On Fast Money last night, they were discussing the dramatic surge in XLF call buying, which was considered to be wildly bullish. I consider it to be wildly foolish if the buying was based upon Thursday morning’s GDP number. Can the economy really be expanding while shedding jobs?
Fast Money also thought that Dell’s IT-spending bomb was just wonderful news because it will be creating such good bargains on tech stocks today. Of course, if you are long tech, that’s the kind of thing you would say to keep other traders in long enough for your to get out.
Watch the comments section for updates throughout the day.
Hey George,
I see what you mean now
That is a nice move in such a short timeframe.
Thanks everyone. Today was a very interesting day and I made out with some $$ which makes it good.
Have a great Long Weekend. See you all on Tuesday when Gustav hits!
George,
Thanks so much for the info. I normally like to fade overbought and oversold conditions, trading once every two or three days. But maybe I will be doing more daytrading soon!
Matt
Matt;
You’re welcome. Glad I can contribute something!
This method is so simple and effective too.
I hope it is beneficial to all.
Matt;
One last thing.
What I’m after is the best of both worlds. Your method plus day-trading.
Day-trading would allow me to make money while my other positions are making money. That way I could put more of my funds to use.
So, I’m after what you have already established, along with what I already know.
Day-trading is absolutely the best thing that’s ever happened to my career. I had a rough beginning because everyone was teaching trading backwards.
I do longer type trades using the daily and weekly with my method, but I don’t have the “feel” for that trading like I do for day-trading – because I don’t understand the “fading” and things of that nature.
So I will learn how you figure things out and follow that lead.
Sure is nice of you to provide this service.
Thanks
George,
It costs almost nothing to run a blog like this, so its not a burden to me at all. I don’t charge for subscriptions or run advertising because I want to keep the pressure on myself to be a good trader. I also benefit by learning amazing things from my readers such as yourself.
To learn how to fade overbought and oversold conditions, sign up at:
http://www.sentimentrader.com
…and look at the “STEM.MR” model. Yesterday, it flashed an extreme overbought signal. My other indicators agreed, I piled in short, and cleaned up today. It was easy.
Of course, most people can’t trade as I do. The problem is that when you get a good overbought signal, as we did on Thursday, it is very difficult to short because it looks like the market is going to the moon.
So, on Thursday, we got the 3.3% GDP number and the market soared. Psychologically, very few people can short into action like that, but that was the exact thing to do.
In the middle of next week, we will probably get a good oversold signal. It will look like the world is ending and it will be difficult to go long, but that will be the trade.
This style of trading is working beautifully right now. It doesn’t work so well when the public is stampeding into, or out of, the market. The masses can bend all of the indicators, but they are on the sidelines for now.
Matt
Matt;
That’s exactly what I’m after. Knowing when to do that.
I’ve always had that urge to let or hop a stock drops then get in. I feel it is the safest and least risk to buy in that situation.
The BBT stock was <20 bucks mid-July. I told everyone I knew to take out a second mortgage and buy that stock. Now, it’s at 30. Probably a good time to sale.
The difference between that specific stock and the stock market in general is that I KNOW that stock and how it reacts – I don’t know the overall market. But I want to be able to do that same thing with the overall market. Those are killer profits.
I’m glad we have a long weekend so I can study sentimenttrader and see how that works. I spend most of my free time doing stock related activity.
Thanks for the link and help.
George
This week, I’ve been long EXM since $32.50, only 2000 shares, but EXM was up today despite the pasting in the general market, anybody with an opinion about the shippers? I know the global slowdown has alot of people skeptical about any strength in this group but they mostly look oversold, low PE’s, big dividends, BDI at a low, but could turn up. I think EXM could run to 40+.
This is the best trading site, with the most informed and knowlegable posters on earth, thanks Matt for being such a great sponsor.
Hi Randall, good bet on EXM. The credit crunch is global and emerging markets are also fighting inflation. Growth is slowing and commodities and shippers will take a hit. Long-term contracts will ensure that dry shippers still make good/decent money, but if BDI tanks their share price will also be hit.
Your bet has been good and maybe you will make more short-term? I would recommend stop-loss at a level you’re happy with. For safety.
Bank failure in Georgia. Integrity Bank. Look for this every Friday into 2010.
Gustav will determine direction next week. If we’re lucky it turns north and oil will tank.
How cute: So bank integrity has failed. How can that be?
Random musings:
We had now two times a pattern of 3 days up then one day down. This time the down day did not fall as much as last time. If were going up next week it will from a higher level.
Almost everyone I follow expects more volatility beginning next week…
On Thursday the market was shot up with the futures – you see that in the European intraday charts. The stock up/down pattern that day looks more like a short squeeze / coverting of positions. No real buying interest if you ask me.
Don’t expect a recovery anytime soon. I can’t find the graph now but analysts’ expectations are way, way to optimistic for Q1/09 and the following quarters. The world economy is a tanker, it moves slowly but it has decided to slow down. So will earnings.
The credit crunch is alive and well. Ignore positive news as long as the banking system does not show signs of healthy expansion. Too much money is spent to patch up mistakes of the past, not to finance new growth.
You got that right Yerk. 18 months ago the average forecast for S&P500 earnings per share was 92 USD. The latest average forecast is 72 USD. This is real reported earnings.
David Rosenberg at Merrill Lynch forecast earnings at 68 USD for 2008 and 63 USD for 2009. I think he is too optimistic for 2009 as energy companies’ earnings will fall more due to lower prices and continued cost pressure.
Add on recessionairy and gloomy multiples and we have a long way to go before the bottom-fishing can commence. Bunker down folks.
Larry,
I’ve been watching hurricanes very closely for 14 years from here in Miami, and the forecasts seem to be getting more and more accurate – especially the three-day forecast. So, I think the Gulf Coast will definitely take a hit from Gustav. However, the one thing that you don’t hear discussed very often is how fast Gustav will be moving when it does hit. A few years ago, a giant storm sat on top of Cancun for 2-3 days. That’s a nightmare. But Gustav looks like it will race through the Gulf very quickly, and that will minimize the potential damage.
Matt
We’re getting some wind and rain from Gustav here in Miami since we are on the “dirty side” of the storm. I don’t expect to lose power, but if you don’t hear from me, that’s what happened.
Ok Matt, I just saw the latest prediction. They pinpoint it quite well.
Gustav seems to turn into a little nightmare. From the National Hurricane Center:
“DATA FROM AN AIR FORCE RECONNAISSANCE AIRCRAFT INDICATE THAT
GUSTAV HAS CONTINUED TO STRENGTHEN AND NOW HAS MAXIMUM WINDS
NEAR 145 MPH…230 KM/HR WITH HIGHER GUSTS. THIS MAKES GUSTAV AN
EXTREMELY DANGEROUS CATEGORY FOUR HURRICANE ON THE SAFFIR-SIMPSON HURRICANE SCALE.”
Hi Matt,
I think a category four hurricane is too much for the electricity infrastructure in Florida?!
Hope to hear from you soon.
dressguard,
Gustav is a monster now, but it won’t hit Florida, though Hanna looks like it might. My building is connected by underground wires to a Florida Power and Light substation, so my power is pretty steady. When the substation gets knocked out, it’s pretty high on this list for repairs, so even then, I’m usually powered up in no more than a day.
Matt
Matt,
you wrote: “On Fast Money last night, they were discussing the dramatic surge in XLF call buying, which was considered to be wildly bullish. I consider it to be wildly foolish if the buying was based upon Thursday morning’s GDP number.”
If you believe the GDP report, buying XLF makes sense: “Domestic profits of financial corporations increased $24.7 billion in the second quarter, compared with an increase of $37.3 billion in the first.” (http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm) There seems to be something broken in the banks’ own reporting. They get the sign wrong…
Yerk,
The Larry Kudlow interpretation of that stat would be: “THE FINANCIAL SECTOR IS BOOMING!!!”
Matt