Market Symmetry

666 low…

When technical analysis said "if we broke 680 we were going to 500 on the S&P."

888 high…

When technical analysis said "if we broke 875 we were going to 1000 on the S&P."

I joined dawgs in SDS right at $61.8. Lets rock.

In UltraShort S&P 500 (SDS)

200 @ 62.12 w/ stop @ 60.5

Closed some "other picks"

3.02 on 11-26-08 to 7.69 on 4-28-2009: SLW 154%
5.49 on 11-26-08 to 7.90 on 4-28-2009: AUY 44%
17.27 on 1-4-09 to 19.88 on 4-28-2009: CHK 15%
18.99 on 11-26-08 to 25.88 on 4-28-2009: VMW 36%
63.12 on 1-4-09 to 74.44 on 4-28-2009: DO 18%

I still have many of these in my real accounts, but I just thought it was time to take "paper" off the table.

The Yellow Metal

Gold is behaving very nicely. It bounced off its 200 day MA and formed a nice, fairly large double bottom (shown in Yellow). With the expected market weakness coming up, I see Gold finally breaking through the $1000 barrier "for good" in the coming weeks.

However, the descending trendline is a barrier of resistance which needs to be broken for the breakout to commence. Gold at $940 would be a signal to jump in with both feet. I will be using the Double-long gold (DGP) ETF as I already have miner exposure.

Chart of the "week"

Speaking of "hanging mans", this chart of crude is full of them. Beware of this commodity! It looks ready to head back to 40, despite all my prior bullish calls on it earlier this year.

I will be getting out of the rest of my energy longs monday.

Sold EBAY @ $16

A nice 12% profit.

Short AMZN at $86

$88 was the high from all of 2008 and 2009.

It traded near $87 today and I got some May puts when it was at $86.

This stock was trading at $35 just 5 months ago.

In 3000 DXO @ $2.56

Let's daytrade the DOE report. 2.45 S, 2.9 target. At the channel bottom.

Gut-wrenching volatility

I woke up this morning, S&P -4. 5 minutes later, S&P -8. 10 minutes later, S&P -4. Now S&P
-11. Did anyone really make money there?

On to the 3x short financial short (FAZ). Up to 13 and change in the AM, closed at 9 and change in the PM. That's a 31% intraday swing.

Yesterday we retraced 50% Monday's move and closed exactly at 850. The trendline is still broken, but the bears need to close this thing much lower today.

The last 2 trading days shows the problems with SRS and FAZ…

Copied from my Motley Fool CAPS blog:

Say on Friday you were thinking IYR (the Real Estate Index) and XLF (the Financial Index) were headed lower.

IYR was trading at $33 at this time.
XLF was trading at $11 at this time.

You wanted to short these indexes but you did not want to use options or short common to do it.
You find that there is an index FAZ that is “triple short” the XLF and an index SRS that is “double short” the IYR.

Say you bought SRS on Friday at $26 and FAZ at $9 (the prices that correspond to the levels on IYR and XLF above.

If you didn’t watch the market on Monday you would check IYR and XLF on Tuesday:

You would see that the IYR was off from $33 down to $31.4 or a 7.8% decline.
You would see that XLF was off from $11 down to $10.60 or a 3.6% decline.

If you didn’t know any better you would think. “Since I am double short IYR and triple short XLF, I should be up over 10% on FAZ and over 15% on SRS, I am so smart.. where will I spend all the money”

In reality SRS closed at 27.2 and FAZ closed at 9.15. So you would have only made 4.6% on SRS and a pathetic 1.5% on FAZ…

Really even though you are supposedly “double” and “triple” short these underlying indexes you actually didn’t even MATCH the 2 day decline in these things, not even close to matching the declines actually...

This is because in order for you to make money, not only do the indexes have to fall, but they have to fall EVERY SINGLE DAY. On the triple indexes a one day, 20% plunge is almost completely negated by a 10% bounce the next day. The double and triple indexes have one huge enemy, math.

I understand this fact which is why I created the Ultrasuck portfolio in CAPS to track the destruction of these ETF’s over time, but that being said…. Even though I understand it, it still pisses me off when I finally try to buy these silly wealth destroyers to hold for a few days…

What people buying these things need to understand is if the path of the last two days continues in the same way: (market down huge on day 1, market up half as much as the day before on day 2), these ETF’s will only be up marginally and the underlying indexes will be ZERO...

So you will have successfully shorted Financials and Real Estate to zero and will have nothing to show for it except for a sob story about how Direxion ripped you off!

Rant over….

PS: I am still holding some SRS and FAZ, but I am not happy about it....

Back in FAZ @ $9.99

Out of FAZ in trading account

I sold rather nervously near the open at average price, $12.70. I late got stopped out at 11.50 of the remaining 300.

I will buy back in the 10s.

S&P percentage gains on a per week basis during this rally…

Copied from my Motley Fool CAPS blog....


Look at the “percentage gained” over this 6-week rally and see if you notice a trend…

Week of: Start End Points Percentage
13-Apr-09 856.91 869.6 12.69 1.48%
6-Apr-09 839.75 856.91 17.16 2.04%
30-Mar-09 832.98 845.61 12.63 1.52%
23-Mar-09 803.24 832.98 29.74 3.70%
16-Mar-09 758.29 803.24 44.95 5.93%
9-Mar-09 680.76 758.29 77.53 11.39%

Gains have been getting weaker and weaker. Most of this rally all took place in the first 2 weeks.

Also some must view links for this upcoming week:

1. Percentage of stocks above the 50-day moving average, multi-YEAR high:
http://stockcharts.com/h-sc/ui?s=$SPXA50R&p=W&yr=3&mn=0&dy=0&id=p24812634319

2. Retail is now OFF THE CHARTS bullish because we eeked out another measly 1% rally on the week.
http://www.sentimentrader.com/

3. Put-Call ratio is 0.56, multi-year low. Traders are gorged with calls…
http://stockcharts.com/h-sc/ui?s=$CPCE&p=D&yr=1&mn=0&dy=0&id=p79337359546

4. Since the rally started on March 9th, there have only been three 2-day corrections and ZERO 3-day corrections. A big run up with no pullback lead to “weak longs” and the longer the rally goes on the more momentum, non value driven, short term traders get on board. These traders are fickle.

Although I cannot tell you the day this bear market rally ends, I can tell you that we will wipe out all of the piddly gains over the last 3 weeks of this rally in just a few trading sessions, what happens after that is more up in the air.

Richard Russell: The scariest declines in bear markets are typically the ones when investors think they are making progress and recovering their losses, only to see stocks go into a new free-fall.
“That cycle of decline, followed by hope, followed by fresh losses, is really what ultimately puts a final low in place. The final decline of a bear market tends to be based on “revulsion” – a growing impatience among investors who conclude that stocks are simply bad investments, that the economy will continue to languish, and that nothing will work to help it recover. Revulsion is not based so much on fear or panic, but instead on despair and disillusionment. In a very real sense, investors abandon stocks at the end of a bear market because stocks have repeatedly proved themselves to be unreliable and disappointing.”

Good analogy for what is going to happen to this rally below:
http://www.youtube.com/watch?v=uHz2xCV64n8

Short Retail (XRT)

I'm thinking of going short the Retail sector. From a low of ~ $18, the XRT ETF that tracks retail is up to $26, or 45%. I know the space is heavily shorted, but goodness, does anyone practical think people are going to just start going to the malls again and spending gobs of money on their credit cards they don't have?

Might use options on this one.

Out of SLW and AA.. 255% on SLW!

Sold AA at $8.52 (cost was $5.42) (this got called away from me at that price)

Sold SLW at $8.65 (cost was $3.4) (It closed right below my call strike, but I sold it anyway)

255% gain on Silver Wheaton in just a few months and it was a pretty large position. I'm pretty proud of that one.

This is probably my biggest gain in a stock (not an option) in my trading career... it is hard to let something run this far without taking profits, but I am glad I was able to do it. This is the reason I didn't hold onto the stock even though I could have (since we closed below $7.50), I believe I have gotten enough out of this one...

1st thing Monday..

I am going to be out of US Steel (X). $12 a share appreciation in a couple months, or about 70%, is good "enough". Again, don't be greedy and stupid. Take profits!

No more OIH

OIH is at the very top of its channel. I'll buy it back if it really breaks out.

11% is not bad, and i was capped anyway.

I'm not a hog

I sold the remaining HOG at $18.91, for a lovely profit of $7.91 per share. I will be a buyer again in the low teens.

Rosetta Stone

RST pricing at $18 today, trading should begin around 11AM.

I plan to buy a couple hundred shares in my IRA. Nothing too crazy.

Hopefully they make RST optionable.

Las Vegas Bomb

Take a look at these year/over/year statistics for Vegas for February:

http://www.lvcva.com/getfile/ES-Feb2009.pdf?fileID=37

Convention attendance down 34%
Average Daily Room Rate $ down 23%
Overall Visitor volume down 8%
Room supply up 3.9%
Gaming Revenue down 17.9%

In short -- SHORT the gaming stocks. Once this bull move is over in the market, these stocks are going back down, again.

Oh, and visit vegas. We are -- paying only $140 a night to stay at the Bellagio -- a STEAL!

X marks the spot

Taking profits on X, selling half. The stock is up $9 from where I bought it, for > 50% gain. I'm greedy, but I'm not stupid.

Back in SRS, FAZ....

SRS @ $31.43

FAZ @ $9.77

The destruction in these guys is amazing.

They are off at least another 20% since I got out on Thursday.

Goldman Sachs is trading near $130 and Citigroup is up another 15% to $3.50. Unreal.

Nearing the end of the current bear market rally, BUT….

Copied from my Motley Fool Blog:

It’s been a while since I wrote a long post on my thoughts on the market out here.

--------------------------------- Background
When this whole rally started in the 600’s I bought in with both feet. I loaded up on Citigroup, UYG, GE, SSO, Alcoa, TAN, DXO and I sold all my gold and silver miners near the peak after the Fed announcement of Quantitative Easing at GDX = $38 a share.. I even put 100% of my 401K in the market near the lows.

Well I finally have gotten rid of all my longs except for a few I sold in the money covered calls on for April that will probably get called away from me.
I even have dipped my toe into shorting the last few days but I have kept it VERY small and actually have been stopped out for now as the “animal spirits” are really in the equity markets right now.

That being said we are nearing the end of this bear market rally. I am not smart enough to tell you if it is today at 856 on the S&P. I am always early on predicting market moves and luckily I have adjusted my trading to fit my “always early” timing.

For instance I was finally getting bullish on this market again when it broke 750 to the downside on February 22nd when I posted:

“You want to see what irrational panic looks like, look no farther than today.”
http://caps.fool.com/Blogs/ViewPost.aspx?bpid=149024&t=01001808419327792238 2/22/09

But I noted in my post that I was just STARTING to nibble on long side candidates when I said..

“I am FINALLY adding some NON-gold related longs to my real account.”

This is the number one lesson trading these markets has taught me, you are never going to catch the exact top or the exact bottom. I started buying things at 750, bought all the way down to 666 and started selling above 830…

I have made great profits this year and am not as concerned with making all the money that will be made on the downside as shorting is stressful and dealing with Ultrashorts or put options is like juggling chainsaws…. Look the single day, 50% loss in FAZ Thursday for a good example. I shorted Lehman Brothers the whole way down with puts in 2008 and I believe I took 3 years off my life doing so. :)

--------------------------------- The BUT….
There is a reason I have a “but…” in the title of this post…. The reason is although this may be another bear market rally, 666 on the S&P could have been the REAL low.
But to me that does not really matter, in my opinion even if it was the REAL low we are NOT just going to go straight up off of a V bottom like what is happening right now. We are up 28.5% from the lows in exactly 1 month’s time. A 28.5%, 1 month rally is NOT the way a market bottoms. So selling here makes sense if you believe 666 was the ultimate bottom OR you believe the real bottom is lower.

Arguing if that was really the low or not matters very little as it is 30% away from where we are now. Do you want to hold even if we only retrace half of the rally? (15% decline) I know for sure I do not.

--------------------------------- The Reasons….
Anyway, if you want more proof that we are due for a pullback of some sort, or maybe something more sinister (like new lows) I will offer up some proof from a technical perspective and from others. Really I probably should have just limited my post to this info.

1. The “dumb money index” at http://www.sentimentrader.com/ has swung to positive in the short run AND the long run.. First time this has happened since September 2008.

2. Corporate Bond spreads, although off the all time record levels of January 2009 have not improved substantially and are still sitting at levels that would have been unthinkable in 2008.

3. This chart, which needs no explanation. (C-RSI over the last 8 years)
http://www.stocktiming.com/Tuesday-DailyMarketUpdate.htm

4. Mutual fund inflow finally have started to surge. Trimtabs reported 11.9 billion in Mutual fund inflows last week. The previous week there was only 3 billion of inflows and that had been the trend through much of March. Mutual fund money is “the dumbest of the dumb money” and you always see a surge of mutual fund money coming in when the market tops.

5. At the same time Equity ETF’s had outflows for the second consecutive week. So pro traders are selling to mom and pop mutual fund holder.

6. A great deal of credit indexes are STILL HITTING NEW LOWS. The ABX indexes all put in new lows. What about the Public Private Purchase program? :) The CMBX spreads are still above the levels where they BLEW OUT in November 2008. Triple A CMBX spreads are at 600 basis points and they were at 200 during the stock market crash in October. So right now CMBX spreads are 3 times worse than October 2008 and ABX prices are at their worst levels ever. Yet the market continues to rally.

5. Although unemployment is a lagging indicator it is surging at an increasing and mind-boggling rate.
https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg35EYd0kRByWIt7YAX8IPRMmjj1C5lHzDg2wy3Me6K3Mg4WZ75QUTyRwnNRQnk-2EaIhsCkJMMkFicJi5sQTA0jlFbTJJre2VDnLQXpYlOe7oAiTq7WYMM3S5F2mBCxgtC5lrwJdVBofhx/s1600-h/Unemployment+Rate-2009-03.png

6. The bottom at 666 had no capitulation associated with it.
“in January 2008, when the S&Ps were in the early stages of what was to become a devastating collapse, domestic equity mutual funds were worth about $6.5 trillion. Lo, a little more than a year later, in February 2009, we see that the value of these funds had fallen by about 48%, to $3.4 trillion. But guess what: Over that time, net redemptions totaled only 2%, or about $100 billion! What that means, explicitly, is that mutual fund investors have stuck with this bear market throughout the decline.” Rick Ackerman from www.rickackerman.com One of the best investors I read.

7. The trailing P/E of the market is 100… you won’t find that stat on CNBC.

8. World trade has fallen off a cliff and has not recovered during this market rally. The Drybulk index has been down 21 of the last 22 days yet the market has rallied this whole period. Here is a graphical picture of world trade.
http://www.advisorperspectives.com/commentaries/images/jm021309image001_0F6C5DDE.gif

9. The big money was DUMPING hardcore into the financial run up on Thursday.
http://online.wsj.com/mdc/public/page/2_3022-mflppg-moneyflow.html?mod=mdc_leader

10. Jim Cramer called the bottom for the 10,000 time at 856 on Thursday.. (29% off the lows) Also he is still on TV and I have always said I believe the real bottom comes when his show gets pulled because no Cramericans have any money left.

I think that is enough for now. Something I realize is FACTS ARE NOT SHORT TERM TRADING INDICATORS but they should still be kept in mind when trying to determine the longer-term picture. For instance some REITS are paying their dividends by issuing more stock which is the “ponziest” thing I have ever heard, but that being said SRS which shorts REITS was down 24% on Thursday.

One thing I learned from 2007 is being right on the macro level is not the same as being right trading the markets. Still all these things are to be kept in mind as eventually FACTS MATTER.

Thanks for reading this extra long post. Please rec and comment.

PS: Quote of the day: “Buying our own treasuries: Paying other people interest to loan ourselves money we don't have.”

Exiting DXO

DXO is trading favorite of mine (2X Crude Oil). Today we made a dogi (usually a sign of a trend change) and hit up against this 3.2 area which has been a resistance area. Volume continues to decrease, and RSI is decreasing -- which is very bearish.

Bottom line -- I took some OIH out, I'm out of DXO in most accounts, and intend to liquidate in my others. I will buy DXO when it gets to ~ 2.6, as I think we will break this uptrend trend line but find support at the 50 day.

Forced to dump all the shorts....

Took my lumps....

Sold at 3:30 and feel like I sold the top, but don't want to get run over too much. Losses are still manageable here.

Out of 1 lot of OIH

Capped out my profits at 6% -- freed up my margin. Still have one lot left.

More FAZ at $14.00

All this rah rah and cheering and yet the Dow is only back to 8000 again. Whoopdie do....

This is why if you are going to fight the tape like I decide to do a few days ago you start with only your small toe in the trade. (which I did)

Knocked my average down to $16.

Things I "should" do today

1) I should be getting out of my GDX trade today (breaking 200day MA)
2) I should be getting long on the market again (financials breaking out PM)

The contrarian in me wonders if this is a big fat nasty trap.

I think the market may be up Thursday, but I am short....

It's the last day before the 3-day Easter break and how nice would it look to be able to say we have had 5 straight weeks of gains.

That being said I am still holding SRS, FAZ and TYP.

So if the market goes up Thursday, I will say "I told you so"

If the market goes down Thursday, I will make money.

Win - Win! :)

Seriously though, what would scare me from the short side is if Thursday is so bullish that we take out $9.70 on the XLF and 845 on the S&P. (the highs from a few days ago)

The funny thing about this rally is even though it still SEEMS LIKE it is going full steam I sold my 401K 2 full weeks ago at 833 and even with all this "rally" we are currently trading at 825. The "real" portion of this rally all took place in the first few days.

Thursday could blow this out of the water though as I expect a gap up of some sort, the question is "will it hold?"

Adding Tech to my list of shorts.... Bought TYP at $34.58

Picked up a decent sized block of TYP (Triple short Technology) at $34.58

1600 on the Nasdaq is a brick wall and a lot of the momo's are up a huge amount today.

If 1600 falls I have an easy exit point without too much pain.

PARABOLIC

It's not often I skip for joy, but the move in VMW has simply been parabolic. As you can see, this move today has busted its 200 day MA, as well.

Very bullish, but the move is not sustainable at this rate of change. I am taking a full lot off (100) and writing options on the rest (35 strike).

Oil Markets

The Oil markets are always perplexing. I've long been an oil bull, and remain so even after the bubble burst. Price action again, like last year, defies supply/demand logic. As RVASpeculator would point out, this is indicative more of currency devaluation than fundamental production or demand issues.

Today, more builds in oil and gas stocks. And DXO was down to 2.83, and now it is positive and at 2.99. A simple trade that has worked for the past few weeks is to buy pre-EIA stocks release at 10:20 on Wed and sell on Fri of that week. I'm sure it won't continue forever, but something I am taking note of.

Bought back GDX calls @ 1.4

Made a quick 22% profit. I am now back, fully unhedged on GDX. Gold looks to bounce here and the market looks like it wants to roll over further, which should drive gold and GDX up.

Unloaded DXO premarket

at 3.05. I'll buy it back at the 2.7 level again, once we get back there.

Still long term bullish on oil, but getting out of the "trade" that is DXO in my major account (still have a small position on my IRA). Still long OIH, XLE, SU, LINE and many other energy names.

Sold DXO, TAN... added SRS, FAZ

Sold DXO @ 3.18 (cost was 2.39) (This position had gotten HUGE)
Sold TAN @ 7.45 (cost was 5.90)
Sold PAAS @ 17.14 (cost was 12.10) (I got rid of the covered calls I sold for $0.85 for $0.15)

Metals look to be breaking down HARD so all I have left is SLW and AA and both are 100% covered right now so declines do not hurt me.

I also added SRS at $40.25 and FAZ at $16.30.

I am not positioned back to the dark side where I belong.... FINALLY!

Dow 8000 seems a good a time as any to be pointed that way.

I know I spend alot of time on Gold, but...

Is this a bullish descending wedge, or a breakdown about to happen?

Bought SRS, FAZ

SRS at $46.19 (Ultrashort Real Estate)
FAZ at $17.30 (Ultrashort Financials)

Amazing Day

3 hours to the close, and my accounts are "breaking out", owed mostly too my mega-long energy positions. Even with OIH being partially covered up and GDX being down big today, my trading account is up well over 10% today, and the rest of my accounts are all solidly in the green!

I don't want to jinx it...

Added more DXO at $2.63

I talked about the trendline on DXO in my last post.. We got another test of it today and I couldn't pass it up.

I raised my average from $2.31 up to $2.39 with the purchase but added 40% to my position.

If the trendline breaks I am out of the whole position.

More option writing

Wrote GDX covered calls, April 41s at $0.75. If they want to take it at 41 from me that will be an 11% profit in three weeks.

Trading/Investing Bloggers

I am tired of bloggers out there bullshitting their trades. When these traders have a good idea but it doesn't go their way, they blow smoke up our asses about how they "got out of that trade" or intimate that position size wasn't as big as they first indicated. My favorite is "averaging down" or posting 2 hours after the move was made that they "got out in time".

Listen, my trades blow up all the time. But at least I am honest about it. Maybe that won't get me 10,000 comments on each my blog posts like others, but you sure know what the truth is.

Most bloggers have great ideas, but I think the need to keep readership (and ad revenue) high ends up affecting the truth too much.

Just come clean. Say you lost $100,000 today. We can all relate to you at least some point in our trading career. Pride is a powerful thing!