In and Out

Sold Transocean (RIG) @ $70 for a 6.5% gain. Will rebuy in the low $60s.
Sold Freeport McMoran (FCX) @ $118 for a 14.5% gain. Will rebuy in the low $100s.
Sold Lazard (LAZ) @ $39 for an 18% gain. Will rebuy around $35.

Yamama outside day

Sold 1000 yamama gold (auy) @ $12.95 for a 21% gain. Have 1000 left.


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Gold breakout

The Head & Shoulders formation I mentioned earlier has been invalidated, with Gold closing at $1414, a new weekly closing high and "closing in" on its intraday all-time high of $1428.

Gold also made a new all-time high in euros at 1051 Euro, signaling a clear breakout above 1000 euros.

It would appear as though Gold is set to make a run at $1500 this year. I hope you all have miner exposure!

Some new positions in the past week

Bought:
Freeport McMoran (FCX) @ $103 (S @ 98.7)
Emerging Markets ETF (EEM) @ $46.81 (S @ $42)
Junior Gold Miners ETF (GDXJ) @ 41 (NS)

Sold:
300 Ultrashort S&P 500 (SDS) @ $26 for a 1% loss, will sell the rest at a more substantial loss ($25 stop -- 300 shares left).

Gold at a short term crossroads

Gold has reached the top of the shoulder at $1375. If gold can break out above here it will signal a move to much higher prices. If Gold cannot the head & shoulders will be completed and the likely downside target will be distance from the head to the neckline, or $100 from $1320 or roughly $1220, which coincides nicely with the 200 day MA at $1222 and the 50 week MA at $1206.

Personally, I think Gold moves higher from here. But in case it doesn't, it's best to have a downside target in mind.

Sold coke

Sold out of coke (KO, $54 cost basis) at $64 for a 19% gain. Will reenter under $60.


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Doubled short positions

Doubled my double index shorts (sds) @ $27.18


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Out of tbt

Sold my entire ultrashort treasury position (tbt, cost basis $34) for $38, a 12% gain. Will rebuy in the $36s once the front end of the curve flattens a bit, and may write some puts there.


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Taking a shot short

Bought 300 UltraShort S&P (SDS) @ $26.05 yesterday. Stop @ $25.

Will get more short if 1195 is breached.

Took profits across all gold miners

Sold 1000 AUY @ $12 (2000 left, 13% profit on the 10 lots sold)
Sold 200 GDXJ @ $41 (100 left, 46% profit on the 2 lots sold)
Sold 200 GG @ $48 (out of this position, 9% gain from a cost basis of $44)

Silver -- at least a ST top in

The Silver ETF has traded over 8x its normal volume while making a new lifetime high.

$SILVER traded to a new 30 year high (just the Hunt brothers got a worse price) over $29.

I believe at least the short term top is in on Silver; I would be shocked if at least it didn't correct 10% from here additionally.

$GOLD may get dragged down with it as well for a short time.

S&P Topping Patterns on Weekly & Daily Charts

Despite the impending annoucement of QE2, there are quite a few technical market hurdles before we can usher in a new monetary era of fiat devaluation-based prosperity.

Taking a look at the weekly chart, you'll notice that we are bumping up against the 200 day Moving Average which proved to be resistance back in April, and we quickly went lower.

The S&P daily chart is showing several dogi's in a row, indicating that trading ranges have been tight and the market has no real direction, even though it has been trending up.

Finally, take a look at the chart of the dollar. I've indicated the trendline cap at 89 and the ascending trendline floor right around 76.3. Despite QE2, the dollar could be poised to bounce off this trendline.

Should the dollar find support here on this trendline, it would likely mean lower equity prices again. While it would be a surprising conclusion that the dollar could rally in the face of more Quantitative Easing, remember that the Yen has rallied for 10 years against the dollar in the face of massive QE in Japan.

A stronger dollar right now indicative not of true dollar strength (investment fund flows) but of deflation (demand for money increases).

While this is S&P 500 negative, I do not believe that over the intermediate term it is Gold negative. Gold is only correlated to the dollar slightly less than 0.5, meaning that it moves with the dollar only 50% of the time. This year's earlier move in Gold and the dollar simultaneously during the Euro-blowup in May demonstrated that.

As the demand for real money continues to accelerate, Gold will be less and less affected by the $USD. Gold and the dollar can go up together, and likely will, until such a time as the dollar "breaks".

One could make a strong case here for short ES ($SPX), long GC ($GOLD); personally though I am not repositioning myself until after the Fed meeting and elections.

Faded mcp

Sold all mcp at $35 for a 6% gain.


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One winner, Few losers

Stopped out of Agrium (AGU) for ~ 5% loss.

Bought MolyCorp (MCP) yesterday @ $30.50 (NS). That's already up 10%.

Bought Conoco (COP) yesterday @ $61.06 (NS).

Added to Yamana (AUY) yesterday @ $11.17 (NS). Cost average now up to $10.60

Getting Assigned

More profit taking, this time forced.

Selling Waste Management (WM) @ $35 for a 14% total return.
Selling LINN Energy (LINE) @ $32 for 30% total return.
Selling Kimberly Clark (KMB) @ $65 for a 9% total return.
Selling the aforementioned Mosaic (MOS) @ $67.50 for a 2.6% total return just this week.

Taking profits, Initiating new trend positions

Bought Ultrashort 20+ Year Gov Bonds (TBT) @ $34 (Stop @ $31) ; Target $37
Bought Agrium (AGU) @ $86.68 (Stop @ $83)
Bought Rosetta Stone (RST) @ $21.14 (NS)

Sold a lot of GDXJ @ $36, 25% total return
Wrote covered calls on all my long gold stock positions (except AUY) capped at 5% additional upside

It's 6AM do you know where your BOJ is?

The yen is now essentially at 81. Where is the bank of japan to be found? Not throwing money in the fire yet. Much more of this and the dollar is going to get routed, quickly.


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Long live yellow

Out of my gold shorts for a 4.3% loss. My gold miners more than made up for it. Next target $1450.

Sold Verizon for $32.40, a handsome 27% total return. I'll buy back VZ back below $30.

Sold Silver Wheaton (SLW) at $27.20 for a breathtaking 45% return in 2 months!!

Will write some in-the-money puts on SLW in the meantime.

Mosaic

Great short-term buy-write. Buying Mosaic for $66.76. Wrote an OCTOBER $67.50 for $1.10.

$174 potential profit (2.6% or downside protection) with 5 days left to trade.

Gold topping

ST top is in on gold, $1364. First pullback is to $1300.

Bought 1000 DZZ at $8.99 to hedge some downside risk (not all, of course).

This bear has gone into hibernation

All 2000 sds sold for an 9% loss.

I'm hiding in my gold stocks and value stocks. If I called the top so be it. Let the chips fall where they may.


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Out of moly again

Sold mcp at 28.7$ this am. Looks like a solid sale point. May re-enter from the long side depending on mkt conditions


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Moly, Transocean

Sold MCP @ 28.21 (30% gain) on Monday. Bought it back at 26.25. Huge, beautiful bullish reversal today with a long tail on heavy volume.

Bought back by RIG call late last week for a nice 30% profit. RIG is beginning to look overbought but I think oil is starting to break out and RIG may exceed 70 in the near term.

Repulsed

Gold was repulsed (temporarily and not violently) from $1300. The miners have sold off worse than gold itself. This is a good entry point for additional miner shares. In other news -- the s&p Is amazing and I will be covering all my shorts probably Monday when we hit 1155


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Backing up the truck short

Bought 1000 more sds at 29.9
Will sell all 2000 sds at 28 if we break out here

The FOMC meeting marks the top


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Rotating out of auy to gdx

Sold 1000 auy @ 11 (7% gain)
Bought 200 gdx @ 55.6


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Market Topping Now

Market divergence continues. Money flow loss leader for the past two days running has been SPY, indicating distribution.

Increasing FX volatility due to Japanese Central Bank intervention is also causing wild swings in the currency markets.

OPEX Thursday should be down substantially (1%+) and OPEX Friday should be flat to down if history is any guide.

The ST top is in, as is the Intermediate and long term.

RIG and MCP

Wrote a 60 October covered call on RIG at $60 for $3.1 as it looks very toppy. Bought MCP at $22 last week.


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Gold looking ST toppy here

Gold feels a bit toppy here in the short term. A pullback to the 1230 area before a further advance next week when volume comes back to the market seems reasonable.


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The silly season… CRM, NFLX, OPEN

How about a stock with a 213 P/E ratio and a 79 forward P/E that is worth over 15 billion.

How about large cap stock with a Price/Book ratio of 42? (this is NOT a misprint)

How about a stock that only is expected to have 91 million in REVENUE (not income) for the full year of 2010 yet trades at a market cap of 1.3 BILLION dollars?

From these above statements you would think I was writing this article in 1999 but actually I am talking about the three stocks listed above (CRM, NFLX, OPEN)

As of today:

CRM = $120 with a market cap of 15.5 billion
NFLX = $146 with a market cap of 7.7 billion
OPEN = $55.5 with a market cap of 1.27 billion

Why are these stocks going parabolic at the moment?

1. Tech is hot: AAPL, VMW, GOOG and friends have been the “safe havens” for folks. Although the overall market is in a clear and well-defined downtrend since April of this year hedgies have been hiding out in tech. A few large high profile buyouts have just added fuel to this fire.

2. Momentum: These stocks have done nothing but go STRAIGHT up since the fall of 2008. Since this time period CRM is up over 550%, NFLX is up 700%… When a stock goes STRAIGHT up for this long without any real shake out moves people just keep adjusting their sell stops and riding the wave.

(un-numbered side note.. NFLX was trading for less than $20 in 2008 and currently trades for $146 but do you know anyone who is a new subscriber to NFLX in that same time period? Personally I got my subscription back in 2005 and most folks I know FINALLY jumped on board in 2006-2007 or so)

3. Large short interests: All three of these stocks have had very consistently high short interests.

TMFDeej pointed out the stock OPEN to me back in July when he wrote the blog post:
Cast your vote for the World's Most Overpriced Stock:
http://caps.fool.com/Blogs/cast-your-vote-for-the-worlds/423777

At the time this stock was trading for $45 a share and I said:
“This always happens with these stocks. The short interest gets really high because the stock is really overvalued, then the stock goes into a parabolic blowoff destroying the early shorts before it implodes. Hard to pick the tops on these momo stocks so I am waiting for CRM to roll over before I get short... “

Since the time of this comment in July I believe all three of these stocks have ramped at least 20%… Could this be the “parabolic blowoff”. I’m not smart enough to tell you if it is over but I can just say be on the lookout for a rollover/breakdown of the trends to get short. (only if you are an aggressive trader, I may personally stay on the sidelines)

In summary the market looks to be rolling over as the long-term moving averages are crossing to the downside. (my next blog this weekend will be about this fact)

These momentum leaders have been rising in my opinion for the three reasons above and when the market turns south I believe these types of “momo” stocks will lead the way.

Adding more defensive names

Johnson & Johnson @ $58.81 (NS), 3.7% Yield
Utilities SPDR @ $31.54 (NS), 4% Yield

In lazard

Bought a few lots of lazard (laz) @ 33. Company and economic story


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"Low Risk" Intermediate Term Trading Ideas

P/E Compression (and dividend divergence) Trade -- Short NASDAQ (QQQ) / Long Dow Jones Industrials (DIA) [Equal Dollar]

Thesis: In a mini-deflationary event, dividend, low P/E stocks should outperform high P/E, low dividend stocks

Apple Mobile Phone Wars Trade -- Long Apple (AAPL) / Short Research in Motion (RIMM) [Equal Dollar]

Thesis: Apple's market share of the mobile phone market is only 5%. RIMM has not released a competitive phone in years -- old technology.

Ag Boom Trade -- Long Mosaic (MOS) / Short Whole Foods (WFMI) [Equal Dollar]

Thesis: Food input costs will continue to increase helping Mosaic's demand, pressuring margins of grocery chains like Whole Foods.

Exxon underperform Trade -- Long Suncor (SU) / Short ExxonMobil (XOM) [Equal Dollar]

Thesis: Exxon continues to barely replace reserves on non-acquisition basis. The only thing propping up the stock is it's cash flow and share buybacks. Puchase of XTO energy will pay dividends in the long run but I expect Exxon to underperform more highly levered players like Suncor.

Tactical short opportunity

Today's gap up from the GDP number should provide a good entry point for additional shorts. I'll be looking to add to my sds in the 34s. Fade this gap!


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Get shorty

Yesterday I Added 200 more sds at 33.8; no stop. 800 total now. Plunging dollar yen indicates stocks will be plunging.


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No longer a ZROZ, bonds matured

Sold my 25+ year Treasury Zero Coupon ETF (ZROZ) @ $86 yesterday, ~7% gain. Will buy back in the low 80s (this treasury move has been parabolic!).

Also, Waste Management bonds matured. Total Return on those guys 24% over 3 years.

Back down chop

More sds (200) at 32.5. Stop @ 31.5 target $36


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Closed Gold Shorts

Sold all 1000 of my DZZ (Double Short Gold ETN) for $12.16 for a ~ 5% gain.

I think Gold has bottomed here +/- $20.

New long -- Zero & Monsanto

Monsanto, the global leader in agriengineering, is on sale. I picked some up at 54.59. It's got a 2% yield. It's at decade lows.

I also picked up some treasury zero coupon bonds (strips) in the Pimco ZROZ ETF. Price $80.23.

Back in the party

Short with SDS @ 33.50 (200)

Also wrote two SDS Aug 31 Puts @ $0.90

This may not be the end of this little bull escapade but it sure does feel like it.

Begrugingly covering

I'm out of my remaining sds for a loss at $36.


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Changes to shorts

Sold another 200 sds @ 37.3
Bought 1000 dzz (hedge to my huge gold exposure) @ 11.55 with a sell for all of it at 13


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Euro gold pair busted

The Dennis gartmans of the world got destroyed on this one with a near 3% move on the euro and more on gold. That's greater than a 6% loss on a leveraged trade. Ouch. I expect more deleveraging ahead but see this as a buying opportunity for yamama (auy) under $10.


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Sds stops adjusted

Set stops on Remainder of shares (500) at 36.8

Looking for a possible bounce here on employment surprise tomorrow and don't want to be caught too short.


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Lightened up the shorts

Sold 200 SDS @ $39. 16% profit.

More shorts

Bought 400 more SDS @ 36.10 yesterday. No revisionist history here, just didn't update the blog.

Market Probing

The market is probing for any support from the PPT. So far, not so good. Bombs away. Next stop 980 on the S&P.

Wal-Mart

RVASpeculator and I agree -- Wal-Mart is cheap by historical and forward looking valuations.
He believes that Wal-Mart may be beaten up because of two main reasons:
1) Yuan revaluation makes chinese goods more expensive
2) Large component of retail ETFs and mutual funds, which are being sold or sold short.

Wal-Mart is currently sporting a trailing 13 PE and forward 11 PE. It is carrying a 2.7% dividend yield. It's historical low point is in the low 40s for price in the past 5 years. Wal-Mart is a buy anywhere in the 40s.

I will be writing puts, In the money, on WMT if it gets down into the lower 40s.

Another Ponzi?

The paper gold (futures) market recently made a few changes. One of the ones cited by GATA and others is that COMEX can actually make delivery in shares of GLD instead of providing physical gold. I agree this is rather odd, but even worse is something I believe has been completely overlooked:

The GLD fund itself can not take delivery of gold immediately. It would be impossible to arrange delivery to vaults on demand. I suspect that GLD has predetermined delivery dates. Until then, it probably holds Gold Futures and takes delivery of those futures. This is why GLD doesn't experience any contango or other issues with its valuation because it takes physical delivery.

However, this presents an interesting conundrum...

You buy Gold futures, COMEX gives you GLD shares instead, in which GLD holds gold futures to take physical delivery.


Let me say it again. $GOLD is backed by GLD which is backed by $GOLD.

Does anyone else see a problem with this?

Now granted, I realize that "supposedly" GLD holds a fair amount of actual physical gold. And I believe it does, contrary to popular belief. But I believe it holds a substantial portion of gold futures contracts (with the intent to take delivery, granted) that constitutes a circular ownership trail of nothing but paper.

Finally, a few disclosures:

1) I am a conspiracy theorist.
2) I believe that physical / spot gold is not a ponzi.
3) I own lots of Gold and gold stocks.

First published on my blog, permabullybear.blogspot.com

Short again & some new longs

Bought 300 UltraShort S&P 500 (SDS) @ $33.50 with no stop
Bought 100 Chicago Options Exchange (CBOE) @ $31.50 with no stop (this is an IPO)
Wrote July 34 strike Puts on SDS @ $1.80
Buying more Yamana Gold (AUY) at the open, bringing total share count to 3000

Tremendously long consolidation almost complete

Yamana gold has been consolidating around the 10 level since May of 2009. Meanwhile, gold prices are up almost 30% from that point. Yamana is 50% below where it was in March of 2008, when Gold was just barely at $1000 (the first time).

This consolidation will end as soon as Gold decisively breaks out from the $1250/65 area. I believe this will occur in the next week. Gold did a classic break out and re-test move to shake the weak hands out. The next week should be solidly positive for $GOLD futures and should close Yamana above $11, on its way to $30 in the next 12 months.

Gap and Crap (Out)

Futures this morning gapped up handily -- almost 17 handles when I awoke from my slumber. Everything was higher.

And then, crap. Actually, there have been 3 other bad closes in the last week. One gravestone dogi, two other "ugly" candles. And then this nonsense today.

We need a full candle closed below the 200 DMA to feel "excited" about being bearish again. Until then, I'm not sure what to make of this.

I do know that Gold rolled over like a dead dog, and that doesn't really excite me considering the amount of gold positions I have.

Time to load up on SDS again?? Perhaps.

Likely $GOLD triple top breakout

Gold's continuous futures have already broken previous resistance. I expect a substantial bullish impulse tomorrow!


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Wow

Ok I didn't reopen shorts today like I said I would. Thank god too! I'm not doing anything again until a downtrend in the euro resumes.
Today is a prime example of why remaining short a market over even the intermediate term is often suicidal for ones net worth.


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RIG Bonds

RIG Bonds, due 2013, now yielding 7.3%. Bought 5.

The dangers of High Frequency trading in your own account

Let my example be an example to you all. Overtrading is silly and makes you no money. I have a conviction that the market is headed much lower and I want to hedge my longs. So I buy lots of ultrashort S&P (SDS) in anticipation, and make real $$. Then, I try to get cute and try to avoid the short covering spikes.

This is silly. It's overtrading and it makes you enter positions at the times OPPOSITE what you should -- after the move has already begun.

I am opening new shorts tomorrow using SDS and QID, and I'm not letting go.

More position updates

Wow, I've been slack.

Bought DD @ $41 and $37, cost basis then $39.
Bought XOM for $67.
Bought KO for $54.

Position Updates

This has been a long time coming:

Sold half of my BP for a 40% loss.
Wrote a BP $20 July Put for $98.
Got assigned on my RIG at $65. You know where that is now.
Sold 200 AUY at $11 yesterday.

Covered all shorts again

Sold all SDS @ $35.3 for just marginal hedging gains; less than 1%.

Missed the boat by not selling yesterday morning for a 5% gain.

Pile it on

I'm putting my money where my mouth is. I'm piling on another 100 sds. This grizzly smells blood in the stream from an injured bull. Bought at 35.8 with a stop at 34.8.

Oh and Gold to new closing highs today!


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More destruction ahead

We closed today below major support in all major FX crosses --euroyen, eurodollar, Aussiedollar -- and this portends further weakness in the equity markets as the new deleveraging cycle accelerates. Capital flight is occurring in the European market which is driving FX markets which is in turn driving the dollar which in turn is driving US stocks (along with energy uncertainty from the BP spill) lower... In turn driving gold higher? Got that?

I expect more of the same the rest of this month and quite frankly the rest of this year. Short term setup on the s&p puts us at 1014. We will likely get there next week.

Be safe and get hedged If you are long -- it's about to get ugly.


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Beep Beep Beep

Backing up the truck.... bought 300 more UltraShort S&P 500 SDS @ 34.7 with a stop @ $34.

Total position: 500 SDS, or roughly $17,500 short with 2X leverage $35K short.

Reshort at resistance

Bought 200 SDS @ $34.30

I'm out of my shorts (really naked now)

34.6, closed all SDS for a "minor" loss. Let the bull parade begin up to 1150 where I may short again.

I'm a happy trader

Bought 300 UltraShort S&P 500 (SDS) @ 35.16, stop @ 34.1

I'm only going to track the SDS in the blog and not on the positions list as I am in and out of it too quickly here since this bear move began.

SDS

Sold 200 SDS @ 37. Will reshort if the market closes in below 1050 about 10 minutes before the close.

Short and re-short

Reshorted ... bought 300 UltraShort S&P 500 (SDS) @ $35.12

SDS covered

Sold another lot of sds this morning at $36.


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Less short

Sold 200 sds @ $34 for a 18% profit.


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Gold looks toppy

Gold (GLD) looks toppy here. We've tested $1250 3 times now and failed. There are no triple tops -- so Gold will eventually surmount this challenge. But there may be a pullback to the upper $1100s in the meantime.

I'd use this opportunity to write near-month (June) covered calls on any gold miner positions (GDXJ, GDX, GG) and to accumulate phyiscal Gold (PHYS).

I like the $31 June calls on GDXJ, the $55 June calls on GDX, and the $49 June calls on GG.

Euro (and consequently equity) bounce coming

The Euro hit a panic low today around $1.22 intraday. This likely marks a short-term bottom in the eurodollar cross. Already in afternoon trade it has recovered all the way to $1.24. I suspect equity markets may get a bit of a boost tomorrow as the euro may rally on shortcovering to $1.26.

This short-covering will be ahem...short lived. I expect the euro retest the 1.22 area again in the next week or two, and I expect substantial market intervention from central banks again in this area to try to build an artificial bottom.

Sara Lee, you've been good to me

Sold all of my Sara Lee (SLE) for a 52% gain including dividends. The stock is now fairly valued to slightly overvalued.

$9.93 Purchase Price
$14.80 Sale Price

Moving on Up

Bought Bristol Myers Squibb (BMY) @ 23.9 (NS)
Bought more Ultrashort S&P (SDS) @ 31 (S @ 29)
Bought Goldcorp (GG) @ 46 (NS)
Bought Goldenstar Resources (GSS) @ 4.4 (NS)

Volatility high = Put premiums very high

If you are willing to own some big cap names here at 40% lower prices and still collect an option premium, there are some interesting opportunities out there.

Write an AAPL June $150 put for $0.80. AAPL is currently trading around $235 (36.2% stock price decline required to lose money on option). If you believe AAPL will not trade down to $150 by June 18th then this is a money maker.

Write a GOOG May $390 put for $1.00. GOOG is currently trading around $493 (20.8% stock price decline required to lose money on option). If you believe GOOG will not trade down to $390 by May 21st then this is a money maker.

Write a BRK.B May $70 put for $1.00. BRK.B is currently trading at $74 (7% stock price decline required to lose money on option). If you believe BRK.B will not trade down to $70 by May 21st then this is a money maker.

Write a BP June $42.50 put for $0.83. BP is currently trading at $49 (13.2% stock price decline required to lose money on option). If you believe BP will not trade down to $42.50 by June 18th then this is a money maker.

Tried and true market signal vs. “Fundamental Analysis”

Something I wrote down many years ago when I first started following and investing in the stock market was…

Best long-term market timing system:

20 week moving average crosses over the 50 week moving average by one percent you go long… If it goes below by more than one percent you sell.

Everyone talks about esoteric technical systems like Elliot Wave or some crazy “can’t fail” chart pattern but in reality stock technical analysis boils down to two things.. support (and resistance) and most importantly TREND.

The 20/50 helps you get the trend part right.

How can you argue with a strategy (the 20/50) that:

- Got you to buy in the year 1994 at around S&P 450.
- Didn’t tell you to sell until year 2000 at S&P 1400.
- Got you back in the market in 2002 at S&P 900.
- Told you to sell again in Jan 2008 at S&P at 1450.

So given I know this signal and respect it, tell me what I was thinking back in the summer of 2009 when these two moving averages crossed again and gave a BUY signal at around S&P 1000? Why didn’t I buy there, I was actually just finishing selling my last longs at the time and shorting some things.

See Chart:

Basically I thought… “It’s different this time”.

The market had run from 666 to 1000 is just a few short months. I was long for most of it and felt like a genius.. Fundamentally I saw the economy was still very weak and there were many reasons good for us to go lower. All of these have been covered in my blogs and in other folks blogs.

I ignored the signal and did NOT go long. The only thing the signal did was keep me from trying to short and made me put ultra tight stops on the few shorts I tried because I realized the trend was against me. So the signal saved me lots of money I could have lost shorting but I did not buy the signal because of “fundamental analysis”.

A couple of weeks ago the market topped out at 1220, a full 20% above the 20/50 signal point.

That’s 20% that I missed on the long side because I didn’t follow a simple signal. There is a reason old pros say things like “charts don’t lie, people do”, “the trend is your friend”, “the market can stay rational longer than you can stay solvent”, etc.

It is because the market can always find a reason to go up or down that is disconnected from the fundamentals and informed participants are always surprised how far it will overshoot on the upside AND the downside.

The market is driven by panic, euphoria, outright manipulation, greed and a myrid of other human forces. In the long run it is fundamentals of course, but the long run is MANY YEARS.

So in summary the market has not really gone anywhere the last few weeks and you can see the red line gaining on the blue line in the all important chart above… Maybe the market has topped (no one knows for sure), but what I am SURE of is that the person who WAITS for the signal on the long and short side will always DESTROY the person who tries to pick bottoms and tops.

Trust the predefined mathematical market signals you believe in (whatever they may be) and not fundamental analysis if you are going to try to time the market.

New Stuff

Buys
BMY @ 24.45
SDS @ 29.8
NLY @ 17.2
AUY @ 10.20

Sales
RST @ 27.32 (32% gain, final lots)

Rosetta Stoned

That was some really good stuff, man. Sold 200 at $26.98 for a 26% gain. 200 left.

AUY put, FAZtastic no more

Put 200 shares of AUY @ 11. Trading at a slight loss considering option premiums, (5%) right now. Holding onto them until the cows come home.

The FAZtastic journey is over. Sold all lots @ 11.34 for a 75% loss. Lovely. Probably calling the top here by my action, too.

The Great Recovery in Pictures.

First lets take a look at the stock market over the last year.


Wow that’s quite a rally off the lows. Let’s see, what originally caused all these problems in the stock market?

If you had to sum it up in just a few sentences you would say that first real estate declined which caused people to get in trouble with their mortgages. That hurt the mortgage-backed paper, which hurt the banks, which lead to the mortgage crisis, which caused massive job losses. This caused even more problem like lower consumer credit, more job losses, more home delinquencies, etc…

Well looking at the first picture (of the stock market) I would guess that all of these issues have been solved or at least improved quite a bit…

First lets look at the crux of the problem, the housing market. To get a rally like in the stock market delinquency rates must have really improved or at least stabilized.
Lets look at the “prime” delinquency rate and see….

Fannie Mae Serious Delinquency rate:


Well, that doesn’t look very good. Actually the national delinquency rate has been skyrocketing in a “hockey stick” manner. 8.78% of all US mortgages are now at least 90 days late! In the bubble states the stats are pretty unbelievable. Florida’s statewide delinquency rate is up 7% over the last year and now stands at 19.38%.

Let that sink in for a minute. Currently 19.38% of all Florida “homeowners” are at least 90 days late on their mortgage. Do you think this is going to lead to higher home prices in the near future or lower? How will this effect mortgage backed paper? Also consider the fact that the $8000 handout from the government runs out at the end of this month.

Ok, so the housing market is not recovering at all. So this market rally must be based on a large turnaround in the jobs market. Folks out of work for a while must be finding jobs in droves. Lets take a look at how many people have been unemployed over 26 weeks.

Unemployed over 26 weeks:


Ok… that doesn’t look very good either.. maybe these folks are just some kind of losers and really the overall job market is improving?

Let’s take a look at all of the recessions since the 1940’s and this current recession and see how the overall job market is doing. With a 80% rally in the stock market it probably has turned quite a bit.



Oh… that doesn’t look too good either. Especially when you consider currently we are counting the 1.2-1.5 million temporary jobs for the US census in these numbers.
Well what about lending and consumer credit. A big part of this crisis according to the talking heads was “banks aren’t lending”. I assume consumer credit has turned around quite a bit then?



Oh… actually it has declined for 12 straight months now and has been declining throughout this whole market rally? Strange…..

So you have a situation where the real estate delinquencies are surging, the job market is not improving and banks are not lending yet the stock market is rallying like it is 1999. How can you explain this?

Easy, the government is spending and giving away more money than in any other time in history (and this is an understatement)

1.5 trillion dollars going to be spent just this year…
A record $220.9 billion deficit in February alone
For every dollar in taxes and other revenues the federal government took in, the government SPENT $3.05.
2.4 trillion needs to be auctioned off in the treasury market just this year.

From Chris Martenson:
"Taken together, this means that in only two short years, 2009 and 2010, as much new Treasury debt will be auctioned off to the public as was outstanding in 1995. Since government borrowing never gets paid down, at least in modern history, it means that the last two years have seen as much borrowing as happened over the period in which electricity was strung to every house, the highways were built, and our population tripled. What can we point to that was created over the last two years to rival those accomplishments? "

So we have paid for this stock market rally with our futures. And the sad part is we have not even improved the things that the average person on the street cares about like the price of their home, their job and if they have access to credit.... we just gave a bunch of money to banks who speculated in stocks and made another valuation bubble.

Do you feel this stock market rally was worth it?

More PPL

Pennsylvania Power & Light (PPL), sporting a 5% dividend, at its channel low of 28 and only 25% from its 5 year low versus nearly 100% away from its 52-week high.

Risk is low, reward is high. Near term price target -- $32.50 (top of the channel).

Long term price target -- $42

Buying 2 more lots

Fixed income & Kimbo

Bought 5xConagra 2021 9.75% bonds

Bought Kimberly-Clark (KMB) @ $63

Sales & Hedging

Sold two lots of Kraft (KFT) for $30.50 and all three lots of Hershey (HSY) for $43

Gains of 13% and 27% respectively.

Bought another 100 SDS @ 31.22 with a stop @ 27.50.

More buys

1) Humana 6.45% due 2016
2) Wrote AUY May 11 Put @ 1.1

New positions

New positions in ExxonMobil (XOM) @ 67.60, Dupont (DD) @ 37.50, and Southwest Airlines (LUV) 2016 4.25% bonds

More putting naked

Wrote two RST 20 Jun Puts @ $0.8
Wrote one GRMN 30 July Put @ $0.95

Sold two lots

of RST @ $25 even for a 25% gain. Wrote a $25 June call on RST for $2.24

New Bond & Sold WM

Bought Pepco 6/1/2017 6.125% Bond at 106.131

Missed the WM sale @ 32.50 in yesterday's post for a 11% profit.

Closing "Other Picks"

I'll put my money where my mouth is. But wow, these picks did great:

Other Picks
• Bought AA @ $10.48 [11-26-08]
o Closed AA @ 13.34 [3-3-10]
o $2.86 profit/share; 27.3% ROI
• Bought DBA @ $24.80 [11-26-08]
o Closed DBA @ 25.11 [3-3-10]
o $0.31 profit/share; 1.2% ROI
• Bought KO @ $45.90 [1-6-09]
o Sold KO @ 53.9 [3-3-10]
o $8 profit/share; 17.4% ROI
• MSFT @ $20.49 [11-26-08]
o Sold MSFT @ 28.46 [3-3-10]
o $7.97 profit/share; 38.9% ROI
• PFE @ $16.07 [11-26-08]
o Sold PFE @ 17.32 [3-3-10]
o $1.25 profit/share; 7.8% ROI
• VLO @ $23.24 [1-4-09]
o Sold VLO @ 18.63 [3-3-10]
o $4.61 LOSS/share; 19.8% LOSS
• YHOO @ $10.58 [11-26-08]
o Sold YHOO @ 15.57 [3-3-10]
o $4.99 profit/share; 47.2% ROI

17.14% Average ROI

Lots of Position Changes

Sorry for my tardiness. It's been months since I updated my position list.


Stock Activity
Bought MOT @ 6.58
Sold LINE @ 22.50 – 40% profit including dividends
Bought GDXJ @ 28
Bought GDXJ @ 27
Bought RST @ 20
Bought SDS @ 40.98
Bought ATVI @ 11.30
Bought INTC @ 20.84
Sold WMT @ 52.50 – 7% profit
Bought KFT @ 26.70
Bought AUY @ 10.1
Bought BP @ 56.7
Bought HSY @ 36
Bought WM @ 33.16

Option Activity
Wrote June 2010 KFT 27-30 Strangle
Wrote June 2010 VZ 26-31 Strangle
Wrote June 2010 WMT 50 Put
Wrote Jan 2011 KO 42.5 Put
Wrote Jun 2010 MCD 60 Puts
Wrote May 2010 GDXJ 31 Call
Wrote June 2010 RST 25 Calls
Wrote June 2010 SDS 41 Call
Wrote April 2010 AUY 11 Puts
Wrote Jun 2010 BRK.B 65 Put
Wrote May 2010 HSY 36 Put

Bond Activity
Bought Viacom 5.625% 2012
Bought Joy Global 6% 2016
Bought Fortune Brands 6.375% 2014

I know of a fund manager (named Mr. Gold)

This guy has beaten the market 10 of the last 12 years. $10,000 put into his fund in 1999 (Dec 31st) would have turned into over $37,000 while $10,000 into the S&P in 1999 would have turned into $9,000.

In 2008 when the S&P lost 37% of its value this fund manager was prudent and made sure that his fund still returned 3.5% for the year.

Obviously I am talking about the commodity of Gold and not a mutual fund but the point I am making here is if I WAS talking about a mutual fund all the performance chasing sheep out there would be begging me to tell them how they could give this fund manager their money.

But tell the person that this is gold and all of the sudden their eyes glaze over. In their zombie like state they utter something like “Isn’t gold risky” or “I heard gold is a big bubble”. I actually was telling someone about gold 3-4 years ago at a cookout and they vehemently argued with me that it was illegal to own gold and they did not believe I owned any.

A big deal is being made about all the commercials on talk radio and CNBC/Fox News for buying gold. I admit that this bothered me as well which is why my last call on gold when we were trading above $1100 in November 2009 was “Gold: long term hold, short term reduce”

http://caps.fool.com/Blogs/ViewPost.aspx?bpid=287772&t=01001808419327792238

But the reason I made this call was I believed the dollar index was going to rally from 75.
I said:

“The problem is the dollar index hit 75, rallied to 76.5 and now is headed to right above 75 in my opinion to make a short term higher low. The insane downside momentum has abated even with today’s 1% decline. When momentum slows the moving averages flatten out and that is how you get rallies… even in something as fundamentally worthless as the US dollar.”

Well flash forward 3 months and now the dollar index is above 80 and gold has gotten taken down over 12% off its highs. Most of the gold mining stocks have lost 30% or more off their highs. If you noticed in CAPS over the last week I was closing all my hugely profitable gold and silver miner shorts.

Is the correction over in gold and gold related stocks?? I don’t think it is yet. I still think gold is going to correct back to 3 digits to scare all the late gold buyers.

But what is funny to me is that will NOT change that gold is in a BULL MARKET.

This will also not change the fact that gold will continue to beat the S&P for quite some time to come….

The reason gold is not a bubble is the common person still HATES gold and thinks it’s a huge bubble. Sure some investment gurus are huge gold bugs and so are some vocal folks on TV but as someone who has lived through quite a few bubbles in his life knows its not until the COMMON person gets involved with an item that it becomes a bubble. Do you remember the tech bubble? Every person at my gym and every one of my friends was talking about their next tech stock and how the “New Economy” had changed stock valuation forever. Do you remember the real estate bubble? Home prices can never fall! They are not making any more land! Real estate is the path to wealth! I just got back from this Carleton Sheets seminar!! Your mailman was saying that and so were your mom and brother. Ask those same people now what they think about gold and they will tell you it is a big, risky, scary bubble.

This is why in my opinion although gold could have more short-term downside it will CONTINUE to crush the S&P for years to come.

End RANT!

Financial Advisors… They only know ONE word!

That word is “BUY”.

So I am in my car a lot and I usually keep an AM talk radio station on.

On the weekends there are a few “Investment Advisors” that have weekly shows. For years I have listened to their advice more for personal entertainment purposes.

I listened through all of 2007 and 2008 when every weekend they said: “Now is the time to buy this dip in the stock market”. Every weekend without fail it was the same thing.

I hadn’t heard any of their shows for a while but in December 2009 when the Dow was above 10,500 and the S&P was above 1100 I was curious if they had maybe FINALLY turned cautious on the market. I mean the market had rallied about 70% from the levels in March and valuations on stocks were higher than pretty much any point in history aside from the Tech bubble in 2000.

I turned on the radio and I heard this:
http://www.fileden.com/files/2010/1/31/2745273/BUYBUYTheMutualFundShow_12-05-09.mp3

I learned from this that it does not matter WHAT the market does, these “Financial Advisors” will always say the same thing. BUY, BUY, BUY!

It reminds me of an old adage, never ask a barber if you need a haircut.

Sold Ford

Sold Ford at $12 last week (sorry late post). 200% Gain. I'll take it.

2010 will be what 2009 should've been

Thus I'm lightening up on my positions. MCD & JNJ sold for 6 and 10% profits. KO sold for a 12% profit. Averaging down on HSY.