Wednesday, February 27, 2013

It is true....

Buying at new highs in stocks and other securities has always been the right play. Everybody is a winner in those situation. The skeptics are short and need to cover. Again and again...

Here is this from somebody.

It is counterintuitive and tough to do, but it is a great strategy, provided the consolidation near the top has been long.
Have the stock markets been in a "consolidation" since 2000?
Maybe. Maybe we just needed to consolidate the gains that happened before that. Or it is just inflation of assets.
Same thing. Gotta keep up with inflation.


Oil is an outdated indicator

This is the difference between 2007 and now. Low energy prices. Relative to other costs

Oil prices were weak in the 1990's. We considered that a good thing. And what happened. Debt creation soared on the back of low energy and low interest rates as the economy roared.

Now we have a huge supply of Nat gas coming in to the economy. So far for electricity and home heating. Soon for transportation.

Don't look to the price of oil to be an accurate indicator of the strength of the economy. It is being replaced by NG, which is plentiful....

And that's the truth.

First Solar reload??

First Solar down to where it broke out some time ago....

I will be interesting to see if the old resistance can become new support.

Just watchin'

Tuesday, February 26, 2013

A new world every day....

I trade, therefore I am...

When a trade is setting up I just feel it in my bones. It tends to affect my long term outlook as I search for the reasons for the action of the markets....
The last few days saw a set up for a market decline that was easy to see. I put on some short positions as the decline proved itself by weakness in the tape. But I trade. Particularly when short selling. It has been very difficult to make any money on the short side for me. And even when I'm long and start telling myself that "this trade will be for the long term" I take it as a warning to myself to WATCH OUT! About the time I start thinking long term seems to be the end of the move...

So, although at the end of yesterday I felt that my shorts were just the start of something big, and I posted a picture of a bear "sitting tight", I did no such thing. I cashed out my easy money today. And later in the day did some bottom picking as the tape seemed to be saying that the selling had ended as fast as it had started. At least for now.....

The VXX trade is featured....

And I really can't stay bearish when silver acts strong.

And there is still that WLT ceiling to take another shot at....

Small positions and lots of cash.....


Short squeeze

From Wikipedia, the free encyclopedia

Short squeeze is a rapid increase in the price of a stock that occurs when there is a lack of supply and an excess of demand for the stock.[1]

Short squeezes result when short sellers cover their positions on a stock. This can occur if the price has risen to a point where short sellers must make margin calls, or more loosely if short sellers simply decide to cut their losses and get out. This may happen in an automated manner for example if the short sellers had previously placed stop-loss orders with their brokers to prepare for this possibility. Since covering their positions involves buying shares, the short squeeze causes an ever further rise in the stock's price, which in turn may trigger additional margin calls and short covering.

Short squeezes are more likely to occur in stocks with small market capitalization and small floats, although can involve large stocks and billions of dollars, as happened in October 2008 when a short squeeze temporarily drove the shares of Volkswagen on the Xetra DAX from 210.85 to over €1000 in less than two days, briefly making it the most valuable company in the world.[2][3]

The opposite of a short squeeze is the less common long squeeze.

This can also apply to futures contracts.[4]


Friday, February 22, 2013

Occupy Wall Street

The sentiment that led to OWS and to the Tea Party is not gone.
Recent developments in Italy show a populist politician surging in the polls and drawing huge crowds.

“The pro-euro parties are losing ground in favor of populist forces,” Riccardo Barbieri, chief European economist at Mizuho International Plc in London, said today in a research report. “But, much like in the Greek case, there are no viable alternatives to austerity and structural reforms.”

Grillo in Italy

And the recent new of an American CEO taunting the French union workers. Calling them lazy, etc.....


I am reminded of Ms. Antionettes comments regarding cake.....

It ain't over till it's over.....


Rising wedge in intraday IWM


Prospect of rate rise

The dialogue on the financial channel is about the prospect of the US Fed withdrawing stimulus at some point in the future. The prognosticators always offer their outlook for the economy and the stock markets. Usually saying somthing to the effect that the US economy is improving and the rise in interest rates and withdrawal of Fed stimulus will be taken in stride and the economy will learn to walk by itself.


How long has it been since the US economy and the stock markets were not dependent on artificial stimulus and low interest rates? I think it has been about 25 years. The Reagan deficit spending was the original stimulus. Then the Greenspan years. The bust of 2000 led to an outright dependence on Fed stimulus. And now Bernanke is on the job for more of the same. I think this economy and this stock market is addicted to easy money.

The question is not how the economy will go on after stimulus wanes. The question is how the stock market will react to the prospect of that stimulus waning. It is that uncertainty that will drive prices. The debt has not been liquidated, after all. It has just been moved around.

Just thinking...... Bearish lately....


Thursday, February 21, 2013

General market weakness

Markets weak today continuing the weakness of the last several day. Where are the bottom pickers? Not here yet..

Volatility has woke up. A look at the VXX chart shows large volume over the last months. Normally when a chart is going down on high volume I think it is confirmation of the trend. Sideways on high volume is accumulation or distribution depending on which end of a trend we are.
Not sure on this chart, but the volume declined on some of the declining days recently. Price of VXX moving strongly off of A bottom. Don't expect a straight move up. But IF the vxx reaches the level of the previous hard ceiling it would signal serious damage to the broader stock and commodities markets. And my experience is that markets seem drawn to ceilings.
It will take time, IF this happens. A couple months would be the expectation.

Easy does it!

Tuesday, February 19, 2013


CIMTR on Amazon here

A few weeks ago I communicated via e-mail with Dr. Alex Elder. His "Trading For a Living" was one of the important books on trading that I stumbled across in the first couple of years of trying to find that "secret" that would make me money in the markets. (By the time I found that book I had already surmised that there would be not secret to be found and was on the lookout for books with a certain generality about them. That is hard to explain, but at the time the sources that I searched for were somehow recognizable to me by the tone of the delivery. Low key and serious is about the best way to describe them.) When Dr. Elder offered to send me a copy of his "Come Into My Trading Room" I accepted eagerly. I recieved that book a few days ago and finished reading it a few minutes ago.

I must say that it is even better that the original. I have fifteen years more experience now and CIMTR is definitely a complete book on trading. The overall theme of this book, as of the original, is of the three M's. Mind, Method, and Money.

Mind refers to the psychological aspects of trading. In the end I think this is the most important of all three.
Method refers to being able to find a method that agrees with the mind of the trader. To each his own. In the beginning somewhere I heard of the hedgehog principle. That being the importance of knowing what you were good at and sticking to it. I had also heard of identifying your edge. If you couldn't identify your edge you didn't have one!
Money refers to sound money management. Knowing how much to bet on every idea. And most of all knowing how much you could afford to lose. And not exceeding that!

All three of these ideas are interrelated and Dr. Elder, with his background in psychology does a masterful job of pointing out the pitfalls that EVERY trader falls prey to in all of these areas.

This book is one that would need to be read many times over as one learns to trade. Much as I did with "Reminiscences of a Stock Operator". And I have no problem mentioning them both in the same sentence.
In the future I will refer to CIMTR as I continue to learn from every winning trade and more importantly from every losing trade. A highly recommended book for everyone who is seriously looking for trading improvement.
Thank you again Dr. Elder.

WTF with WLT!

I like when I am sitting at my computer screen, watching the goings on, and one of the stocks I am waiting on takes off. Like this:

Looks like we may get that breakout....

Control your risk. Scale in, and don't let anything cost you more than you can tolerate comfortably!


The next day:

I got out quick. A move up that doesn't keep going is not to my liking. Actually that is just an excuse. I had too big a position on to hold.....

Sold everything midday and bot som vxx....

Lackluster copper....

Dr. Copper can't keep it up lately.....

Copper, the metal is used in many industries that are basic to the world economy. The metal is often referred to "Dr." due to the predictive ability of copper demand in economic activity.
More on Dr. Copper.

Here is the chart. It adds to my general sense of wariness....


Friday, February 15, 2013


I copied this "Quote of the Day".

  • Quote of the Day

    "Many folks seem to think that the dollar going down will magically solve our trade deficit. I disagree. We don't export enough to solve our trade deficit. What we need to do is stop consuming beyond our means and start saving, which is what will be forced upon us eventually." -Bill Fleckenstein

  • When it gets right down to economic fundamentals, the above statement reflects the truth. The dollar going down will cause us to limit what we buy from abroad, or make it ourselves if we want it. But if all currencies are going down, then the dollar is only valued relative to other currencies. And that won't affect the trade deficit...

    But when inflation starts to hurt in the currency manipulating countries, think China, then they will be forced to let their currency rise, limiting their exports and they will "export" their inflation to us. Interest rates will rise around the world, debt will continue to contract, and we will stop buying the crap from around the world that we buy. We will have incentive to save, our savings accounts will actually pay interest. And at some point a US Dollar will hold it's value...

    Finance will no longer be king. Manufacturing will return. Unions and workers will regain power.

    And then we will all be drinking free BubbleUp, and eating Rainbow Stew!


    Selling in the morning...

    As the chart below shows there was some selling this morning in the SPY.

    I expect some sort of pullback in the averages as this nation goes into the "sequester" debate/decision.
    The republican response to the state of the union address was the same old talking points so I expect more of the same obstructionism.
    It seems to me that any large players would be reticent to add to positions ahead of such an event as the budget debate. And I expect the traders will start to pull back as well. Of course mom and pop are probably looking for a pullback to buy......

    Here is a 5 minute chart of the SPY this morning....


    Wednesday, February 13, 2013

    Running out of steam?

    I keep seeing raiding parties from the bear side.

    CDE crashes today. It wasn't a high probability, just bottom picking. But down sharply.

    I had some CLF. Was looking for a return of enthusiasm... NOT!

    US Treasuries had a poor demand sale this morning.... Down again. Interest rates going up... Sometime. I wonder how the U.S. economy will handle higher interest rates?

    Devon still strong....

    But I notice the S&P makes new highs on LOW volume... A warning sign for the short to medium term at least.

    On a brighter note I bought a couple tickets to see Merle Haggard, at 7 Feathers, in March.....

    Thursday, February 7, 2013

    Wednesday, February 6, 2013

    History doesn't repeat...

    .... it rhymes.

    The thing I like about technical analysis is looking for patterns that I've seen before. Since the patterns reflect the emotions of the traders as related to the price of the underlying security I expect traders to act the same way as they did before. Not always, since there are always some sharpies out there to take advantage of those predictable.

    But looking at the GLD chart I am struck by the similarity of the price action to the pattern some months earlier.....

    In particular the rounding action of the bottom. I find that the round bottoms are the most desirable., oh, you know what I mean.

    Silver is holding up well also.... Coils can go either way so be careful!


    Friday, February 1, 2013

    The great inflation

    Disappointing GDP numbers out this week. Stock market rallies

    Housing stocks still on fire.

    And the dollar continues weakness even as the interest rates edge up to 2% on the long UST.

    Gold and silver have been under pressure lately. The talking heads on CNBC say gold is under pressure because of selling to buy stocks. I think this is only a temporary and trading phenomenon.

    When I look at the silver price I see the increasing likelyhood of a big move up in the near future.

    And the dollar is at a floor that will probably give way this time. In the past the dollar has rallied off this floor, but I think that the rallies are over. Time will tell. Am positioning myself accordingly.

    Nat gas will be strong over the coming years. The low prices have capped wells, put drillers in bankruptcy. Combined with the general push to convert transportation to NG, electricity generation away from coal, and the move for U.S. self-sufficiency. Exports will probably be approved.


    Control your risk.