Tuesday, October 28, 2008

Market Shenanigans ?

I want to touch on the trading action in the markets which many are commenting on. You must realise the basic premise that capital markets need trust to function properly. That trust has not only been broken but it has been manipulated and taken advantage of to an extreme never before witnessed.

Some are calling the late day sell off manipulated etc. Last I heard a margin call sellout is not manipulation but in today's environment with the likes of Paulson, Bernanke, Cox and Co. anything is in the realm of possibility.

That said, many will recall an oft repeated (on these pages) and virtually completely ignored adage 'that it takes a lot of buying to put a market up and a mere lack of buying to put a market down'. I believe we are experiencing a buyers strike. The sound rational, experienced money is leaving the building or may have already left. Forget the reasons as that is meaningless drivel for CNBC types. The fact is what counts and the fact remains that buyers have left the building as they cannot trust financial statements, they cannot trust management statements, and most importantly they cannot trust regulators to keep a level playing field. This leaves the market to the black box, momentum, type traders. Our capital markets are quickly spiralling downward on par with the foreign currency black markets that existed in communist countries.

Exaggeration you say? Maybe, but give it some time.

I realise some may find this to simple but this is what I believe is going on. There are fewer and fewer bids so it is feasible to hit "air pockets" where there is no bid under the stock. I suggest you fasten your seat belts and keep your tray tables in the upright and locked position as this is going to be very uncomfortable ride. If you have any experience trading the pink sheets, or the Vancouver stock exchange, or some of the overseas markets you will begin to start appreciating the big picture of what is transpiring.

You must keep your head when others around you are losing theirs. Stop listening to this drivel about averaging in or 'legging' into positions. Do not be a hero here. I am absolutely dying to buy some of the names (tickers) I shared with you in a post recently but I will not as I do not relish getting my head handed to me. Besides I want to keep my gains and this is exactly the time ego and success can cloud ones judgement. Trade smaller, trade smarter.

I will repeat once again Jesse Livermore's admonition that "it was never my thinking that made me the big money it was my sitting", got that !!

Good speculating to you all and never forget that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:
Long 2 units of Ultrashort S&P ticker SDS @ $90.60 stops $101.88/$95.94
Long 1 unit Japanese Yen ticker FXY at $97.15 stop at $101.68
Short 1 unit Salesforce.com ticker CRM @ $56.05 stop at $34.31

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