morning after Wal-Mart Cut its profit forecasts, jobless claims came in higher than expected, and the trade gap narrowed. Overall, I think today will be either one of two things after we open. We could sell off hard and fast then see a very modest rally begin to form and stabilize. Or, we could see a small rally then keep going down because there is really no support near by after we break the lows from October. Again, its important to tighten up your stops and let these winners run their course. Happy Trading!

Wednesday, November 12, 2008

Futures Down on Recession Concerns

Good Morning! Pre-market futures are down considerably this morning on lowered forecasts from over-seas. Primarily, the English government sees considerable downside risk and lowered GDP growth. This has hurt the GBP which is down almost 200+ pips this morning. Even though I am bullish on the GBP, I'm glad I didn't buy in yet (or advise members to do so). We are going to get much better prices later on with the dollar. I think it's wise to tighten up stops after the open. Who knows what can happen and when we will rally, so lock in profits now on this weakness. I'll be at a conference this afternoon in DC, so I will have to save any comments until tomorrow. Happy Trading!

Tuesday, November 11, 2008

Just Pick A Direction Already

Open down, rally up, close down...I just wish this market would let the bullz or bearz win the tug-of-war. If you look at the chart below, the S&P has been trading between 1,000 and 850 for nearly a month now. And, it has had wild swings between these levels the whole time. I have both LONGs and SHORTs in my portfolio just waiting for the big break in any direction. Like I said on Monday, I hope this week shows us the new short term direction (either bullish or bearish).

Oil and Gold continue to get hammered but are showing signs of firming up a bit. The commodity index has just been crushed over the last couple of months. Still, I think we should wait until we see a clearer road (though you could start selectively buying some of these while keeping cash in case you can get better prices later). If we see a strong rally, getting to the 600 level should be no problem at all.

The DBC Tracking Fund is a good LONG play right now. I bought calls today as I think this will head back up to the $30 level over the next couple of months.

The following are a couple short ideas that still look attractive. Many have had very nice runs up over the last couple of weeks and are due for some short term corrections. If the markets tank these will surely be great trades.

The GBP looks very interesting to me as a LONG candidate. If the markets sure up sooner than later, the dollar could fall very fast again. I have been saying for a while that the dollar's weakness won't happen over-night. We had great trades last week (if you were a member) when the dollar was way over-bought. I got out at a nice profit and suggested to everyone that we wait until we get better pricing and ride the wave back down again. Well, I think we are close to the level where we can get back in. Notice how the GBP is sitting on support from its Fib levels.

My advice in these market right now is to be patient. Let the direction be set and then follow it up or down. Again, I have both LONG and SHORT positions in anticipation of a big move for both the bullz and bearz. Either way, we should be ready to make a lot of money soon!

Monday, November 10, 2008

Good Looking Short

Here is a good looking short. GG has come up from around 15 very quickly and is now bumping against resistance around 25. I bought puts on these this afternoon and expect it to retrace fairly quickly.

Future Up Modestly To Start The New Week

Good Morning (or really a continuation of my day from yesterday)! Pre-market futures are up almost 1.5% this morning with a variety of news. China announced a new stimulus package, AIG restructured its debt with the government (i.e. you and me the tax-payers), and McDonald's had sames store sales increase a whopping 5% in October alone. Another bankruptcy also emerged as Circuit City filed amid competition from Best Buy and Wal-Mart.

In addition, the dollar has shown some more weakness this morning, helping oil and gold push to higher levels. I think we are slowing putting in a base in these areas and its time to start buying up great over-sold securities (OIH, GLD, GDX). If we hold the lows of October, we could see a very strong rally through December and into 2009. I still remain sceptical of this possibility with the buffet of bad news out there, but things may already be priced into the market. Let's see how the week goes. Happy Trading!

Mid-Night FOREX Trading

I've been up all night in the FOREX markets. I didn't think this was how it would end up when I placed a couple trades at 8pm last night. But, I guess sometimes you have to stay up and watch your positions. Hopefully members got the email about shorting the dollar against other currencies. I got out of my AUD and EUR longs early this morning at nice 100+ pips moves. I have a couple others that I will hang on too for now but I think taking some money off the table is always a great idea...especially in these volatile markets.

Friday, November 7, 2008

Big Swings This Week...TGIF

Another crazy day as usual on the street. I just wanted to re-cap the week real quick. We started off the week with huge rallies going into the election (and thank goodness that's over with). Then we finished the week with huge declines and a lame dead cat bounce on low volume. So, what should we take away from this? Right now, I am not cheering for the bullz or bearz, but have positions in both directions. My gut feeling is that we will continue lower for the time being as investors realize that jobs are being lost left and right which will effect virtually everything in this consumer driven economy.

With this said, the markets have always been prone to change directions when all feels lost (i.e. when we all are yelling SELL, the markets take off!) If you notice on the graph below, the DOW is sitting directly on its Fib retracement levels. If we break below this level, the next region of support is around 8,000. If on the other hand we see a sustained rally, we could be back up to the highs of the week very soon.

FOREX markets tell the same story; indecision. However, some currencies look like good short term trades. The AUD/USD has had a big run up and is hovering around its Fib levels. I think this could get back down to the .65 level if the markets continue to fall next week.

Likewise the GBP/USD could fall more but has already moved back to relative lows and is sitting above some Fib support levels. Long-term I think the dollar will weaken (as I have stated for a while now) and this should be a good buy against the Pound. I would keep your stops tight around 1.53.

Another way to make money on dollar weakness is this UDN Dollar Bearish Fund (i.e. when the dollar weakens UDN goes up). It trades with great volume in the market and is way over-stretched just like the dollar. For traders with a more conservative risk structure this may be safer way to short the dollar indirectly.

CAL is becoming a wonderful trade. I alerted this one to members a while back and it has begun to really pay off. With the dollar weakening and Oil likely to see some sort of short term increase, airlines will get slammed. Like I have said before, I'm expecting this to more back down around the $10 level as it moves away from its 200-day moving average.

Hope everyone wasn't shaken up by the big swings this week. It's important to keep a level head during these times and not get persuaded by the media and other news commentary. Don't rush to pick the bottom or top; there will be plenty of profits left after a clear direction is established. Have a great weekend!

GM's Burning Up Cash...Will It Go Bankrupt?

GM just announced earning, which were horribly low (go figure). But, what is interesting it their burn rate of cash. They have approximately $20B in cash and need to stay above $12B just to maintain operations. Now, at the rate they are going through cash, they will have to file for bankruptcy unless then get major financial help from the Government (that means more money out of taxpayer's pockets). I have two views on this. 1) GM can't fail because of the job losses that it would case; not to mention the effect on the stock market. 2) We should let GM fail because the wasted cash we would use to try and hold them up (just to see them fail later on) would be better spent helping workers find new jobs or pay pensions. Here is a chart of GM which looks like a falling knife.

Just so everyone is clear, I don't suggest either going long or short these types of stocks. The simple reason is that each day could shoot it higher or send it lower. Someone said that they wanted to buy it at $4 because "it can't go lower than that." What I'm saying is that IF it goes go to $2 (which is very close and easy to get to) then you would have lost 50% instantly. Don't speculate with these stocks right now...things are way to uncertain and the risk/reward is not clear.

Jobless Rate Raises to 6.5%

Good Morning. Pre-market futures are mixed this morning as the jobless rate came in higher than expected. The US 240,000 jobs in October (big surprise) which puts the rate at a 16 year high. The dollar is also falling this morning with some speculation of a rate cut coming as the economic condition. I think that we might see a slight up day or every flat, and then continue the fall next week. Let's all keep in mind that people are losing their jobs, leverage is high, and consumer confidence is at all time lows. So, any buying should be short lived. Happy Trading!

Thursday, November 6, 2008

Markets Continue Slide...How Low Can It Go?

Well, I think we have officially ended that brief bear market rally we had late last week and early this week. The markets just seemed to be pressured all day long. I posted a chart of the Russell 2000 to get some fresh perspective. Notice how it had a nice run up but it should re-test the lows near the 460 level sooner than later. Members know that I closed out a good deal of my put positions today with very healthy profits. I still am holding a handful of others (MMM, DV, PTRY) in case we really drop tomorrow after the jobs report comes out. Remember that October when had bank failures, job cuts, and the "big plunge." So, I'm expecting (and so is everyone else) a record increase in the unemployment rate for the month.

DHI is an interesting graph. It has shown two great bearish patterns; a bearish engulfing pattern on Monday and a shooting star pattern yesterday. What's interesting is that the high of the shooting star has held tight during this stock's rally today (that's right I said rally today when the markets tanked). It has had a great run up over the last week or so, but I if it gets near $8 I'm going to short it down to $5.50 or lower.

It's already been a long week. Everyone get some sleep tonight and be ready for what should be another crazy day tomorrow. Football Note: Go Broncos! (okay...I'm originally from Denver)

On The Sidelines in FOREX Market

Just wanted to post this chart of the EUR/USD. Over the last 5 days alone we have seen huge swings just this currency. While this does present the opportunity to make money on each little move, I like to make money on the big moves. Granted there are great opportunities to go long and/or short after spikes, but I want to wait until the full pricing of the interest rate cuts set it later tonight. I personally think the dollar will get stronger in the short term to test its highs and then roll over. When it finally shows the signs, I'll be ready to take advantage.

Interest Rates Cut....Futures Fall

Good Morning! Interest rates were cut around the world this morning as the credit freeze deepens in the global economy. The FOREX markets have been a little crazy and very volatile after the announcement. I expect things to settle out soon at which point I might make some trades there. Should be an interesting day as usual....

Wednesday, November 5, 2008

Look Out Below! Markets Fall 5% After Election...Reality Finally Sets In

As I was expecting the markets fell sharply today. I think people are starting to realize that there is much more going wrong than right for this economy. Across the board we saw declines of more than 5%. With this bearish engulfing pattern I think we are definately headed to the 880 level or lower on the S&P, which is also the mid-point of the bullish engulfing pattern from a week ago. I hope everyone either sold out of your longs or bought puts for protection.

WYNN was an amazing short term trade. It may go lower tomorrow on continued weakness but I was not greedy with a 100%+ return on my puts. Many of my members made a pile of cash just on this one trade alone. Notice how quickly it ran up to $60 (when I called the short) and how quickly it fell right back down to the $45 range.

In the FOREX markets, the GBP still looks like a great long candidate, but I am waiting until the interest rate meetings in Europe this week. If they cut rates this thing may move lower and present an even better opportunity.

The CAD has been an amazing trade as well. If you dont remember I advised everyone to short this one at virtually the exact highs last week. I think its fallen to fast and is due for a very quick rebound (if any) before continuing the slide. A note to my memebers: I know I havent been active in the Forex markets lately and its because I think we can get better prices on these trades. We should all wait until we know where interest rates are going before we make a decision to go long or short.

I am still ga-ga about MMM. It tried to breakout of its Fib levels today an failed miserably. Additionally, it showed us a great shooting star pattern. I have puts on this and am looking for it to fall near the $57.50 level before I close the trade out.

During the rest of the week I think we are going to see continued selling pressure. If we do make another run higher, look for the highs yesterday as areas of resistance. Let's make it a great final week of trading!