Wednesday, February 29, 2012

Interesting day.

Interesting day in the markets.
I closed out most of my positions in the first hours. Partly because I didn't like the way things looked this morning. I had some silver positions and a few speculative stocks. (ADY, EGLE, RIO)

A few posts back in "Markets tense" I mentioned that silver would either go up from here or have "the mother of all reversals".

Looks like the latter.
So I'm out of the markets for awhile. Except I added to the VXX. Will wait and see how things shake out. Here are some charts:

The best thing to do at times like these is just stand aside and wait for a clear direction.

Controlling risk,

Tuesday, February 28, 2012

intraday selloffs.

One thing I'v noticed over the years that it depends on what time of the day it is as to how much credence to give a selloff or a rally.
Usually I don't give much credence to the moves in the middle of the day. Like the selloff that just happened today.
I wonder if this is the result of millions of East coast workers checking their blackberrys on their lunch and then deciding to "take Profits" before they go back to work??


I mentioned CDE a few posts back.
Looks to be ready for a breakout......

Market feels tense

The markets feel like they will break one way or the other from here. It frankly feels like things could get hot to the upside. But those pesky long bonds keep rising. Maybe just shorts covering. Alot of the time when something is expected by too many people they end up upsetting their apple cart and the market goes on without them. But TLT is up and that is or has been the warning of weakness in the stock market....
Silver up. It either takes off to the upside or does the mother of all reversals here. The price is at the same place where the wild run to the top commenced last year. SLV is the leader, SLW is the follower....

So things are not adding up. Yet.
Control risk,
@ 0852 PST
Here is another possible indicator of inflation expectations rising.

Sunday, February 26, 2012

one plus one equals two

plus this:

equals this:


Over on the Big Picture blog I ran across this link:

And my response in the comment section:

When most people think of "speculators" they thing of rich traders and hedge funds buying up supplies and sitting on them while the price rises. But supply is not constrained. According to the author supply is not constrained. Well, supply is constrained. It is constrained by the fact that everyone in the supply chain speculates. Does the gas station where you fill up wait until he sells his tanks down to raise the price? No. As soon as he senses that prices are on the rise he raised HIS price? Why? Because he has to pay a higher price for the next truckload that he buys. And is he in a hurry to sell what he already has? No. Why would he be in a hurry to sell it? The price is going UP. So when everyone in the price and supply chain expects the price to rise the pric goes up rapidly.
And if the price of oil is higher than it should be then demand will fall off. But if the large heinous speculators want to buy it then the big oil suppliers would supply those speculators with all the oil they wanted. Why not? If the oil companies can't sell the oil to the refiners then they would sell it to the speculators. And what happens then when the speculators have all they need and there is still no actual demand? Then the price collapses. And the speculators sell at a loss. This is why the large speculators are so intent on getting things right. And there are not only speculators that buy UP the price but speculators that short the energy markets and expect to make money when the price goes down. Is anyone out there attacking the oil short specualtors? I think not. For the same reason your Congressman did not complain when speculators were running up the price of housing or running up the price of stocks. When speculators buy they push up the price and when they sell they push down the price. Net result is ZERO.
There is a reason that speculators THINK the price will go up. That is what needs attention. Not that speculators are speculating!
And then I find this chart. (thanks Big Picture)

Can we conclude that corn farmers speculate???


Friday, February 24, 2012

Thanks Jesse!

After posting that last boring blurb I went over to Jesse's Cafe and shamelessly stole this cartoon that expresses eloquently what I think about the Tea Party and the state of the American political system. I suggest that anyone who looks at this blog also visit Jesse's Cafe Americain......

2/24/2012 Boring......

End of the week. The markets are getting dull. Earlier in the week I noticed some buying on the dips that had some volume but not in the last couple days. Today, Friday saw some intraday breakouts to the upside that failed. When breakouts start failing it is a sign to beware of a possible reversal in the averages. And if haven't mentioned it in awhile, the averages are all important to the trader. If the averages turn down it is damned difficult to make money on the upside in most stocks. It makes it hard to find those sustained trends that allow you to get in late and get out early and still make a profit...

"Buy late and sell early".....

I'm getting mixed signals. For the past few months I've paid attention to Deutche Bank (DB) and silver (SLV) for my signals as to which way the broad averages would go. Those two still look reasonably strong. BUT.....I bought a few shares of VXX today at the close. A well defined stop loss below the recent lows.

It looked intraday like someone was looking for buy stops above recent highs in LLL. The price barely went above the channel and then sold off. Sometime when something on the chart is obvious you have to expect that others will "run the stops". ie, push the price up in anticipation of buy orders above the market with the intent of selling into those buy orders. So I usually put on a small position as the run starts and only add to it if the price is able to hold up there and move higher.

Some of the best breakouts are in cases where there is a breakdown from the promising pattern and then a quick reversal and up through the pattern. Here is LLL.....
One of my favorite ways to get position in a stock is to start to buy as the stock is coming out of a consolidation and moving back towards the top of a range. ADY is an example. It narrowed down to a fine coil and has started up in the last couple session. If the general market holds up it may go to the top of the recent range. If not then it will break down and I'll take a small loss. The perfect trade would be for it to go back up to $4, have a further consolidation of declining volume, then buy some more as it goes higher. They don't usually turn out perfect however!

Merlot 181   !!


Thursday, February 23, 2012

Political editorial

There is a big brouhaha going on over a provision in the law that would require employers to provide contraceptive insurance coverage. The argument against Obama and against the provision is that it would go against the religious beliefs of Catholics who do not believe in contraception.

But, wait a minute. If an insurance company is going to sell a policy to a religious entity whose members do not believe in contraception the insurance company will price in the fact that none of the covered participants will use the service. Right? So they would get a better price for the coverage since they aren't going to use it. If I belonged to a group that spent our lives eating veggies, exercising, and only breathed clean air I would expect we would get a good deal on medical insurance. So, since no Catholic women will use those contraception services the Catholic church won't have to pay for them.
And we all know that there are NO Catholic women who use contraception!

The light bulb goes on??

I've been watching TATA motors since December when it broke out of a small formation with a powerful move higher. I didn't look for any fundamental reasons but I've been wondering if there were. This afternoon CNBC tells of President Obama making a commitment to expore natural gas passenger vehicles. The light goes off in my head. I google "does tata motors make natural gas vehicles". Here is the link:
Do you suppose that is the reason? Will TTM get to import their very inexpensive cars? Natural gas. Another reason for nat gas prices to bottom.... Here is that impressive Tata chart.

A story: In late '08 or early '09 I was trying to bottom pick in Tata. I bought a whole bunch at about $4. Then the stock went to $3.50 and I let it go with a big loss for me. I didn't look at it again for sometime. I suggest you look at a long term chart. It was an impressive move up after that $3.50 bottom! Of course alot of things went up in '09, and I more than made up for that particular stock. But the lesson is to avoid the bottom picking large losses so you will be there to catch the move up. It is all in the timing. If the timing ain't right get the heck out until it is!

Things looking surpisingly strong.

Looking around this morning.
Copper strong. Silver and gold remain strong
The speculative favorites from years ago showing signs of life. Are the "animal spirits" returning to the market. It is still early. But..... ADY, FCEL, BLDP, NATI, NVAX, DRYS, the specs.....
CDE may breakout here. It was a favorite a couple years ago. I remember they couldn't pronounce it on CNBC. (kor' duh lane) It is up in Idaho.....

Biotech is hot.
But Dr. Copper is the big chart.

Copper looks to cross above the 200 week moving average......
And finally, TLT finally looks ready to go down. In the past the up days numbered 3 to 4 in a row. Yesterday stands alone, so far. There may be coming an "Oh no!" moment soon when the longs realize their error. Also know as a "Minsky moment" I think. LOL

We'll see.
Control your risk.
EDIT: @ 1107 PST....TBT is giving ME a Minsky moment today!  gh

Saturday, February 18, 2012

Saturday Feb. 18,2012

Gonzalo Lira posts a good blog about the inflationary/deflationary ramifications of a war with Iran:

I looked through my defense stock charts. Here are the two that really stand out, besides Boeing.
Teledyne and L3. Teledyne is a picture of a long term uptrend. And LLL is a potential breakout.....

Oil us up around $103/barrel. USO chart:

And finally TBT has been giving me fits but I'm hanging in there with a long position here:
It is hard to reconcile a bearish outlook on the stock market and a long here.......

Wednesday, February 15, 2012


I'll admit I was a little nervous last night when the futures were up so strongly, and this morning they were still up but not as strong. Todays action in the markets reinforced my bearish feelings.

 After the market close there was a lot of chatter about Apple. (AAPL) I don't usually follow Apple but have been aware that it has done well over the last few years. Looking at the chart of Apple gives some insight into the sentiment of the markets. Apple has been a darling of tech. Tech has been the strongest sector over the last few weeks. And now it appears to have made the beginnings of a top. As a lesson it is hard to find a better example. My notes are on this chart, but watch this stock over the next few weeks. I think it will be a good lesson......

It was curious that the treasuries didn't go up as strongly as I would have expected today with all the bearish indicators otherwise..... TLT:

Here is a chart of the Nasdaq index. (QQQ) Notice the volume on todays downday.

The point of these blogs is to make the point that in order to make money in the stock market by speculation one has to have the ability to change his mind when the facts change. It looks to me like the facts have changed. At least the odds seem to be that the markets will be choppy for awhile. So I think it prudent to stand aside. (I am actually short the smallcaps using the reverse ETF TWM....) But the point is that last month I was bullish and now I am not. The rally has remained on low volume and now the volume is picking up on down days. I do not argue with the market. At least I TRY NOT TO ARGUE WITH THE MARKETS.
One of the best quotes I've heard was made by Bernard  Baruch. In his book, "My Own Story" he says he is asked by someone why he has changed his mind on the markets. He replies to the effect: "When the facts change, I change my mind. What do you do, Sir?"
This is the flexibility that the speculator must strive for! Let the ego go.
Writing this blog does make that more difficult. When I make a "prediction" I want it to go as predicted. If it doesn't go as I thought, I feel embarassed. But, I still manage my trades on the best impression of the market, and my trades often change before I make my opinion known on this blog. That is why I alway say:

Control your risk!!  (Control your own risk!!)

Tuesday, February 14, 2012


As usual in my short term orientation I am starting to feel bearish on the markets. I've noticed some sustained selling in the indexes lately as well as quite a few speculative stocks that have been running up without strong fundamentals.
And then today there is this article:

It seems that war may be on the way and the markets may just be starting to price it in. We'll have to wait and see. I took my "investing" money out of stocks and back to bonds for now.... I try to just "invest" when the odds are in my favor.
Gold and silver may be weak as well. For now.

Wednesday, February 8, 2012


A quiet day. Some intraday selling that perked me up. Will wait to see if it comes back again. First day in a while with an opening up and a selloff....... If that becomes a habit it could signal a change in direction. At least temporarily....
Citi still strong.... Steel showing some distribution?? Dollar still weak. Keep an eye on long term rates. Still less than 2%. TLT may be rolling over. One of the best topping patterns is a rounding top...

Although if the long bond declines I would expect the stock market to be rising.....At least at this point in time.

Tuesday, February 7, 2012

Who's next??

A picture appears in my mind. It is of the U.S. as a group standing and staring across the Atlantic at Europe and Greece in particular. Shaking our heads in consternation at their fiscal irresponsibility, while the Europeans are working steadily to fix their problem. All of a sudden it appears that they have indeed come up with a fix for their immediate problem. They stand back from their labors, wipe their collective brows. Then they turn and look back across the ocean and a look of alarm comes over their faces for behind US is the same problem they were struggling with.

Are we next? Is the U.S. Dollar the next cause for alarm??

Will gold and silver do it again?

Control your risk!

Dear Rick

My e-mail to CNBC and Mr. Rick Santelli.....

You said it Rick Santelli. With the assistance of Mr. Dent. The
U.S. has a problem. A CHRONIC illness, Rick. It may be an illness that we don't
solve. We may just have to live with it. So lets stop the conventional cures and
try to palliate this debility with the unconventional. How about socialism. Take
from the richest and most profitable and distribute to those who can no longer
work..... How about a socialized medicine for all! Then I too will quit my job,
spend my savings and let some youngster have my job! Aren't we productive enough
to provide for all of ourselves?? We've spent the last 50 years increasing
productivity. Is it any wonder that we have a chronic unemployment problem when
the money printing/credit expansion stops????


Saturday, February 4, 2012

2-4-12 The indexes head higher.

The markets are looking ahead to a solution to the Greek mess next week. Last news this week was for a resolution "anytime". It remains to be seen what that resolution will be or what the response to the markets will be. A selloff/pullback would not be surprising. When the future becomes the present the market must then decide what to focus on next in the future. Good job numbers on Friday propelled the indexes higher. Looking inside the indexes, particularly at the things that I watch: ie, metals prices, grains, meats, interest rates and select stocks, things look optimistic.

Of note is LVS. Las Vegas Sands. This stock has stayed consistently higher in a longer term perspective over the last year, trading in a range. It has now moved above recent highs and looks to breakout of the range on the weekly chart. Of all the types of business that would portend a recovery in the broader market I would have to consider a casino stock near the top of the list. The do a lot of business in asia so it is more of an indicator of a global recovery. In my long term investing I am long the world. (EEM)

US Steel finally broke to the upside on good volume this last week. (X)
Steel Dynamics has continued higher. I picked this one last November or so....
AK Steel is looking weak however. The reason will become apparent some day.

The banks have been doing good. Citi looks to have broken out to the upside. The regionals have been strong for some time. As I've pointed out before. UMPQ etc....

Interest rates may move higher. TBT keeps costing me money because I keep getting in early..... I must be careful or I'll sour myself on this fund and miss the move when it happens. BUY NEW HIGHS!
The most probable outcome of bottom picking is smelly fingers!

Here are the charts.

In chart reading it is not unusual to see a price break a trendline and then come back to touch that trendline. You can see this in the TBT chart above.

If you are waiting for a pullback to get into the stock market you missed one the week before last. I was talking to someone a couple weeks ago who told me he was waiting for a pullback before he gets in. My response was, "if something is going up, buy it. If it goes down, sell it!". It really is that simple. Unless your EGO gets involved. Trying to pick a bottom of a move is just done for bragging rights because it is unproductive from a making money standpoint. It is hard to buy something that is going up because you can see that you have not bought at the lowest prices, but the fact is I prefer to buy things that are going up than things that are going down because I see my profit almost immediately and there is a lot less anguish waiting for the trend to change. If you keep the trend as your friend you will live happier and wealthier......
One note. Sometimes when the laggards start to get caught up it is a sign of a top in the markets as the public likes to buy the cheap things.. but a big trend change usually gives fair warning.