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,
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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??
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cde

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

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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,
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@ 0852 PST
Here is another possible indicator of inflation expectations rising.
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one plus one equals two

This:

plus this:

equals this:

THOSE DAMNED OIL SPECULATORS

Over on the Big Picture blog I ran across this link:
http://www.mcclatchydc.com/2012/02/21/139521/once-again-speculators-behind.html

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!
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And then I find this chart. (thanks Big Picture)

Can we conclude that corn farmers speculate???

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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......
http://jessescrossroadscafe.blogspot.com/

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   !!

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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!
Right!

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:
http://www.thegreencarwebsite.co.uk/blog/index.php/2012/01/22/tata-motors-makes-natural-gas-commitment/

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!
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