Thursday, January 26, 2012

wish you were here

It is hard to convey the passion that I feel for trading. It isn't about money. It is about the challenge and doing something well that has been the hardest thing that I've ever tried to do. It is about the challenge of learning my own emotions and how they affect my trading. How they affect my play in this ongoing poker game that is speculation.
Anyway, wish you were here.....

Wednesday, January 25, 2012

Yes, that's it!

Raison D' etre

Trading is my raison d' etre!

Geez, I better not get too giddy today. Or I'll pay for it tomorrow......


metals and the US Fed.

The Federal Reserve released their monthly statement this morning. As it was put by someone on CNBC, "this is a cut and paste Fed". The statement remains the same as it has been for sometime. In light of the pick-up in economic activity this seems overly dovish. The Fed apparently is going to wait until they absolutely KNOW that the economy is revving up before they consider tightening. This action (or lack of action) this morning was very bullish for gold and silver. The long bond was bought up for a sharp rise on the short term view that the fed will support the long bond. The dollar plummeted. It shouldn't take long for the markets to come to the conclusion that it is a losing proposition to hold long term US paper while the underlying currency is declining. And it will give increased impetus to the view that the Fed will make a mistake by letting the inflation bug out of the bag. It was this same type of Fed action that led to the big decline in the dollar a couple years ago and the big bull market in silver and gold. That may happen again.
I added to SLW today. GG is looking good. Steel still strong..... Also added to TBT, although I wouldn't recommend it to the faint of heart. And I may find myself arguing with the bond market, which is a bad thing to do from a profit point of view....
The charts:
t Look at TLT, TBT, SLW, GG, GLD, SLV, UUP,

The second TLT is what it looked like later in the day.....

Saturday, January 21, 2012

Bad week for bonds.

As the situation in europe shows signs of a positive resolution the fear will come out of the long bond market. This should make for a good move to the downside in long bond prices and an increase in the yield. This may be a major top if it happens. Bonds have been in an uptrend for 30 years, culminating in the real-estate mania that topped out a few years ago. Since then the uptrend has been held in place by the fear of economic collapse in this country and around the world. As those fears subside, if and when world economies return to growth the fear will be of inflation. There are still billions of people in the developing world who want a modern lifestyle. This will put inevitable pressure on food and energy, not withstanding the natural gas prices and availability. And politics will continue to move this country to a protectionist stance. All of this is bad for long term bonds. It will not happen overnight, and there will not doubt be some rallies in the bond markets to come, but this may be the top in a long period of declining interest rates.
Here is a chart of TLT the Lehman long bond fund.
I anticipate selling below all of the recent lows. Perhaps a cascading effect similar to the recent gold selloff. Bonds are a different animal tho. Each market has it's own personality. The way to play such a move is to short the TLT or for long only investors buy a fund that shorts the long bond. Such a fund goes by ticker symbol TBT.

Always limit your losses by getting out if a market goes against you. It is better to keep your money and live to play another day. Sometimes getting the timing right means several trys at a move or a stock and if you let the market give you a big loss you won't want to look at that market, let alone trade it. Don't lose money is the first lesson of profitable trading. And don't take your eye off the ball. Scale in as the market proves you right. The big money is made off the big move so don't get greedy or in a hurry.....


Wednesday, January 18, 2012

Today Jan. 18, 2011

Increased volume on an upmove in the major indexes today. Even better volume on the emerging markets index (EEM) and the small caps (IWM). The markets have had several opportunities to sell off and haven't so this is a good indicator. Maybe the big investment banks are on the sidelines.(see previous post)
The S&P:

Interesting price action in SLV today, the silver ETF. Buying on above average volume all morning. SLV looks to break the downtrend line soon. That is the first sign of a change in trend. Silver is not only a flight to safety, but more so an inflation hedge and an industrial metal. Buying could signal that investors are looking to a pick-up in physical demand or a pick-up in inflation. My feeling is that the market is in the process of changing from deflationary fears over Europe, and by sometime late this year or next we may be back where we were in 2010 as far as inflation goes. Time will tell. Here is the chart of SLV:

Not time to get excited yet, tho. When and if we get to about $35 things should be getting heated up!
The same applies to Dr. Copper: Things will get going when and if we get above about $36.

FCX is looking good. Highlighted in an earler post....I bought some GoldCorp today. It didn't act the way I thought, but haven't sold it yet. There may be a changing of hands in the gold market from those who took safety from the Euro and deflation, to those who are worried of inflation. Gold can profit from both but it takes time for the  paradigm to shift. The gold STOCKS were not a good bet deflationwise, but usually boom when things start heating up in the metals markets. And the US smallcap stocks and the emerging markets, for the investors.....

These two areas are where I am "invested" for the longer haul.....
Good luck. Now back to the Merlot......

Investment banking slumps!

Citigroups earnings were down yesterday in big part due to a slump in TRADING revenues. The effect of regulation is taking it's toll on the investment banks. JPMorgan also down recently. This is a good thing for the markets. This is getting the sharks out of the waters and letting the market express the optimism that has been repressed for years.
Is there any better reason for the little guy to get back in?
Here is a link:

Steel still acting good.  Copper strong. S&P strong,(volume light, lack of Citi????) Nat gas down, GOOD! Banks trying to rally, probably short covering. Banks don't need to be a big part of a strong economy despite what some say. Banks are the tail on the dog. The tail should not wag the underlying economy, if you get my metaphor. I see a period of shrinking banks, there are too many banks leeching money out of the economy.......
It is shaping up to be a good year for the little trader. So far.....
Control your risk,

Thursday, January 12, 2012

Long bond smackdown.

A few minutes ago the U.S. Treasury concluded todays auction of long term government bonds. There was poor demand and the UST sold off sharply. It is my view that the long bond market is set to go down. The trade MAY resemble that of the gold market from a few weeks back. In other words the chart shows the potential for a lot of selling below here.

The fund to buy as/if this develops is TBT.

Always scale in and control your losses......
Did I mention X.....US Steel is trying to go up.
Bon Appetite

Wednesday, January 11, 2012


The Euro is down again this morning. I just can't shake the strong feeling that this thing is going to bust out to the upside. The stock indexes feel strong, gold is up even with a strong USDollar, copper is up....the list goes on.
Not a time to buy THIS particular chart, but everything else points to a reversal in this one....
Here is a prime example:

Scale in. Control risk.

And I think that the bond market is giving a "headfake" today. But it remains to be seen who will be right and who will be wrong. Maybe I'm getting faked out!!  Remaining vigilant.

Monday, January 9, 2012

Is Europe really a problem??

Here is an observation regarding the Euro currency as seen from the perspective of the Euro currency fund FXE.
I notice that the big volume came during the upmove from #1 to #2 on the chart. Some big volume on the initial selloff from #2 to #3, but the volume lately has been anemic during a move down. I put a lot of credence in what the volume of any move tells me. And that leads me to think that there may be a rally in store for this currency. And that has meant a rally in the U.S. and world stock markets as well as a weak US Dollar which has meant higher metals prices.......We'll have to wait and see.
Here are the charts.

control your risk with money management

Thursday, January 5, 2012

TBT bottom forming????

TBT looks to break the downtrend. There may be a bottom forming. It is too early to take a big position. The trend is still down, but a small initial position may be warranted with a view to add as this fund goes above recent highs, and a sellstop below the recent lows.....

control your risk

The investing elephant

As I sit here I was struck with an analogy. That is, the markets make the big moves from the buy and hold actions of the investors but the traders try to profit from moves of a generally shorter duration. The traders trade against one another while the long term investors move the markets in trends. So the picture that came to mind was of a lumbering elephant, the investors market, ambling along while traders fought each other to stay on the back of the elephant. If a trader can get a good seat he needs to hang on as long as he can. If the elephant makes a hard turn the trader has to be aware and jump off, but if too many traders jump at the same time they tend to get hurt in the fall, and sometimes the elephant gets spooked and runs amok.

Control your emotions and control your risk!

Wednesday, January 4, 2012

Jan 4, 2012

Nice start to the new year in the stock markets. Volume generally a little low but I expect we will have to see the reaction to better gauge the strength of this market. Metals up yesterday and today. Steel particularly strong. I talked about Steel Dynamics last November and we finally got the buy signal today with a breakout to a new high on increased volume. This is what it means to buy new highs. In this case the move may be the confirmation of a trend change from the long downtrend. Time will tell. Here is the chart.:
I look for good support at the recent highs if the price falls back. If it goes much lower than that I will consider myself wrong.