Thoughts on DXO and the market...

Here is the chart for DXO.... This trendline has been intact since the middle of February when I bought my large chunk… there have been at least 5-6 tests of it along the way. Currently we are sitting right on the trendline. I thought about selling it in the $3’s but because all those calls I sold against other positions and the FAZ I bought were offsetting my DXO losses I decided to give it the benefit of the doubt and see what it did when/if it got to the trendline. I grown attached to DXO. :)

We are at the trendline now and it is “do or die” time for Oil and the DXO. I think it continues higher but if the market shows me otherwise I will book my profits. I did not add more as I am not 100% sure which way this one will go.

As far as the overall market goes as you can see from my trades I have been getting smaller and smaller as time has gone on. I went from almost being 100% margined when I was mega-long the gold and silver miners AND a bunch of market longs (20+ positions) to having no margin and a big pile of cash currently (5 positions and 3 are covered). I was very bullish on the stock market but sold my 401K at 832 as posted here. I was bullish on the financials but they rallied from $5.8 to $9.5 in just a few weeks.

So keeping in mind that I am not invested heavily in this forecast, what I see is:

A pullback in the short run (day to few days) followed by a bit more of rally into the intermediate term. Today was the end of the quarter which is always positive because of window dressing and tape painting. The first of the month has been a negative market day for countless straight months so April 1st should be red, but calling what happens tomorrow is a fools game. Anyway this rally in the intermediate term could take us only to 850 but it is possible that it runs all the way to 900 and beyond.

Either way I do not see a new bull market at this point and I think the rally runs out of steam as soon as we get overbought and the confidence indicators are showing LOTS of bulls and we finish off the last of the stubborn bears out there. How high we go depends on a combination of how stubborn the bears are and how dumb the bulls are! I’m not riding the upside but I am not shorting here either….
When you don’t have a big opinion on the overall market direction it is a traders market and you need to stay small, try to pick short-term winners and take profits quickly. This is exactly what I am doing along with not being a very active trader in this whipsaw consolidation days.

Ugly Day

Today's closing price action didn't really excite me. We closed under 800, after being up another 1% earlier. The bulls clearly couldn't hold the momentum. We will probably sell off into the unemployment number on Friday.

However, I bought 200 OIH @ 76.09, and wrote an OIH 75 at $4.15 and an OIH 80 at $2.20 (Aprils!). My cost basis is 73. I am happy to get long OIH with a cost basis at 73, but I'd much rather sell OIH at 75 and 80 and make $1K.

Sold FAZ at $21.40

Bought at 18.66... sold at 21.40.

Would have been better if I had sold it at $24 yesterday but I want out while I am still up 15%.

Two Long Energy Ideas

RIG, stop 54.70

OIH, stop at 72.5

Pivot Day

The GM/Chrysler issue could really blow up this rally -- immediately. Futures are pointing to opening below 800, which is a substantial area of support. The other area of support is the 50 day moving average at 792. Closing below there would be a substantial blow to the bull case may warrant liquidating bullish trading positions and becoming short term bearish.

RVASpeculator is already short financials -- it may be time to short the market in my account, today's outcome dependent.

Half of DXO

Following the script I laid out earlier in the week, I sold 1000 DXO at 3.04. I have set a stop for the remaining lot just below where I bought it, at 2.69. The dollar seems to be rallying rather strongly here and it may be troublesome for DXO and other commodities.

Sold the 401K, bought some FAZ

I realize this rally is probably going to 900 on the S&P like everyone is saying but I am out of my 401K at 832. (today’s close)

The way I see it is even if we go all the way to 900 on the S&P that is only 8% higher from here. The downside risk is greater than 8%. Plus because I got 30% of my money in almost at the exact bottom in the 600’s I am up for the year now in my 401K and I want to keep it that way.

I will not be putting my 401K money back into the market until the 50 week moving average crosses the 200 week moving average to the upside which cannot happen for quite some time (probably 10 months at the minimum). No more gambling with the long term money.

I also bought two chunks of FAZ (triple short financials) near the close of the day on Thursday. Financials hit their peak last week and the market has continued higher NOT taking the financial sector along with it. To me this is telling that the financials will lead the way down again when the next downturn comes.

UYG (double long financials) has hit the 3.00 – 3.05 level three different times since March 18th…. On March 18th, March 23rd and again today on March 26th. If UYG can break out and go to 3.10 I am going to use that as my cue to get out of the FAZ and see how high this rally can go. I can see a possible scenario where the market goes higher and UYG does not break out and I also can see a scenario where all hell breaks loose and the momo buyers jump ship, so I will hold the FAZ until the market tells me not to.

With the way this rally has been going I may get taken out of that trade on Friday but I hope to hold on to it longer than that.

I love ETF's..... Selling more calls.

ok... TAN is up 9% today, so I forgive it for yesterday now.

I sold April AA $7.5 calls at $1.02
I sold April PAAS $20 calls at $0.85


Now have calls against everything but DXO and TAN.

I hate ETF's: Part CCXLIII

I buy TAN a few days ago because I figure this solar crap is going to go higher if oil keeps rallying. I check the components of TAN and they are all large solar companies.

I notice all the large solar companies were up HUGE today. TAN was up 0.5%

Here are the top 10 holdings of TAN:
ENER +5.43%
FSLR +4.02%
LDK +7.29%
WFR +7.09%
QCE.BE +11.54%
REC.OL +4.10%
SWV.BE +0.81%
SPWRA +0.38%
STP +1.82%
YGE +1.72%

Explain to me how TAN can only be up 0.50% when this is what it holds?

Is the other 40% of the fund that is not listed invested in tulip bulbs or fake dog poop?

Added to my VMW position

200 @ 24.57

Into the GDX fire

Bought 200 GDX at 37.52. No stop, yet. Will buy more on a pullback, and then set my stop.

How high can oil go?

As an owner in a large position of DXO, the double long crude ETN, I've been trying to figure out how high crude can go, and carry me to fat profits.

The basing pattern we've seen November - March has been impressive. I expect this to be the base of the next bull market in oil. Unlike the equity market, oil made its low in December, and has been climbing higher ever since.

40 is the absolute nominal floor for oil now. But again, how high can oil go, now how low.

We will bump up against nominal long term resistance at ~ $58. I think we get there tomorrow on a bullish inventory report, and I will take some profits on DXO (3.35-3.40 area), perhaps taking 50% off the table, just to buy it back on a pullback ($3).

Above $58, there's really good, solid resistance levels around each major round number -- $70, $80, $90, and $100. Interestingly, above $100, there's really nothing until the all time high from July. We won't be there again for a little while.

I guess my summer target for crude would be $70-75, which would put DXO around $7. It will be a choppy ride.

Another look at GDX?

I'm not bullish yet, but man if we can close near the moving averages...and when the 50 crosses the 200..we could be off to the races. I moved my buy up to 34 on this one, and my stop will be 29.

Near perfect retracement to the breakout point

Back to 806 on the $SPX. I thought we would retrace to the 805 support level, and 806 is close enough. I expect to rally tomorrow. Energy is the wildcard -- what will the oil inventories report bring? If we get a surprise bullish number, I think the whole market rallies again, strongly. If we get a bearish number, oil could pullback to $50 and the market could levitate in between today's close and Monday's highs.

Sold TBT at $44.50

Fed announced they would buy Wednesday and it started to tank. It was still above where I bought it on Wednesday during the panic and still above my old $39 average.

I didn't want a winning trade to turn into a losing one.

I will short treasuries again but I am all about keep profits these days. It looked like it might take out $44 and if it does that it is probably headed back to sub-40's

Bulls on Parade........

http://www.youtube.com/watch?v=-58-36lSqG4

This market may scare the crap out of me here, but man is it powering higher. Everyone's favorite 900 target is in sight now.

As you can see from the right of the screen I am making bank on this move but when the market is up 25% in 10 days all you can say is "wow" and try to stay nimble... Maybe my problem is I am a constant contrarian. Everyone is screaming buy now and I am seriously considering liquidating my 100% long 401K Tuesday and putting stops under all my positions… (except DXO which I am taking to my grave)

FAZ (the triple short finacials ETF) lost 45% today… 45% TODAY! I almost bought some; it is actually on my radar at these levels. The biggest problem I constantly fight as a trader is pulling the trigger too early, bears are getting killed left and right and the last bear gets the honey.

Bought TAN at $5.90

TAN is the solar ETF... I didn't do enough research to pick an individual company.

If oil is going higher all this alternative energy BS is going higher too. I hate to buy something when it is already up 6% on the day, but so be it.....

The fact that Gold is just flat tofday...

...with the market up 3% is very encouraging medium term for gold. It looks like the "scare trade" is gone and now its the "inflation/quantitative easing trade" for Gold.

Finally out of my gold related names...

I held these positions since November of 2008 so it was hard to let them go...

I sold calls in February against AUY, GDX and MFN. AUY and GDX were my 2nd and 3rd largest positions.

All of these just got called away, but lucky for me I made money on most of the calls.
GDX and AUY settled right near the strike price I sold at.

GDX called away @ 37 + $2 for the calls I sold= out at 39 (cost was 21.8)

AUY called away @ 9 + $0.85 for the calls I sold = out at 9.85 (cost was 4.32)

MFN called away @ 5 + $0.70 for the calls I sold = out at 5.70 (cost was 3.52)*

*I should NOT have sold calls against this one as it closed at $8 a share.

I also sold calls against GDX, AUY and SLW in February and all of those went out just about worthless and I am not figuring that into the gains for these stocks because I am lazy. Even though selling calls cost me big on MFN it still has been a very profitable tool for me since I recently started doing it. Currently the only calls I have outstanding are the ones I sold on Friday against SLW.

I now have no margin and a sizable portion of cash on the sidelines. I will be looking for more opportunities tonight and into next week. I’m thinking this bear market rally has some more gas in it and will probably be jumping back on some high beta plays early.

Tonight I have actually been looking at some solar stocks. (gasp!) I know it’s a busted bubble and a lot of the companies are scams but it still could make some money if oil keeps going up, especially since they are all off about 90% and sitting near their 52 week lows. Thoughts?

What kind of 'flation?

Deflationists says that inflation can't occur with 8%+ unemployment. Deflationists say that the debt deflation occurring now is wiping trillions off the private sector's balance sheet, and the fed hasn't thrown enough money at it yet.

Inflationists say that deflation can't occur with monetary stimulus the likes of which we have never seen. Inflationists say that the doubling of the Fed's balance sheet in the last year and the quadrupling of it by the end of this year can't help but lead to inflation. They are both wrong, and they are both right.


The US government has succeeded in preventing a deflationary depression. They have not succeeded yet in preventing a hyperinflationary depression.

A deflationary depression occurs when the money supply is contracting and growth is contracting simultaneously. A hyperinflationary depression occurs when the money supply is expanding and growth is contracting simultaneously.

We witnessed a mini "deflationary depression" for the past six months. I believe on Wednesday we witnessed the beginning of a mini "hyperinflationary depression".

Take a look at the chart above. The dollar began its rapid ascent with the deflationary episode beginning with the crack in crude prices in July 2008, which is expected in a deflationary episode (fiat currencies become more valuable). Now, last week, the dollar began its descent, which is expected in inflationary episodes. The dollar is currently resting near its ascending trendline, depending on which trendline you use. Should the dollar break this trendline, it will confirm the beginning of the inflationary episode, which may eventually become a "hyperinflationary depression".

While $4 trillion may not be enough to really get hyperinflation going, the fed has signaled that it will continue to inflate the money supply to counteract the forces of deflation. They will not be able to pull the plug once they release the hyperinflationary genie in earnest. This too is also a feedback loop -- as more defaults occur, more money inflation will be required to makeup the difference. This is where the "hyperinflationary spiral" may occur.

I realize that the dollar is the "reserve currency", and that will not be changing. That doesn't mean that the US can't experience 15% nominal inflation rates coupled with 8% unemployment. Just look at what happened in the late 70s and early 80s.

I am long lots of crude, and I want to be long Gold on a pullback.

Taking more profits, raising more cash

Sold HL @ 1.95 (cost was 1.3)
Sold CDE @ 0.85 (cost was 0.55)

10 for 10 today….

Look to the right and view the 10 positions that I have not sold.

As you can see everything I sold early in the day went much lower right after I sold it.

Here is what my stocks returned TODAY:

AA = Up 17.5%
AUY = Up 4.2%
CDE = Up 33.9%
DXO = Up 5.4%
GDX = Up 6.8%
HL = Up 20.7%
MFN = Up 5.3%
PAAS = Up 13.1%
SLW = Up 12.9%
TBT = Up 0.56

Not one position down! Even TBT was up with the Fed buying treasuries!

The market was down over 1% today and my account was up over 10% yet again. Not selling the gold mining/silver mining shares when it looked bad has made all the difference. I am staring to get scared about the mining shares now with their parabolic rise.

I may be selling HL and CDE. When a stock is up 34% in one day it may be time to take some off…

Protecting my profits, cleaning house...

Sold C @ 3.06 (cost was 1.6)
Sold UYG @ 2.76 (cost was 2.25)
Sold GE @ 10.67 (cost was 7.1)
Sold HUM @ 25.73 (cost was 21.2)
Sold SSO @ 19.63 (cost was 17.2)

My longs now are all inflation related and I have raised quite a bit of cash.

I had very nice gains on all of these positions.

Best day of 2009 for me... I have now tripled my account this year with no options

When I start feeling this good about myself it is time to pull in the horns a bit and sell some stuff.
My only loser in the long list of positions to the right was TBT which I added to in the 43's on the dip.... (and AA was down 4% as well)

My whole account was up 8% today and I am in no options positions (only long stocks) and the market was only up 2.0%.

I had 7 of my positions up over 10% today. A few of them were up over 20%.

A WONDERFUL day but as someone who has been doing this for a while knows you have to be careful in situations like this.

The Short Treasuries Swing Trade is Dead

I'm not saying that traders out there can't daytrade treasuries anymore, but if anyone can honestly tell me how the treasury market is going to react to the fed buying treasuries on a day to day basis, then they'll make money on holding this instrument TBT. I honestly CAN'T, and I honestly don't believe anyone does know. And you know what? I don't trade things that I don't know how they should react. I have been out of the TBT trade since Monday (yes, I missed the massacre), and I don't plan on re-entering it. I am neither long nor short bonds -- I am just not touching them until I see how things play out when and after the monetization occurs.

Out of CL

On a great tape today, CL was down. I don't like things that severely underperform the market (-3%). Out with a small, 0.5% loss.

Oh my valero

I'm already in VLO for about 1000 shares, so I can't justify jumping on more. But goodness, this chart looks mighty bullish, with an easy stop at 14.50, a short term target of 25 and a medium term target of 35, with some potential resistance around 30. In short, 18.50 to 25 would be a 35% move itself. This is a great spot here even by buy-and-hold fellers for 5 years from now.

Joined Dawgs in AA (Alcoa) at $5.48

It looks like it is going to trade a new record level of volume. I believe today is the panic capitulation for Alcoa.

More than 3 times normal volume... Just broke the all time volume record for AA.

Long and strong at $5.48.

Also got filled on a small position in UYG ($2.25 limit order I threw out there pre-market)

I am prepared to add to my AA trade if it retests $5, I only bought half the amount I wanted to buy. If it breaks much under $5 I will sell it but I have no hard stop entered.

DXO breaking out

If by 3:30 we are still here, I am buying 2000 DXO at market., Target 4.

Finally time to flush out some weak longs...

I said this "flush out move" on this rally was going to come Friday afternoon into Monday morning.

It appears the move is going to happen Monday afternoon into Tuesday. It is good and healthy for the market to pull back as it cannot rise with everyone on board. Sentiment was extended to say the least. I made no trades today as I am in all of these things at much lower prices and I intend on just taking the hit of this pullback UNLESS it starts to look more much ominous. This is possible as many smart bears are "all in short" here but I am still giving it the benefit of the doubt.

Ok, so maybe I should have sold Citi with it up well over 100% in the last few days for me but cutting winners short is even worse than leaving some of the profit on the table in my opinion... as long as you don’t leave ALL the profit on the table!

I’m still waiting for an entry on UYG, I might not take that trade. Citi and HUM are on the chopping block and GE is pretty close to a sale for me now as well. I will let the market tell me when/if to sell these.

MFN (Minefinders) is going to get called away from me this week as I sold upside calls against it for March and it just keeps going up 14% every single day (today included). I am going to let them take it off my hands instead of closing the calls, its more than doubled recently as well.

Letting them take all those shares from me will be like losing an old friend, but if you are going to close a winning trade selling upside calls is a good way to do it because at least you lock in even more profit than the current price.

$COMPX vs. $SPX

Amazing underperformance today. The nasdaq is actually down 0.1% and the S&P is up 1.6% as I write this.

TBT

Setting my stop for TBT at 48. PM we are indicated somewhere around 48.30, which would be a break to the upside in this pennant formation. As it was, it was getting quite compressed. I'll happily stay long, and I will buy it again at 46 or above 50.

A look back

On March 6th, I sent this note to many of our loyal readers in an e-mail:

"Thanks to all of this market destruction, there are some extreme examples of market volatility that could provide what I call, easy money.... You can write puts for December 09 on the S&P at 400 and pocket a $150 premium. Using a bull put spread option, you can buy puts for December 09 on the S&P at 350 for $75. You collect a net premium of $75 and your required collateral to hold is $500 (the difference of 400 on the S&P and 350), making your total return 15% and annualized 18%.... Even in my wildest bear dreams the S&P will not be below 400 this year, that would be another 40% decline from where we are today."

On March 6th, the S&P was at 683. Today, the S&P is at 756. If you executed this strategy, the puts you wrote would now be worth $75 each and the puts you bought would be worth $46 each. You take a $75 gain on the puts you wrote and a $29 loss on the puts you bought and that gives you a $46 profit per contract pair (spread) in just over one week. $46 on $500 collateral is 9.2% return, but annualized its 478%.

We all need dry powder in our accounts for opportunities like this!

Brush my teeth

Colgate looks clean. Buying on Monday with a Stop at 53.95, target 66.

My thoughts on GDX....(gold miners)

When you don't do the "Tim Knight 100 year chart method" the trend is your friend.

Here is the one year chart. I started buying below $20 and I see no reason to sell. 50 day crossed above the 100 day and is pushing all the way up against the 200 day. 100 day MA just turned up for the first time.

Tested the trendline perfectly and had a hard bounce. Exactly the bullish chart action you like to see.

I am a goldbug, but...

...this chart looks horrible for the miners. GDX needs to close above 34 (~ the 50/200 day MAs) and then 38 before we are out of the woods on these guys. Look at that strong descending trendline I've drawn!

RVAspeculator's first post....

I look forward to sharing my day to day trading thoughts out on this blog.

You can see my current positions on the right. I only have one account unlike Dawg's tangled web of accounts. :)

I am still very bullish in the near term but think Friday/Monday could be "give back" days.

I will post my trades out here going forward.

More SSO stop updating

Up to 17.46

X sucks

Steel is behaving badly and thus so is X. I'm not sure this makes me really ultrabullish right now if one of the base commodities of the indutrial world is in the toilet, but certainly the market can rally without them.

Buying DXO above 50 day MA

We still have yet to break out from under the scourge of the the 50 day for the past 3 months.

DXO needs to close above the 50day (2.53) decisively and then I will be megalong DXO.

Buying the breakout on $SPX above 750

No resistance until 800, so I will be uberlong in that no-man's land, once we are trading above 755.

updating stops

SSO, 16.94

New Longs

TBT, stop 43.97
XLE, stop 39.45
X, stop 16.45

Gold behaving nicely

Gold is behaving quite nicely after a near perfect 10% retracement to the 50 day moving average. Even with the market up strongly today Gold is still up 1.7%. I will be buying any breakout above $1000, but until them I am cautious.