Monday, September 15, 2008
Monday Morning Thoughts
Been trying to formulate a game plan for the day. First off, be very cautious with your trades as you can get steamrolled very quickly. Preservation of capital is paramount. Remember that he who loses the least can often be the winner !
Regarding the long bond, or TLT's. We look to be ready to spike up on this news as the Fed is viewed to gain some credibility today on the moral hazard front. I would like to add to my short position here int the TBT and will be watching this close. As long as the TLT does not take out it's recent highs this looks to be the correct trade.
Crude is getting smashed this morning and while many out there believe it is a bubble burst, I am still of the inclination that it is margin liquidation. Entities out there across the board are under pressure to de-leverage. No matter how reasonable or logical the speculative venture, capital is being destroyed at a dizzying pace.
I want to bring your attention to the chart of the XLE (1st chart top of page). The low trade on the XLE is $63.25. Late last week we rallied from here to about $69 to kiss the broken trend line from underneath. Basically if you believe this was a bubble burst, this kiss of the trend line was your chance to get short or shorter.
If you believe, as I do that this was a correction in an ongoing bull market, then the retracement or "the box" on the move from $63.25 - $69.00 is at $65.60 -66.20 rough numbers. I am inclined to buy DIG the Ultra oil and gas proshares as a play on this given the weakness expected at the open, with a tight stop. Tough trade to get long anything right now though that is exactly what I want to do here with energy.
One could also play this via some of my favourites like SU, XTO, CHK, APA etc. which are exhibiting similar characteristics to the XLE.
The IYR (2nd chart from top) as my notes indicate looks to have rolled over right where one may have expected it to.
Good speculating to you all and never forget that "an investor is a speculator who made a mistake and will not admit it".
Long 1 unit Ultrashort Lehman 20yr treasury ticker TBT @ $61.70 stop at TLT $98.41
Short 1 unit Fedex ticker FDX @ $87.25 stop $91.02
Short 1 unit Int'l Bus Machines ticker IBM @ $129.05 stop at $126.36
Short 2 units of Apple ticker AAPL @ $178.05 stop at $177.76
Short 2 units Salesforce.com ticker CRM @ $56.05 stop at $60.62