Thursday, January 31, 2008

A Little Vacation

Just wanted to let readers know that I am leaving on vacation. I am going on an African safari (photographic) to Tanzania. I will be gone 12 days and have been looking forward to this for some time. I will have limited access to information and hence will not be posting while away. Quite frankly I could use the break to re-charge my batteries and come back with a clear head.

There is unrest in Kenya to the north and while we will be in the Northern area of Tanzania we don't expect any difficulties. Ngorongora crater is one of the 7 natural wonders of the world which I am looking forward to seeing. As regular readers know I am not the most technologically savvy cat around but I will try to post some pics when I return.



In my absence I would implore you all to.... do more of what you are doing right and less of what you are doing wrong!



Always add to winners and let them run and never, ever under any circumstances add to a loser. Just ask Mssr.s Leeson(Barings), Meriweather(LTCM), Hunter, (Amaranth) and now we can add one Jerome Kerviel of Societe Generale. The evidence overwhelmingly supports the case that averaging losers ends in ruin. Run don't walk away from anyone suggesting otherwise.



Good trading to you all and see you upon my return.


Open Positions:


Long 5 units Currencyshares Japanese Yen ticker FXY @ $87.54 stop at $91.40

Long 5 units Ultrashort Dow 30 ticker DXD @ $56.10 stop at $53.60

Short 2 units of Deutsche Bank ticker DB @ $119.85 stop at $119.40

Short 2 units of KB Home ticker KBH @ $25.55 stop at $28.10

Short 1 unit of Bear Stearns ticker BSC @ $89.60 stop at $95.70

Wednesday, January 30, 2008

Bad Tape Action

I want you to have a look at the following 4 charts. They are in order the Spiders(SPY), the XLF, the Semi Holders(SMH), and the Retail Holders (RTH).






Do you notice anything similar. As the old lady in the Wendys commercials who shouted "Where's the Beef ?" I find myself shouting where's the volume ? Volume should accompany a healthy run to upside. It has been glaringly lacking of late, yet the pundits are willing to conveniently gloss over that omission in their daily touts. I know they secretly were praying for it (volume) to show up. Well the volume sure came in today and not in a good way for the bulls. Sometimes you need to be careful what you wish for. Today's action cannot be construed as anything other than just plain BAD, no ifs about it. Today's action was decidedly bearish.

You want more evidence.
LOOK AT THE DOLLAR,
LOOK AT GOLD !!
Do you think they are telling us something.
They tell you all you need to know.
Housekeeping notes. In typical fed day trading stocks whipped around. I was stopped out my 1 unit short position on Goldman Sachs at $202.90 profitable considering I was short at $217.75 but yet frustrating.


I was stopped out of my 1 unit short Citigroup position at $28.65. This one has been an enjoyable ride down from the mid 44 area. I would like to get short this one again as I truly believe it is a single digit stock much as that might irritate some out there. It is a black hole, a forensic auditor's nightmare. Yet the pundits would have you believe it's cheap on a valuation basis.


I was also stopped out of my 2 unit short Ultrashort Financials (SKF) position at $98.40 for about a $71/2 point loss on the 2 units. I am watching for another opportunity to get back in as the write downs have only just begun.


The pain of being stopped out of 3 financial positions is mitigated somewhat(I'm justifying here don't you see) by getting short 1 unit of Bear Stearns earlier today at $89.60 which ran as high as 92.30 in the aftermath of the Fed decision. I have my doubts as to whether Bear makes it as I believe it is headed to the scrapheap of financial history alongsided the likes of Drexel Burnham and Kidder Peabody. It gives me no pleasure to copper the trade of a titan like Joe Lewis who is long Bear Stearns to the tune of about 8% of outstanding stock, but I have the most trusted of allies on my side. The facts and a very bearish chart.

The fuel or backbone if you will of this debacle is the housing market and its deterioration which has only just begun. Pom pom TV (CNBC) is still spinning its wheels on subprime which is only a symptom of the disease.

As you all know and are probably sick of by now I have been hounding you all to keep your eye on the Yen as it is the stock of the soup of the leveraged global derivative game. Watching trading today the market was of 20-40 points prior to the Fed and the yen was trading +.05 to +.10
As the Dow got the news of the 50 beep cut and began its nitro fueled move upwards. the Yen refused to confirm(weaken). As the Dow peaked and rolled over the Yen then started to strengthen. This only reaffirms to me what I have already believed and this is as the yen carry trade goes so goes equity prices. All these hedge funds have their multitude of fandangled positions supported by this carry trade. I believe it is in the early innings of being unwound. The size is rumored to be the 1 trillion plus neighbourhood. I read somewhere a while back that the Japanese finance minister was surprised to find out it (yen carry trade) was 10X larger than he had previously been led to believe.
What else, Oh Amazon missing and getting hammered in after hours trading, and they had their best year ever huh, hide in tech did they say. After the close, conveniently I might add, S&P came out with a mass downgrad on mortgage related debt
Good trading to you all.
Open Positions:

Long 5 units Currencyshares Japanese Yen ticker FXY @ $87.54 stop at $91.40
Long 5 units Ultrashort Dow 30 ticker DXD @ $56.10 stop at $53.60
Short 2 units of Deutsche Bank ticker DB @ $119.85 stop at $119.40
Short 2 units of KB Home ticker KBH @ $25.55 stop at $28.10
Short 1 unit of Bear Stearns ticker BSC @ $89.60 stop at $95.70

Shorting KB Home, Bear Stearns and more Dow.

UBS taking write downs of $14 billion, the hits just keep on coming, or should I say cockroaches. When the insurers are downgraded expect another round of write offs.

I know it is Fed decision day but I am compelled to add to my short Dow position. Adding a 5th unit on this pullback at $56.75. Housing is getting worse and it is the cancer in the system. Foreclosures add to the problem stretching it into the future.

The homebuilder rally has been almost as hollow as the financials, you could say the same for retailers as well. KB Home is one I will pick on although the whole lot is in quicksand. Lennar, Centex are 2 of my favourites but I will short 2 units of KB here at $25.45 with stops at $28.10 to give it some financial chicanery breathing room.


The chart on Bear Stearns(above) has rallied smartly as of late. Volume is disapprearing and this is not healthy for the bulls. This was just a much needed bear rally to correct the extreme oversold condition. Has Bear's position improved? Are you kidding me? This one is headed the was of Drexel, Kidder etc. the scrap heap of financial history. Short 1 unit here at $89.55 with a stop at 95.70
Good trading to you all.

Open Positions:

Long 5 units Currencyshares Japanese Yen ticker FXY @ $87.54 stop at $91.40
Long 5 units Ultrashort Dow 30 ticker DXD @ $56.10 stop at $53.60
Long 2 units Ultrashort Financials ticker SKF @ $106.00 stop at $98.60
Short 1 unit Citigroup ticker C @ $44.70 stop at $28.60
Short 1 unit Goldman Sachs ticker GS @ $214.75 stop at $202.70
Short 2 units of Deutsche Bank ticker DB @ $119.85
stop at $119.40
Short 2 units of KB Home ticker KBH @ $25.55 stop at $28.10
Short 1 unit of Bear Stearns ticker BSC @ $89.60 stop at $95.70

Tuesday, January 29, 2008

Watch the Yen !

The above is the yen/euro cross.



I remind you to keep your eye on this chart of the yen. Or if you prefer the yen/euro cross (top chart) which continues to look to be breaking down. The market needs leverage like a crack junkie needs his fix. The yen is the fix. Looks to be disgesting it's recent run up on light volume.


My gut wants me to add to positions like DXD and GS but I will sit tight for now waiting on the Fed as it is led around via the nose by the short bus riding equity players.


Regarding Societe General, others have posted much more eloquently than I ever could, suffice to say I don't believe a word out of their mouths and this is another cockroach, and there is never ever just one.


Regarding Amex's earnings, they should be a cold bucket of water in your face. Amex, as anyone who has their card(s) is anal about loss management and it they are having issues,(which they are) you can be assured all is not well with the economy. The clues continue to appear, the question is are you adding them up and realizing where they are leading us?


Alliance Data Systems deal doesn't go through, just like Sallie Mae, et al not to mention all the unsold dead paper sitting on global investment banks books, marked to market?


VM Ware earnings not up to stuff. Forget the absolute numbers, they will brainwash you into rationalizing averaging down your losing position. I know this because I used to make that mistake so often in my earlier trading days you'd have thought I was a trained seal. Bad habits are hard to break. Do you notice a trend in whats happening with earnings, good, bad, great, indifferent, makes not a whit of difference the psychology has changed, tis a bear market, trade accordingly.
Good trading to you all.

Open Positions:

Long 5 units Currencyshares Japanese Yen ticker FXY @ $87.54 stop at $91.40
Long 4 units Ultrashort Dow 30 ticker DXD @ $55.90
stop at $53.60
Long 2 units Ultrashort Financials ticker SKF @ $106.00 stop at $98.60
Short 1 unit Citigroup ticker C @ $44.70 stop at $28.60
Short 1 unit Goldman Sachs ticker GS @ $214.75 stop at $202.70
Short 2 units of Deutsche Bank ticker DB @ $119.85 stop at $119.40

Sunday, January 27, 2008

Only the Beginning ?

I came across this article by Jon Markman which is must reading. He writes what others either are afraid to, or don't care to. In his most recent article which you can go to here, Markman takes aim at the CDS(credit default swap) issues and the reading is sobering to say the least. The article includes comments from Satyajit Das the derivative expert I have mentioned here previously.

This excerpt by Markman on the insurers is flabbergasting...

Don't count on insurers
Several other major banks and brokers, such as the Canadian Imperial Bank of Commerce and Lehman Bros., have been stiffed by ACA to the tune of billions, and all have let the insurer seek more capital before forcing it into bankruptcy. So the case gives us just a taste of what may come. Consider that ACA was no fly-by-night outfit. It was AAA-rated and met all standard benchmarks for safety. Yet those benchmarks now look ridiculous, as the company was allowed to provide $60 billion worth of guarantees on a capital base of just $500 million.

Can you imagine, as a citizen, if you were allowed to collect fees on $60 million worth of loan guarantees because you owned a house worth $500,000? It's nuts.
For those of you keeping score at home this is a reserve or margin requirement (for you stock guys) of 0.0083 % or 8/10 of 1%. Less than 1 penny per dollar reserved for every dollar of obligations. Where were the regulators? Why is this not a headline issue? To call this a monumental lapse in sanity doesn't do it justice. So they printing money collecting premiums and 1 black swan event wipes them out and now the taxpayer comes to the rescue. Does anyone care or is Dancing with the Stars and American Idol more important. This WILL go down as the greatest PONZI scheme in the history of mankind. Accomplished with every one's eyes wide open !
And people wonder why I am short the markets like I am. I see stuff like this and it makes me think I am being too cautious and need to get REALLY short ! Think back to the tech bubble, after high fliers had sold off 10-15%. Now some very negative bear tells you we're in the 1st or 2nd inning, would you have believe them at the time? Obviously not, as many were buying the dips. Yet most of these tech stocks fell 80-90% from their highs.
The following excerpt gives you a flavour of where Das thinks we are now....
In September, Das told us he believed the unwinding of the great post-millennial credit bubble had barely begun. Now he thinks that the game is finally in the first inning, with much more pain and heartache to come. He points out that all of the new capital raised by UBS AG , Citigroup and Merrill Lynch has only made up for the losses they have acknowledged so far in the fourth quarter of last year, and that if they continue to need to write off their credit default swaps and loans as customers sink under the weight of recession and default on loans, they will be taking equally large deductions against earnings in every quarter of this year and into 2009.

With at least $1.5 trillion in off-balance-sheet debt coming onto their books and tens of billions of dollars in CDS contracts potentially up in smoke, Das figures the banks will need $200 billion in new capital to shore up reserves at the same time they suffer $100 billion in real loan losses. If they need $300 billion -- and so far the sovereign wealth funds have, with some reluctance, put up only around $25 billion -- you start to see the potential size of the problem that lies ahead.


"The hole is bigger than they or their investors expected," Das said. "And they're still digging."
Remember now, this is Satyajit Das talking not Markman the journalist or me the trader but rather one of the foremost experts globally on these "financial weapons of mass destruction" as Buffett calls them. The first inning! Is this hyperbole as many bulls will counter? Is it different this time? I don't know but are you really willing to risk your financial survival to take the other side of the bet?
Maybe it is different this time. But I am betting it is not. Just to remind you, Sir John Templeton called the phrase, "this time its different", the most expensive 4 words ever uttered in history.
Good trading to you all.

Saturday, January 26, 2008

End of the Week Thoughts

I want to share a post with you from Mike Shedlock's (Mish as he goes by) blog from a real estate veteran he corresponds with regularly by the name of Mike Morgan out of Florida. Mish was an analyst at my old firm and is as sharp and candid as ever, with his site must reading for anyone in or interested in the markets. He listens to Mike Morgan regarding real estate means we should as well. I have lifted the piece directly from Mish's site as follows as it is well worth your time.




I was not expecting an update from Mike but I received this email just moments ago. Here is an edited version of what he sent clients.


After receiving a lot of frantic phone calls this week, I thought it might be easier to put something out. The big question has been "Is this the bottom?" My response is, Are you kidding?For those of you wondering what is going on over the last couple of weeks, read some of my pieces from a year ago. Not much has changed, so there is no reason to write for public consumption. I don’t pick stocks, nor do I talk about trades, so I’m not concerned with the run up in the builders over the last couple of weeks.I can tell you this. I wrote about all of the builders that have filed BK and are going under. I wrote about them two years ago. I said one third of the current builders would go BK, and I still believe it. In fact, I said at least three of the top five would not make it. That is still the case. Nothing has changed when you look at impairments to come, JV issues to come, inventory and the economy.Do I pull these things out of a hat? No. I actually spend time in the field. You can only do so much with numbers. But when the numbers don’t match reality, BINGO. So here’s five reasons why we are nowhere near the bottom.



The builders have only taken from 15 – 50% of their impairments. Some have been better than others, but overall I’d say it’s about 30% with 70% yet to come. Jim Wilson and Ivy think we’ve seen the worst. They still have their heads in the ground. Do your own homework. Just look at the number of communities impaired and the level of impairments.The talking heads seem to think the Bernanke fix is going to make everything nice. The Bernanke fix was about as helpful as a shot and a beer for a heroin junkie. It’s not going to fix anything. If anything, it will make a lot of things worse.



Nearly every other analyst still fails to understand the value of getting out in the field. As for being near the bottom – nonsense. As for all of these terrific land, condo and community deals at 50 cents on the dollar – poppy cock. If you think paying 50 cents on the dollar is a smart move, when something is worth 25 cents, go for it. Better yet, call me. I have tons of it. Even worse than paying 50 cents when something is only worth 25, is the fact that much of the stuff we have looked at is actually worthless. How can that be, you ask? Trust me. It can. It is. And I’ve seen deals go down where the buyers bought themselves a liability.



The financial write downs from the banks and mortgage companies are not over. I am still hearing the same thing ... “We don’t know what we own. And even if we did know, we don’t know how to price it.” Some of these guys have tried to sell small pieces, in order to mark to market. Guess what? No bids!
Bank inventory – I’ve written about this a little. We’re seeing this problem start to pus up. I figure it will take about another 8-12 months before it pops. Basically, the banks have no clue what to do with the properties they are foreclosing on and the properties where buyers have stopped paying their mortgage. There are some extreme examples, but we’re seeing the same basic problems nationwide. Eventually, this problem will hit the markets hard in prices and inventory. It will also be an investment opportunity for a large fund to step in, providing they have their ducks in a row before approaching the banks.




Four areas of concentration for my clients have been fruitful.
Biotech – Not the stocks, but the land in areas where biotech parks are being developed in Florida. The University of Miami just announced their own biotech plans.
Senior Care Living
Deep Water Land
Unique Office Space Opportunities – This one is something that takes advantage of the drop in office building prices, as well as the hit the economy is taking at the small business level. Very intriguing opportunity.Condos – Not a chance. Even the deals at 30 cents on the dollar are garbage. Be very careful here. I’ve seen a lot of deals where formally smart money thinks they are getting a deal. They are a bad deal. Be very careful. It is too soon.The Bottom Line: Expect to see lower margins, lower sales, growing inventory, lower prices for land and finished product, all adding to more impairments and losses with much more to come.




Regards,

Mike Morgan








The chart(above) is the Dow Jones Financials, quite the rally. All par the the course. Please don't fall victim to the bottom fishing pundits. You can ignore the dividend yield cheerleaders as well, these dividends are going to get slashed as they conserve capital.





My favourite vehicle for playing the financials short is the SKF(above). I am looking to add to my 2 unit long position on a move upward thru $112.



The Dow Jones Real Estate index(above) like the financials has rallied into overhead resistance and shook out a lot of latecomers to the debacle. Act 2 (commercial) is warming up. Things are going from bad to worse, not cause I want them to mind you. I would prefer otherwise but the facts justify a bearish posture.



Based on this our profitable old friend SRS needs to be back on our priority list. As my notes indicate par ($100) seems to call out to me. The next few trading days could clear up the picture.






I was stopped out this week of a very profitable short in MasterCard( chart above). I have not lost sight of it and this huge bear rally (that's all it is) looks to be losing some steam. The 50 day should offer some resistance and possibly another good short entry. The consumer is tapped out, the housing ATM is closed, banks are setting aside higher and higher reserves for card losses... lots of evidence compelling action here.




Housekeeping notes. I was stopped out of Honeywell today at $59.45 considering I was short at $ 59.90 it was to quote Shakespeare "much ado about nothing". I went back had another look at HON after the close yesterday after being stopped out. People will say I probably should have been more vigilant with my stop position given earnings due out and the big 'reversal' in the market. As you all know I give paramount importance to chart action and NOT NEWS as it conforms to the tape and always appears after the fact.








The HON chart(above) shows what I should have noticed earlier. 1) the violation of the original $56.25 breakdown. on Jan 23 and 2)the next day it did not resume its downtrend. and closed almost right on the rectangle lower limit threshold.(it also consolidated entire day in the upper 3rd of the prior day candle). The gap yesterday is just desserts. The point I am trying to make and this is nothing scientific or overly quantifiable, but when a stock breaks, up or down, it should break hard and flush hard. When the stock stutters and coughs and backfires, etc. Well you know all is not right under the hood. You wouldn't take you family on a long road trip if when you started the car and backed out it backfires, jerks forward as you put it in gear and knocks as you go. The same goes for a speculative endeavour, it we are right in our analysis we should be right from the get go. Lets file this under traders intuition and be done with it.

I don't talk much about it but the homebuilders and the retailers have had quite the bounce here in the rally and folks looking for entries (short) might be looking at a good opportunity. Patience is required as the rally can last longer and run farther than many anticipate. The Comstock piece I linked yesterday outlined how the 9 biggest up days in Wall St. history occurred in the 2000-2002 bear market. Please remember that when Bullish Bob Pisani and the Money Honey are breathlessly telling how fabulous the rally is.



Good trading to you all.



Open Positions:



Long 5 units Currencyshares Japanese Yen ticker FXY @ $87.54 stop at $91.40

Long 4 units Ultrashort Dow 30 ticker DXD @ $55.90 stop at $53.60

Long 2 units Ultrashort Financials ticker SKF @ $106.00 stop at $98.60

Short 1 unit Citigroup ticker C @ $44.70 stop at $28.60

Short 1 unit Goldman Sachs ticker GS @ $214.75 stop at $202.70
Short 2 units of Deutsche Bank ticker DB @ $119.85 stop at $119.40

Friday, January 25, 2008

Friday Thoughts.

The boys over at Comstock have a great piece out today that you should read if you are getting the urge to buy this rally. It also addresses some of the "valuation" arguments being put out by the bulls.



Boy, lots of discussion over who knew what and when with Societe Generale. Risk management is now becoming one of the most famous oxy morons of all time, now joining jumbo shrimp, military intelligence, and honest politician.


Please do not lose sight of this the above chart, the S&P500 on a monthly basis. My earlier note is still included, 'monster top'. It is looking more likely now.


The financials rally has been impressive don't you think? But do you really believe the Bob Pisani kitchen sink is in on all the banks, or do you think an Amback, MBIA downgrade, makes everyone come back for a second helping. What about commercial real estate paper, M&A paper sitting rotting on their books, credit card debt going sour and a housing market in a indisputable bear market. I mentioned the comments of Louise Yamada when she was on CNBC a few weeks back when she said the financials were in a bear market but would be subject to violent bear market rallies. Forewarned is forearmed.


In the realm of the unscientific. I find it very interesting to watch the various CNBC host anchors and their mood given the market activity. How absolutely giddy the get in the midst of a rally and how glum and dour during the downtown. If the charts are correct I might suggest buying Prozac in bulk now while it is pulling back.


Some housekeeping notes,

Stopped out of 2 units short of WFC at $31.60. for a loss of $2.20 on 2 units. Small losses are okay and part and parcel of trading.

Stopped out of 3 units short AMZN at $78.85 for a gain of 5.15 a unit along with another deposit to the mental capital account.

Good trading to you all.

Open Positions:

Long 5 units Currencyshares Japanese Yen ticker FXY @ $87.54 stop at $91.40
Long 4 units Ultrashort Dow 30 ticker DXD @ $55.90 stop at $53.60
Long 2 units Ultrashort Financials ticker SKF @ $106.00 stop at $98.60
Short 1 unit Citigroup ticker C @ $44.70 stop at $28.60
Short 1 unit Goldman Sachs ticker GS @ $214.75 stop at $202.70
Short 4 units Honeywell ticker HON @ $59.90 stop at $59.40
Short 2 units of Deutsche Bank ticker DB @ $119.85 stop at $119.40

Thursday, January 24, 2008

Adding to Ultrashort Dow


The time has come to add another unit long of DXD as it pulls back to its breakout. You have to feel a little discomfort or it would not be pulling back as it is. Long a 4th unit at $57.50
Open Positions:
Long 5 units Currencyshares Japanese Yen ticker FXY @ $87.54 stop at $91.40
Long 4 units Ultrashort Dow 30 ticker DXD @ $55.90 stop at $53.60
Long 2 units Ultrashort Financials ticker SKF @ $106.00 stop at $98.60
Short 1 unit Citigroup ticker C @ $44.70 stop at $28.60
Short 3 units Amazon ticker AMZN @ $84.04 stop at $78.70
Short 1 unit Goldman Sachs ticker GS @ $214.75 stop at $202.70
Short 4 units Honeywell ticker HON @ $59.90 stop at $59.40
Short 2 units of Deutsche Bank ticker DB @ $119.85 stop at $119.40
Short 2 units Wells Fargo ticker WFC @ $ 29.40 stop at $31.40

Getting Long Ultrashort Financials..... once again

The time to revisit this old friend is today. Getting long 2 units of the Ultrashort Financials ticker SKF here at 105.90 with a stop at $98.60
This should suffice as the financials rally into thin air. Societe Generale in France announces a rougue ?? trader loses 7 Billion ! Either they are blind and absent more than Jimmy Cayne at Bear or they are complicit as the had filed or were filing for an equity offering if memory serves. Conveniently left that out of the details. Unbelieveable. Serves the lemmings right who line up for the issue, the get what they deserve.

Good trading to you all.

Open Positions:

Long 5 units Currencyshares Japanese Yen ticker FXY @ $87.54 stop at $91.40
Long 3 units Ultrashort Dow 30 ticker DXD @ $55.35 stop at $55.70
Long 2 units Ultrashort Financials ticker SKF @ $106.00 stop at $98.60
Short 1 unit Citigroup ticker C @ $44.70 stop at $28.60
Short 3 units Amazon ticker AMZN @ $84.04 stop at $78.70
Short 1 unit Goldman Sachs ticker GS @ $214.75 stop at $202.70
Short 4 units Honeywell ticker HON @ $59.90 stop at $59.40
Short 2 units of Deutsche Bank ticker DB @ $119.85 stop at $119.40
Short 2 units Wells Fargo ticker WFC @ $ 29.40 stop at $31.40

Wednesday, January 23, 2008

Wells Fargo Short


Quite the rally day and the cheerleaders on pom pom TV were out in force and making the most of it! CNBC adverts itself as unbiased but can you not notice the forlornness when the markets are RED and the giddiness when the markets are GREEN. I am not passing judgement, I am just trying to bring to your attention the skewed behaviour. If I hear Bob Pisani call another financials' reporting a kitchen sink quarter I will throw up. These financials must have 5 or 6 kitchens apiece!



More seriously it is time to take advantage of the bear rally in the financials. Wells Fargo of which I have included the chart (above) show how violent the rally has been. As I said in my quick earlier post, it looked like a good risk/reward to short WFC at $29.50 with a stop at $31.40. They can talk and hope and pray all they want the overwhelming evidence suggests more downside with the financials and while I could be completely wrong I feel very comfortable fading this rally.

I am moving my stop on Amazon down to $78.70 nothing is for sure and I would hate to give this back as this was my stop error omission. The market rarely offers second chances but I got one with AMZN. I am grateful and show that with a tighter stop.

I was stopped out of MasterCard today at $193.10 which is not bad given I was short 2 units of this tough bird at $ 206.45 . Makes up for the couple of prior small losses. Who knows we may get another shot at her, as she rallies into the 50 day as well as the prior support zone which should now serve as resisitance.

I am moving my stop up on Ultrashort Dow ticker DXD to $55.70. Thereby preventing a winner from possible becoming a loser.

Moving stop on Deustche Bank down to basically break even at $ 119.40

I am also moving my stop on the Japanese Yen to $91.40 so that now takes care of the housekeeping chores.


Have the credit markets miraculously healed? Are the banks not born-again ready to lend? Did we emerge from recession already? Oh, the rumored bailout of the monoline insurers. Sure, reaching into snake holes is just what the doctor ordered. Would you put those rumors past some hedge fund long the financials looking for an exit or worse a change to get fat shorts on? Oh, I'm sorry, that would be illegal, wouldn't it ? Rumored 15billion to shore up the insurers. Are you kidding me, what with about 1-2 TRILLION in bonds they are purported to insure how long will that money last,.... about as long as Warburg Pincus' 500 million did. Mommy I don't like the taste of the medicine can't I have more of the double stuffed Oreo cookies that made me sick. Maybe I'm making too simple of a comparison given I don't have an Ivy League piece of paper.



Now this may in fact be a bottom in the financials. This reversal was powerful and intimidating. The bulls will jump on this as THE MOMENT but there is a ton of damage done on the charts. Bear market rallies are notorious for inflicting enormous damage on late shorts to the party. They are being flushed out of the game. I will be watching this rally closely and we will see how much staying power it has and if the volume truly sticks. One day does not make a trend ! Just wanted to remind you out there that I am not a dyed in the wool pessimistic, unpatriotic short selling scoundrel. Stocks are NOT CHEAP but they were oversold hence today.





As part of this financial rally I have kept my eye on the ultrashort financials, (chart above) remember that one, ticker SKF. I was short 4 units at $76.45 for a good while only to be stopped out at $94.90. It is said that patience is a virtue and it is again this time. I am looking to get long SKF as it is pulling back to some support. I would like to punt a unit long near the 5o day ma with a stop not far below par (100). I am thinking out loud but I will post if I get long a position. Just wanted to bring it to your attention to maybe put on your radar if it is not already.



EBAY reported after the close. Now are you really shocked by the numbers. Be honest, everyone is guided down, warning going forward or missing. And yet the pundits claim the market is cheap on a valuation basis.


We are sliding down a slippery slope of hope.



Open Positions:

Long 5 units Currencyshares Japanese Yen ticker FXY @ $87.54 stop at $91.40
Long 3 units Ultrashort Dow 30 ticker DXD @ $55.35
stop at $55.70
Short 1 unit Citigroup ticker C @ $44.70
stop at $28.60
Short 3 units Amazon ticker AMZN @ $84.04
stop at $78.70
Short 1 unit Goldman Sachs ticker GS @ $214.75
stop at $202.70
Short 4 units Honeywell ticker HON @ $59.90
stop at $59.40
Short 2 units of Deutsche Bank ticker DB @ $119.85
stop at $119.40
Short 2 units Wells Fargo ticker WFC @ $ 29.40 stop at $31.40

Quick Update

Having internet connectivity problems last 2 days = very frustrating to say the least.


Stopped out of USO at $68.90 been long and strong 1 unit since $53.20


Stopped out of SRS at $117.80 again long and strong 4 units since $85.28


I want to intiate a short here on Wells Fargo ticker WFC here as it rallies (into the 50 day ma at $30.04) along with the rest of the financials. Shorting 2 units here at $29.50 with a stop just above at $31.40

Cannot post charts but will try to later tonight.



Good trading to you all.


Open Positions:
Long 5 units Currencyshares Japanese Yen ticker FXY @ $87.54 stop at $85.2

Long 3 units Ultrashort Dow 30 ticker DXD @ $55.35 stop at $49.80

Short 1 unit Citigroup ticker C @ $44.70 stop at $32.40

Short 3 units Amazon ticker AMZN @ $84.04 stop at $84.25

Short 1 unit Goldman Sachs ticker GS @ $214.75 stop at $202.70

Short 4 units Honeywell ticker HON @ $59.90 stop at $59.40

Short 2 units of MasterCard ticker MA @ $206.45 stop at $192.85

Short 2 units of Deutsche Bank ticker DB @ $119.85 stop at $125.40

Short 2 units Wells Fargo ticker WFC @ $ 29.40 stop at $31.40


Tuesday, January 22, 2008

Some Thoughts

A couple of trading updates to take care of. I was stopped out of JC Penney today at $43.50 not bad considering we got short at $62.90. Was fun while it lasted. With regards to the retailers and their pop today all I can say is some dreams die a slow death. Many out there think the retailers are cheap on a valuation basis but with a consumer tapped (debt) and trapped(mortgage on falling asset) I find it hard to follow the logic but this is from the same group that thought and continue to think that first housing and now financials are cheap. I assume they are buying retailers based on valuation because it sure cannot be based on the charts.

Also was stopped out of UNG at $37.35 which was a brief visit but considering we were long 3 units at $34.16 it was a profitable one.

I have been uncomfortable being long anything given the propensity of margin clerks to enforce their will. So getting stopped out of UNG is A-okay with me. Came close to getting stopped out of USO but still in with our stop at $69.

I am moving my stop on Citigroup down to $28.60 and hope to just follow this ridiculous excuse for a bank all the way to single digits. Yes that's correct single digits. The value guys, the sovereign wealth funds and the rest can have all they can buy up here. When your tier 3 (mark to fantasy) capital exceeds your equity and people still claim the stock is cheap on valuation, you have to question the phrase due diligence and whether not only it is being done but whether it still exists any more. But don't take my word for it, ask Ken Lewis at Bank America.

I am also lowering my stop on MasterCard to $186.70 as it has become extremely profitable and is prone to vicious whipping moves I would rather not stomach having worked so hard to get to this point.

CNBC ran a poll today asking basically if what the Fed did was right and approximately 75% said yes. Geee..... Ya Think ! Hedge and mutual fund valets who know only to buy the dips asked if a cutting rates to alleviate their sea of red ink was a good idea. I am going to ask the heroin junkie if he wants another hit, any takers on the under there? I didn't think so.


Cramer now wants the Feds to basically nationalise the monoline insurers. For less than the monetary stimulus package, which is a joke anyway. I gotta give a hand to him and all the "when its convenient capitalists" out there. They can scream and whine with the best of em' when things don't go their way. Bail me out when things are bad, bonus me up the wazoo when things are good. I'm a genius when the market goes up, everyone else is an idiot when it goes down. The Fed Knows Nothing when the market goes down and is brilliant when it goes it. Does this look sound like the picture of capitalism.


AAPL warned going forward tonight after the close. How many warnings and from how many different sectors do people need to get before the message sinks in. I obviously have a horse in this race as I am big time short but the facts speak for themselves. Just like the tech bubble they will admit it for what it is (bear market) when it is 75-80% complete. We need these people to maintain their stance from a contrarian standpoint.

I will say this again. We are headed down the road of Japan circa 1990, the only difference being they had some savings whereas we have none. The Fed has acquiesced to the screams of the equity markets and capitulated, now what happens when the screaming infant appears again unsatisfied. The Fed can cut rates to 0.5% and it will do nothing to alleviate the problem which you know is not liquidity but solvency. Credit is contracting, banks are petrified of lending and nothing will change that until the bad loans across the globe are swallowed and eaten and digested. The pain of which will be ENORMOUS but weren't the benefits ??

Isn't capitalism a 2-way street? Or did you really think the Greenspan Fed abolished recessions from the face of the planet or were you naive enough to think recessions were nasty things that happened to other people and not us. The phrase used during the Japan debacle was called pushing on a string as lower and lower rates have less and less effect, just like a heroin addict.


Open Positions:
Long 4 units Ultrashort Real Estate ticker SRS @ $85.28 stop at $118
Long 5 units Currencyshares Japanese Yen ticker FXY @ $87.54 stop at $85.25
Long 1 unit U.S. Oil Fund ticker USO @ $53.20 stop at $69.00
Long 3 units Ultrashort Dow 30 ticker DXD @ $55.35 stop at $49.80
Short 1 unit Citigroup ticker C @ $44.70 stop at $32.40
Short 3 units Amazon ticker AMZN @ $84.04 stop at $84.25
Short 1 unit Goldman Sachs ticker GS @ $214.75 stop $202.70
Short 4 units Honeywell ticker HON @ $59.90 stop at $59.40
Short 2 units of MasterCard ticker MA @ $206.45 stop at $192.85
Short 2 units of Deutsche Bank ticker DB @ $119.85 stop at $125.40

Tuesday Morning Thoughts

Global markets have been in freefall over the holiday weekend. I guess this may finally put to rest the de-coupling afficionados and their theories. True to form the FOMC has cut rates 3/4 of a point with the lone dissenter being Bill Poole. The regularly scheduled meetinig is less than a week away so the political pressure on them to act must have been unabearable. It is the only tool they know how to use, my guess is it is pushing on a string just like Japan of the 90's and still today.

I am not going to pass judgement on this as I am very short this market and any criticism of this move by me would be viewed as skewed by position bias. What I will say is when the market was steam rolling higher raising rates by a like amount would be considered heresy unless your name was Paul Volker.

My conclusion is that this emergency meeting a rate cut shows the panic at the Fed. What do they know what we don't. My guess is that in the financial arena things are enormously worse than even the most pessimistic amoung us believe. I believe they see the house of the cards the global derivative trade has become and quite frankly don't have any models that can spit out any answers. Basically, they have used one more piece of their ammunition. I am not sure how much more they have let, but I do know it is less.

Do you think that with the downgrade of the monoline insurers that many of these banks who have used them extensively have taken write offs are due to come back for a second helping ? Just a thought.

Remember rallies are to be sold not bought. No matter how much or how often the pundits on pom pom TV tell you that it's capitulation. There will be rallies, they will be fast and furious but this is a bear market, govern yourself accordingly.

Goodl trading to you all.


Open Positions:

Long 4 units Ultrashort Real Estate ticker SRS @ $85.28 stop at $118
Long 5 units Currencyshares Japanese Yen ticker FXY @ $87.54 stop at $85.25
Long 1 unit U.S. Oil Fund ticker USO @ $53.20 stop at $69.00
Long 3 units U.S. Natural Gas Fund ticker UNG @ $34.16 stop at $37.40
Long 3 units Ultrashort Dow 30 ticker DXD @ $55.35 stop at $49.80
Short 1 unit JC Penney ticker JCP @ $62.90 stop at $ 43.40
Short 1 unit Citigroup ticker C @ $44.70 stop at $32.40
Short 3 units Amazon ticker AMZN @ $84.04 stop at $84.25
Short 1 unit Goldman Sachs ticker GS @ $214.75 stop $202.70
Short 4 units Honeywell ticker HON @ $59.90 stop at $59.40
Short 2 units of MasterCard ticker MA @ $206.45 stop at $192.85
Short 2 units of Deutsche Bank ticker DB @ $119.85 stop at $125.40

Saturday, January 19, 2008

Busy Week

Sorry for not posting yesterday. I got caught up in some personal items as well as the market action of which there was no shortage of.

Have a look at the 3 charts below. (weekly view)






Notice anything similar? Look at the volume coming in as we break the summer of 06' lows. This is extremely bad. New lows are being made and as oversold as we look to be we can remain that way for quite some time. The market can also go sideways relieving the oversold issue, it doesn't have to go up. Just make sure you are making the oversold argument based on logic and analysis and not your biased position currently held, unless of course you made the same argument about Chipotle, Crox, Baidu, Apple, Rimm et al when they were egregiously overbought in the bull run!


So what do you get when we have a day where we open higher and run up about 180 points only to reverse and drop to a low off 130 points recovering slightly at the end to close the day down 60 points....A day traders wet dream quite frankly. The damage of the last few days have thrown cold water on the plans of the bulls for a rally. The damage inflicted by the last 3 days is ominous and now opens the gates to further downside. This action is not good if you are a bull or are looking to get long. I would suggest you shelve those ideas for some time as we are in a bear market and the only discussion should be of magnitude and duration. Rallies are to be sold into not weakness bought. A generation of hedge and mutual fund valets are going to lose a lot of money learning this fact.

I would love to tell you that this decline is in the 8th inning or so but unfortunately it has barely begun. Listen housing is barely off 10-15% and the markets are doing this. Imagine what happens when we get to the0 2-30% area. or worse. Now I hear you saying already, 'no way, not here, can't happen'. It is this type of thinking that is going to bury you, guaranteed! I am not being mean or condescending, just candid. Housing prices dropped 70% in Japan after their real estate bubble burst and look where they are. Stop ignoring the facts just because you don't like them. Now I am not calling for us to drop that far(re:Japan) but I sure as hell wouldn't take the other side of that bet. I can only laugh now when I hear people say 'it just can't happen here, no way, the fed won't let it, the economy is to resilient, blah, blah, blah. when what I really want to do is cry for them.
Martin Hutchinson's piece from earlier this week is a must read for those of you who think the worst is over for the financials. Satyajit Das, the derivatives specialist, believes the problems in the financial arena have only just begun and in baseball terms feels that only the national anthem has begun.


The Fed cutting interest rates is not the answer the debt is rotten and there is far too much of it. The ponzi scheme is now unwinding in reverse and the pain is going to be extraordinary. I hope I am wrong but you must hope for the best but plan for the worst.

Good trading to you all.
Open Positions:
Long 4 units Ultrashort Real Estate ticker SRS @ $85.28 stop at $118
Long 5 units Currencyshares Japanese Yen ticker FXY @ $87.54 stop at $85.25
Long 1 unit U.S. Oil Fund ticker USO @ $53.20 stop at $69.00
Long 3 units U.S. Natural Gas Fund ticker UNG @ $34.16 stop at $37.40
Long 3 units Ultrashort Dow 30 ticker DXD @ $55.35 stop at $49.80
Short 1 unit JC Penney ticker JCP @ $62.90 stop at $ 43.40
Short 1 unit Citigroup ticker C @ $44.70 stop at $32.40
Short 3 units Amazon ticker AMZN @ $84.04 stop at $84.25
Short 1 unit Goldman Sachs ticker GS @ $214.75 stop $202.70
Short 4 units Honeywell ticker HON @ $59.90 stop at $59.40
Short 2 units of MasterCard ticker MA @ $206.45 stop at $192.85
Short 2 units of Deutsche Bank ticker DB @ $119.85 stop at $125.40

Thursday, January 17, 2008

Oversold and Cheap ...

I want to touch on something that I hope you may find interesting, if not, then please bear with me as I do it to re-enforce my own habits. I want to talk about 2 items many of you may be hearing on the tube or thinking about yourself. Namely that the market is terribly oversold and due for a bounce and that the market or stocks are cheap on a valuation basis.

First off is the idea that the market is oversold is completely understandable, the natural ebb and flow of all things would suggest it. The problem with this thinking is that markets can remain both overbought and oversold far longer than we can imagine. It is natural to see something sell off terribly, watch a wonderful short entry become fabulously profitable only to start thinking about how oversold the position has become and that it's due for a bounce.

You know the drill, we've all done it on both the long and short side. So you cover your fabulously insulated short or worse you go long looking to trade the bounce !!! (Remember, only 3 positions in a bear or bull market very long/short, long/short, or neutral.) You do this only to watch the stock continue down another 10,20, maybe 50%. Been there and done that. It is a this time I will remind you of what Jesse Livermore called his greatest piece of advice,

"it was never my thinking that made me the big money but my sitting, sitting tight !"


Long ago I would have covered a short position like the Citicorp I have on currently, to make the cash register ring only to watch it cascade down without me on board. I say this knowing full well we could experience a big vicious rally and yet still nothing would change.



The second item is the chatter that certain stocks/sectors are getting cheap on a valuation basis. This argument is probably coming from the same bulls who told you that how the expensive tech stocks were so cheap based on a valuation basis, you know, stock XYZ is only trading 12X 2011 earnings ! I want to remind you that just as stocks ignored overvaluation at the height of a bubble, they were ignore undervaluation at the depths of a selloff or worse. Overvaluation did not stop JDS Uniphase from running nor will it stop Citicorp from falling. JDS did and Citi eventually will stop when its good and ready and not a moment before. Trying to figure out when is a waste of mental capital !

The market will ignore the fundamentals both good and bad for a very long time. The fact of the matter is that this market is headed down and the psychology is getting worse and as oversold as it may feel, it is my belief that the real selling hasn't even started. Just my opinion.

Couple of open position housekeeping notes,

1) I am moving my stop on SRS up to 118.
2) I moving my stop down on AMZN to basically break even at $84.25.
3) I made a typo on DB as it is impossible to have shorted it at 199.85 and it should read 119.85, my apologies.

Good trading to you all.


Open Positions:

Long 4 units Ultrashort Real Estate ticker SRS @ $85.28 stop at $118
Long 5 units Currencyshares Japanese Yen ticker FXY @ $87.54
stop at $85.25
Long 1 unit U.S. Oil Fund ticker USO @ $53.20
stop at $69.00
Long 3 units U.S. Natural Gas Fund ticker UNG @ $34.16
stop at $37.40
Short 1 unit JC Penney ticker JCP @ $62.90 stop at $ 43.40
Short 1 unit Citigroup ticker C @ $44.70 stop at $32.40
Short 3 units Amazon ticker AMZN @ $84.04
stop at $84.25
Short 1 unit Goldman Sachs ticker GS @ $214.75
stop $202.70
Short 4 units Honeywell ticker HON @ $59.90
stop at $59.40
Short 2 units of MasterCard ticker MA @ $206.45 stop at $192.85
Long 3 units Ultrashort Dow 30 ticker DXD @ $55.35 stop at $49.80
Short 2 units of Deutsche Bank ticker DB @ $119.85 stop at $125.40

Adding to Honeywell short

Honeywell has broken the lower boundary of the flag so I am adding a 4th unit short here at $56.20



Good trading to you all.


Open Positions:

Long 4 units Ultrashort Real Estate ticker SRS @ $85.28 stop at $99

Long 5 units Currencyshares Japanese Yen ticker FXY @ $87.54 stop at $85.25

Long 1 unit U.S. Oil Fund ticker USO @ $53.20 stop at $69.00

Long 3 units U.S. Natural Gas Fund ticker UNG @ $34.16 stop at $37.40

Short 1 unit JC Penney ticker JCP @ $62.90 stop at $ 43.40

Short 1 unit Citigroup ticker C @ $44.70 stop at $32.40

Short 3 units Amazon ticker AMZN @ $84.04 stop at $86.85

Short 1 unit Goldman Sachs ticker GS @ $214.75 stop $202.70

Short 4 units Honeywell ticker HON @ $59.90 stop at $59.40

Short 2 units of MasterCard ticker MA @ $206.45 stop at $192.85

Long 3 units Ultrashort Dow 30 ticker DXD @ $55.35 stop at $49.80

Short 2 units of Deutsche Bank ticker DB @ $199.85 stop at $125.40

Adding to Ultrashort Dow 30



I missed the intial break above 57.75 but now it is pulling back and I am adding a 3rd unit long of ticker DXD the ultrashort Dow 30 here at $ 57.75.

Good trading to you all.

Open Positions:


Long 4 units Ultrashort Real Estate ticker SRS @ $85.28 stop at $99
Long 5 units Currencyshares Japanese Yen ticker FXY @ $87.54
stop at $85.25
Long 1 unit U.S. Oil Fund ticker USO @ $53.20 stop at $69.00
Long 3 units U.S. Natural Gas Fund ticker UNG @ $34.16 stop at $37.40
Short 1 unit JC Penney ticker JCP @ $62.90 stop at $ 43.40
Short 1 unit Citigroup ticker C @ $44.70
stop at $32.40
Short 3 units Amazon ticker AMZN @ $84.04 stop at $86.85
Short 1 unit Goldman Sachs ticker GS @ $214.75 stop $202.70
Short 3 units Honeywell ticker HON @ $61.10 stop at $59.40
Short 2 units of MasterCard ticker MA @ $206.45
stop at $192.85
Long 3 units Ultrashort Dow 30 ticker DXD @ $55.35 stop at $49.80
Short 2 units of Deutsche Bank ticker DB @ $199.85 stop at $125.40

Keep it Simple

I want to talk about something that I was asked in an email.I am summarizing the question to keep it short. Basically the question was, why are you charts so simple? Why don't you use the multitude of studies you can use with charting software. The answer like my charts is easy. I need it simple. I need it uncluttered. I have lost more money than I care to recount following some stupid oscillator that was positively diverging while my stock was tanking. Ignoring price I trusted the oscillators, doesn't matter which one just that I was foolish and naive enough to trust it.

The problem was compounded when the margin clerk called and told me of the call amount. I tried to explain to him that the oscillators were positively diverging, blah blah blah..... To which he responded, that's nice you have until 2pm to meet the call or we will sell you out. Which reminds me of a very important speculating rule. Never, ever, ever meet a margin call. It is the markets way of telling you that you are wrong. Bank America should have heeded this warning with Countrywide, they will regret it enormously.

You want steak or sizzle. Wall St., Bay St., Lombard St. are famous for sizzle, dazzle em' with PowerPoint presentations and spreadsheets, etc and next thing you know they're buying farmland in Antarctica. Now I do know of some technicians who won't even follow volume as they don't want to be distracted. Now please know that there are many very successful technicians who use all aforementioned oscillators and studies. They are just not for me and like a tailored suit I need mine to fit me. I hope this clears up the issue of why my charts are 'so simple'. I like how a friend of mine puts it about charts without the clutter, simple yet elegant.

Mark my words they WILL begin to pay attention to this, tis a matter of time.

This thing, UNG, hasn't even gotten started yet !

Honeywell looks very tired here. I understand people who want to enter at the upper end but I will wait for the lower boundary to be broken.

Good trading to you all.
Open Positions:

Long 4 units Ultrashort Real Estate ticker SRS @ $85.28 stop at $99
Long 5 units Currencyshares Japanese Yen ticker FXY @ $87.54 stop at $85.25
Long 1 unit U.S. Oil Fund ticker USO @ $53.20 stop at $69.00
Long 3 units U.S. Natural Gas Fund ticker UNG @ $34.16 stop at $37.40
Short 1 unit JC Penney ticker JCP @ $62.90 stop at $ 43.40
Short 1 unit Citigroup ticker C @ $44.70 stop at $32.40
Short 3 units Amazon ticker AMZN @ $84.04 stop at $86.85
Short 1 unit Goldman Sachs ticker GS @ $214.75 stop $202.70
Short 3 units Honeywell ticker HON @ $61.10 stop at $59.40
Short 2 units of MasterCard ticker MA @ $206.45 stop at $192.85
Long 2 units Ultrashort Dow 30 ticker DXD @ $54.10 stop at $49.80
Short 2 units of Deutsche Bank ticker DB @ $199.85 stop at $125.40

Wednesday, January 16, 2008

Update

The death cross which is the 50 crossing over the 200 day moving average is imminent.



Given the Naz, why would this be a hiding place? It makes no sense. I hope you still aren't thinking that techs are a place to hide. Intel's report should now convince you. Now don't go try rationalizing their numbers by saying they weren't that bad. Remember how I said in a bear market you have 3 positions, very short, short or neutral. Well, that applies to news which as all my readers know conforms to the tape. In a bear market, good news is neutral, neutral news is bearish and bad news is very bearish. End of lesson.




I was stopped out of Fannie today as my stop of $38.60 was triggered. Only 1 unit short at $40 means a small profit and another deposit to my mental capital account. I have no doubt that Fannie is headed lower here but I have better ideas and bigger fish to fry as they say. The stock bounced on the rumor? that treasury was going to raise Fannie and Freddies limits on loans. What a laughter that is not the story itself, but the pump and dump scheme by whomever floated that rumor. The stock got to $39 and change in a frenzy only to fall apart when the rumor was denied. Someone got off some nice shorts up near the resistance area. And who says its pays to play nice has never speculated in the markets that's for sure. Mr. Loeb's classic Battle for Investment Survival was very aptly titled not to mention a great read.





I shorted Deutsche Bank today and some may think that foolish, shorting into the weakness of the financials but I have learned over time to trust the charts. They rarely lie, they can take their time giving one the answer but they are usually correct. Sears ticker SHLD of which I was short and covered a while ago, is a perfect example of the chart telling one that a break of $100 was significantly bearish. But could you short it after the stock had fallen there from $190? Well it fell to $85 so the answer is a resounding yes.



Another reminder to please ignore the shills on pom pom TV telling you how this stock or that stock is only trading for 12 X next years earnings or its cheap on some valuation metric. I can assure you unequivocally that they can get much cheaper and that they can stay that way for a very long time. Ask anyone buying resource stocks back in 1998-2000. Those stocks were cheap by every measure imaginable yet stayed that way until most people finally threw in the towel in disgust. Many leaving to chase the tech bubble. As I have mentioned previously when the bloom comes off a sector, ANY SECTOR, it does not return for a great many years, you name it, precious metals 70's, uranium in the 50's, nifty fifty in the 60's, tech, tulip bulbs, hoola hoops, beanie babies, cabbage patch, etc... You get the picture.






Finally someone mentioned the Yen carry trade. Yeah you guessed it, Rick Santelli, are you shocked. Come on, did you really expect one of the others such as Erin, Maria, or Dylan to? Santelli's comments are worth paying attention to as are Art Cashins'. They are the only regulars worth listening to mainly because they are not afraid to say things most don't want or care to hear.






Can someone tell me why avoiding or heading off a recession is such a priority. The economic classes I took always said growth was followed by contraction, 3 steps forward 1 or 2 steps back. Nothing wrong with that. So why are they so concerned with repealing a basic law of economic nature. This Fed tinkering and manipulating the system has caused us to end up where we are.






The pundits were on Kudlow's show last evening discussing how Libor vs Fed funds has come back down and how this means all is well. Listen, the housing woes are now filtering out across the economic landscape and this is very bad. The housing ATM is closed and given the consumer is 70+% of the economy this is nothing short of terrifying. Commercial real estate along with consumer credit issues are the next shoes to drop. Do not let less bad news and a natural, expected, welcomed, and healthy bear market rally fool you into going long.


Good trading to you all.



Open Positions:


Long 4 units Ultrashort Real Estate ticker SRS @ $85.28 stop at $99
Long 5 units Currencyshares Japanese Yen ticker FXY @ $87.54 stop at $85.25
Long 1 unit U.S. Oil Fund ticker USO @ $53.20
stop at $69.00
Long 3 units U.S. Natural Gas Fund ticker UNG @ $34.16 stop at $37.40
Short 1 unit JC Penney ticker JCP @ $62.90 stop at $ 43.40
Short 1 unit Citigroup ticker C @ $44.70 stop at $32.40
Short 3 units Amazon ticker AMZN @ $84.04 stop at $86.85
Short 1 unit Goldman Sachs ticker GS @ $214.75 stop $202.70
Short 3 units Honeywell ticker HON @ $61.10 stop at $59.40
Short 2 units of MasterCard ticker MA @ $206.45 stop at $192.85
Long 2 units Ultrashort Dow 30 ticker DXD @ $54.10 stop at $49.80
Short 2 units of Deutsche Bank ticker DB @ $199.85 stop at $125.40

Shorting Deutsche Bank

I have asked you to keep an eye on Deutsche Bank. Front running the break down of a pattern can be profitable and it can be punishing. I have waited for the break down to arrive. Well, the time has come to act.

I am horting 2 units of ticker DB @$119.90 with a stop at $125.40. The woes for the financials continue.

Good trading to you all.

Open Positions:
Long 4 units Ultrashort Real Estate ticker SRS @ $85.28 stop at $99
Long 5 units Currencyshares Japanese Yen ticker FXY @ $87.54 stop at $85.25
Long 1 unit U.S. Oil Fund ticker USO @ $53.20 stop at $69.00
Long 3 units U.S. Natural Gas Fund ticker UNG @ $34.16 stop at $37.40
Short 1 unit JC Penney ticker JCP @ $62.90 stop at $ 43.40
Short 1 unit Citigroup ticker C @ $44.70 stop at $32.40
Short 3 units Amazon ticker AMZN @ $84.04 stop at $86.85
Short 1 unit Goldman Sachs ticker GS @ $214.75 stop $202.70
Short 3 units Honeywell ticker HON @ $61.10 stop at $59.40
Short 1 unit Fannie Mae ticker FNM @ $40.00 stop at $38.60
Short 2 units of MasterCard ticker MA @ $206.45 stop at $192.85
Long 2 units Ultrashort Dow 30 ticker DXD @ $54.10 stop at $49.80
Short 2 units of Deutsche Bank ticker DB @ $199.85 stop at $125.40

Tuesday, January 15, 2008

A Good Lesson Learned on NILE



I am doing this post as a lesson to not only myself but others who want to improve their trading. I am most certainly not perfect and am continually learning things. The stock in question is Blue Nile. The above chart contains my notes at the time I was entering the trade. I was short 2 units of NILE at $71.65 with a stop at $74.20. I was stopped out on Dec 27 at $74.30 and wouldn't you know it the stock has not looked back. I am not going to beat myself up psychologically about how much money I left on the table, a look at the chart would make one sick about it. Beating one self up over this serves no purpose and can be harmful to traders as we need to preserve, guard and build our mental capital. It is as much if not more important than the physical kind.



Some may think the lesson here would be to trade smaller with a larger stop, and that's fair. For me though, the mistake was not coming back to the trade. I have noticed a bad habit I have is that once a pattern is identified, if I get stopped out I tend to move on to other prospects and forget about it the position in question. Part of that is the mental capital aspect I covered earlier in that I don't want to depress myself seeing all the leftovers !



I could and should have easily have re entered NILE short when the stock broke the the lows at $65 which was the initial thrust down through the neckline of the head & shoulders formation. I could have re entered the position the minute I broke the neckline a 2nd time. I have made this mistake numerous times and it is my intention to fix it.



I was reading a passage of a trader, whose named I cannot recall, who is basically a trend follower buying new highs. The position in question broke only to whip back and stop him out. He related how this break out and whipping occurred 4 times in a span of about 2 1/2 weeks. Finally on the 5th break out the position ran 3 fold. The point here is he had a plan, he had risk management, and most importantly he had the perseverance and the mental capital to continue to employ it. He did not get frustrated, he did not give.



How many of you out there would come back for a 5th helping of a can of whoop ass ? Not many, this cat did and the profits from 1 trade covered all 4 prior losers and THEN SOME ! This only occurs by letting your winners run.



I hope this helps. Good trading to you all.

Ready to Short more Honeywell.



The lows of the last few days on Honeywell offer some short term support. A break should trigger a new leg down on this stock. I will add a 3rd unit short on a break of 56.20 on Honeywell. A rally to the 50 day MA about 58 cannot be ruled out but the tape looks heavy with a test of the prior lows of Aug and Nov likely.


I am moving my stop up on UNG to $37.40. The reason for this are (a) I am sick of letting winners become losers so this prevents that and (b) I am significantly concerned of the risk of a meltdown in which margin calls rule the day. No matter how much I like the energy complex with crude and nat gas, the selling could, and in my humble opinion very likely will get severe.

Things are getting worse not better. Citi news today was a joke, a dividend cut that everyone but CNBC knew was coming, trivial layoff numbers, and now consumer credit portfolio deterioration. They posted a loss of about 17 billion on toxic paper which is no where near what needs to be written off and raised 14 billion from gullible investors overseas. Now the beauty of all this is that they are still marking to model !! Absolutely Unbelievable. Can you spell denial. Get ready for the garage sale at Citi, they're running out of options. I am still short 1 unit and am moving my stop down to $32.40


I am dropping my stop on JC Penney to $43.40, just tightening things up a little bit here.



I was stopped out of UEC at 2.83 for a loss on 3 units, disappointing as I like uranium in the energy space. Which leads me to a good lesson.





Jesse Livermore in his book reminiscences of a Stock Operator related a story of old man Partridge when someone asked him what he thought of the market, he replied "well, you know it is a bull market" Not the advice say a fan of Jim Cramer and Mad Money but as Livermore said it was invaluable. Knowing what type of market you are in. My friend Dennis Gartman has always said that in a bull market there are only 3 positions for a trader. Very long, long or neutral. I believe uranium to be in a bull market but as we have seen, that can and was overwhelmed by the broader markets bearish mood.



Make no mistake about it, this stock market is in a bear market. Therefore there are only 3 positions one can have, very short, short, or neutral. Govern your actions accordingly.

Good trading to you all.

Open Positions:

Long 4 units Ultrashort Real Estate ticker SRS @ $85.28 stop at $99
Long 5 units Currencyshares Japanese Yen ticker FXY @ $87.54 stop at $85.25
Long 1 unit U.S. Oil Fund ticker USO @ $53.20 stop at $69.00
Long 3 units U.S. Natural Gas Fund ticker UNG @ $34.16 stop at $37.40
Short 1 unit JC Penney ticker JCP @ $62.90 stop at $ 43.40
Short 1 unit Citigroup ticker C @ $44.70 stop at $32.40
Short 3 units Amazon ticker AMZN @ $84.04 stop at $86.85
Short 1 unit Goldman Sachs ticker GS @ $214.75 stop $202.70
Short 3 units Honeywell ticker HON @ $61.10 stop at $59.40
Short 1 unit Fannie Mae ticker FNM @ $40.00 stop at $38.60
Short 2 units of MasterCard ticker MA @ $206.45 stop at $192.85
Long 2 units Ultrashort Dow 30 ticker DXD @ $54.10 stop at $49.80

Monday, January 14, 2008

Some Charts and some Random Thoughts.

A 4yr look at the Diamonds show a market that looks to finally have rolled over. Back in late 1999, early 2000 the majority of Wall St. ridiculed the thought of a bear market. It was supposed to be different that time. Well it wasn't as the Dow tumbled from 11,600 to 7,200. Just as now many poo poo the idea of a bear market claiming valuations are cheap. I can assure you that can most definitely become cheaper.



The Spiders with a longer term view. Notice where a Fibonacci 50-62% retracement of the rally form early 2004 would take us !





The Spiders daily above clearly show a deteriorating broader market.


Buffett called derivatives financial weapons of mass destruction. The fallout from their pervasive and widespread use is not going away. The news is going to get worse before it gets better. Do not let a few days of so called 'clear skies' trick you into thinking the worst is over. Go back and look at the techs. Every rally was followed by a worse decline. The thing to remember is that once the euphoria of the party wears off people will not come back to play for a very long time. So please ignore those hoping, yes they are hoping, for real estate to resume its party in short order. They were doing the same with tech stocks after the bubble burst, just look at JDSU and Nortel, et al, 7 years later! My guess is that real estate may bottom in the 2011, and that may be conservative. Remember I was the guy that thought Nortel (which at the time was $120 Cdn$) could go to 40, and it ended up going to $2.


Stocks can rise and fall farther than you can possibly imagine at the time. Please remember this.
Speaking of stocks rising farther than you can imagine. I was stopped out of Monsanto for a small loss on 1 unit. It was an exploratory trade which I would like to come back to but first I will let it roll over and then short it as it breaks its reactionary lows. Maybe a lesson learned.
I also want to lower my stop loss on MasterCard to $192.85. It has become very profitable very quickly. Again a psycholgical capital preservation move more than the physical type.
Also lowering my stop on Fannie Mae to $38.60. Again need to keep a winner from beoming a loser.
Part of this is my desire to cull some positions. I have too many of them plain and simple. It is a headache I want to relieve. I want to have fewer larger positions and by lowering some stops I will hope to accomplished this.


It looks like MBIA got their financing, 1 billion at 14% for triple AAA. Yeah right. Moodys and Fitch ought to be ashamed of themselves. Actually the people who are still listening and relying on their opinions deserve the fate (and it will be awful) that befalls them. What's that phrase, fool me once shame on you, fool me twice...



To those expecting rate cuts, you will get them, begrudgingly by the fed. I will tell you now that is will do no good. When you need money to run your own house are you going to lend. When you have had you household balance sheet whacked, and I am being nice about this, in many cases decimated, how excited are you going to be about lending. Forget it.


I know many of you have forgotten about this but you remember all those leveraged buyout deals.(merger Monday on CNBC!) All that paper(billions) that was committed to by the banks when the liquor, excuse me, I meant money, was flowing. It's all still sitting on their books, Chrysler, et al., just sitting there rotting, as they trot the globe begging for cash infusions at extortioner rates. For supposedly astute global financial institutions they are breaking the cardinal sin of speculation, keep your winners and sell your losers.


I along with others of a non-mainstream bent have felt commercial real estate is the next shoe to drop in the credit/financial arena. Well I could be wrong as consumer credit (credit cards) seem to be picking up steam and not in good way. I read today $915 billion in credit card debt! WOW ! Talk about a tsunami.


The yen is quietly working its way higher as many on the financial news media ignore it. I have encouraged my readers to pay attention to the yen. Get ready for a barrage of coverage by the financial media cheerleaders.
Good trading to you all.


Open Positions:

Long 4 units Ultrashort Real Estate ticker SRS @ $85.28 stop at $99
Long 5 units Currencyshares Japanese Yen ticker FXY @ $87.54 stop at $85.25
Long 1 unit U.S. Oil Fund ticker USO @ $53.20 stop at $69.00
Long 3 units U.S. Natural Gas Fund ticker UNG @ $34.16 stop at $33.90
Short 1 unit JC Penney ticker JCP @ $62.90 stop at $ 48.50
Short 1 unit Citigroup ticker C @ $44.70 stop at $35.50
Short 3 units Amazon ticker AMZN @ $84.04 stop at $86.85
Short 1 unit Goldman Sachs ticker GS @ $214.75 stop $202.70
Short 3 units Honeywell ticker HON @ $61.10 stop at $59.40
Short 1 unit Fannie Mae ticker FNM @ $40.00 stop at $38.60
Long 3 units Uranium Energy ticker UEC @ $3.23 stop at $2.85
Short 2 units of MasterCard ticker MA @ $206.45 stop at $192.85
Long 2 units Ultrashort Dow 30 ticker DXD @ $54.10 stop at $49.80