The Sky’s the Limit!
The euphoria on CNBC is reaching absurd levels. Several times yesterday, I heard talking heads telling me: “Earnings will be horrible! Buy! Buy! Buy!”
Sure, the stock market can ignore bad news for extended periods of time. But this time around, bulls are going to need to be content with the lackluster earnings of their stocks for quite a while – like possibly the entire year.
Can investors ignore bad news for that long? Maybe, but I doubt it.
The worst thing I saw on CNBC was Don Luskin on Kudlow’s show. He’s one of those guys, along with Jerry Boyer, who has one of those little “I’m insane” grins on his face all the time. Luskin said someting like: “the upside for stocks is unlimited!”
That from a fool who ridiculed guys like Barry Ritholtz and Peter Schiff when they warned about the recession last year.
When CNBC and clowns like Luskin tell me that the stock market is passing out free money as the global economy crumbles, I am forced to conclude that we are seeing a fantastic shorting opportunity.
Nothing screams “recovery” like oil shippers going belly up and defaulting on their bonds, right?
here’s to starting a “nothing screams” meme
Nothing screams recovery like a city in the UK accepting the euro at parity.
http://www.telegraph.co.uk/finance/financetopics/recession/4076347/Village-accepts-euro-on-par-with-pound.html
It might be that the sellers are willing to let the market grind up to spx 1040 before they get a grip on the obamination to come. More light volume grind upward expected. It doesn’t mean the internals are improving, but neutral.
Agree/Disagree?
I hope they don’t allow CNBC to be aired in mental institutions. Those people are suffering enough as it is.
You mean CNBC isn’t aired FROM mental institutions?
Is this good news:
Dec specialty retail sales -18.3%, specialty apparel sales -17.3%; Dec e-commerce sales +4.6% – Spendingpulse
- Women’s apparel sales -20.2%, mens apparel -11.3%, footwear -12%, specialty electronics -21.4%, specialty furniture and home decor sales -21.4%, luxury goods -27.6%
I have taken this upswing as an opportunity to enact a plan I have been tossing around for some time: building a “long-term”, core short position.
I did this twice last year but never had the discipline to hold long term. Maybe third time is the charm?
I sunk 90% of my trading account into DEC 09 SPY puts. The rest is left for short term trading. While I think most on this board are aligned with my views, here is my reasoning:
1. Limited Upside
Current SPX levels are up over 25% from the lows made just over a month ago. I can’t imagine SPX getting over 1050 this year if it even gets to 1000.
2. Huge Downside Potential
I believe we will revisit the 750 low sometime this year and possibly plow right through it. I don’t know when, so 11 months seems like enough time. Don’t have to worry much about time decay either.
3. “Low” VIX
While VIX is at a historically high level of ~40, it has dropped over 50% in just over a month. It really can’t drop much below 25 and will skyrocket if we see more panic selling. Plenty of upside potential on the VIX, which will increase the value of all options.
4. Fundamentals
- Higher unemployment (leading to even more foreclosures)
- Housing will continue to tank
- Commercial real estate will soon join the party
- Bailouts and stimulus will not work. Someone explain to me how increasing our debt will solve our problem of having too much debt. Seriously, it’s that simple.
I’m willing to endure a little pain and will even add to this position if we continue to drift higher. If I am wrong, then I lose the majority of it and have severely over estimated our problems. At least I wont fear losing my job at that point.
So that’s my story and I’m sticking to it.
Regarding a post a while ago about the Fed crushing long term interest rates…one hypothesis was that this was done to avoid more defaults from Alt-A loans that are due to reset in the next year. At first it sounded like a pretty ingenious (devious?) plan. But then I got to thinking….
If you purchased a home with an Alt-A ARM in the last 3-4 years, chances are you are upside down on your mortgage. That means you would need to cough up the difference in cash before you could refinance. How many people who will have issues paying their mortgage when their rates reset will also have thousands (if not tens of thousands) of dollars sitting around?
Maybe that isn’t the plan and they’re just trying to dangle that debt carrot in front of us again. I think we’re all full.
If ever there was a time where CNBC was a contrarion indicator, now is that time.
PS – I swear I try to keep these posts short!
This explains why SRS took a dump today.
http://bloomberg.com/apps/news?pid=20601087&sid=aMjCHzL0Bun4&refer=home
Towelie, What strike(s) did you buy?
newbie: Kept it simple and went with a strike price of 65.
81% of the SP500 is trading above their 50 day MA.
http://stockcharts.com/h-sc/ui?s=$SPXA50R&p=D&b=5&g=0&id=p60367676780&a=156114718
Towelie, I have been contimplating a similar VIX play. (Though with a much smaller portion of the account) It looks like a very reasonable plan, best of luck!
contemplating, contemplating, contemplating, darn it.
just when i got the market figured out… the ignition key on the car gets stuck half way. HMMMM this is no dream something tells me to hide in a little corner cause everything i touch breaks.
Hang Seng down 2.5%. Straits Times down .8%. Nikkei 225 closed before the other two headed south. Europe to follow? Off to bed, hoping for a big gap down when I wake up.
Futures around 927-925 range.
Thanks, newbie.
Charlie, that Bloomberg article might raise another reason for the Fed to lower the long term treasury rates (and indirectly lower loan rates). I had no idea commercial real estate had fallen into the same option ARM crap so completely:
“About $270 billion of mortgages on shopping malls, apartment complexes and office buildings must be refinanced in 2009….”
Ouch. Just when you think you’ve absorbed most of the idiocy of this whole mess you read things like that and wonder how everyone could have been so foolish. So is trading SRS akin to tying your balls to a dart and seeing how far you can throw it before something snaps?
Turns out India’s 4th largest something such n’ so was a scam.
http://tinyurl.com/6t59kb
Danny, the auditors will have to sign off on the 2008 accounts across the globe. It will not be pretty. More to come?
UK’s FTSE is already hitting it’s Nov. 4 swing high. The spx needs another good week to catch up and match the FTSE performance to hit 1000.
Still think the main trend is up but we are on the verge of a decent correction.
S&P down to 880 and then up to 1000 and THEN tests the lows in the second quarter?
917 ha people are coming back to their senses that the worst hasnt come.
Meri-Death is back with the need for banks to raise capital.
ADP Employer Services reports -693K jobs.
Eurpoe down 1- 2%?
Eurpoe –Europe is EU pooping.
Not so much in France
WSJ Headline: Time Warner now expects net loss for 2008, down from guidance of $1.04 to $1.07 a share profit. Shares sink.
Pre-announcement season rolls on…
$600 to fix a freekin ignition key cylinder and housing!!! any people with experience willing to lend me a hand?
K,
Google “hot wire”.
Matt
Wow.. I know this was posted above, but wow!!!
WASHINGTON (MarketWatch) — U.S. private-sector firms shed 693,000 jobs in December, far worse than expected, according to the ADP employment index released Wednesday.
K;
Is that some crap, or what? I’d just leave it running all the time now that gas is cheap.
Matt;
There are some videos on YouTube vindicating Peter Schiff. The amusing part is showing those who were calling him a fool.
Here’s one of them:
http://www.mixx.com/videos/2950918/youtube_peter_schiff_was_right_2006_2007_2nd_edition
Good Morning and here is my Apple update. With Mac World disappointing Apple fans and the new flexible pricing for itunes Apple shares are trading back under the 50DMA in pre-market. If shares remain under $93 and volume starts to increase, say goodbye to the tech rally. Matt is probably right about the end of the rally. 100% cash but looking to go long QID for a scalp.
http://stockcharts.com/h-sc/ui?s=qid&p=D&b=5&g=0&id=0
charlie and george, thanks for the tip i got a friend that knows how to do it am taking my car out of the ripoff shop. lets hope they dont give me trouble
K;
I’ve been through that before and it turned out to be a recall on the ignition switch. Check the Internet to see if there is a recall on yours – you never know.
just got a buy order for drys? place it or screw it?
george this is a 1997 camry its just too old that’s all
How many more companies are going to ‘fess up that they faked their “good” results, like the one in India this morning?
Earnings Q4 will shock people. Q1 will be worse.
Drano, it’s called one-off’s.
ICE just couldn’t stand the 50s. Nice counter.
that’s a might big bounce on a down day..
Hi Matt-
When CNBC took over FNN, they were worth
watching. But today the CNBC sponsors pay
them to suck people into the market. They
are now an info commercial.
Hope your trading is off to a great start.
Sherry
George, that was a great clip on Schiff. We need to email that link into CNBC and demand they get him back on.
SV, agree. There are others out there too, on YouTube.
BBT so depressed, it need therapy. But when it pops that downage, I’m calling for my truck.
SV, we can catalog that under “tell the folks what they want to hear, not the truth”. Actually, most of those talking-heads don’t know the truth – obviously.
I am on their viewer response line now requesting that they have Schiff back on and some of the others to hold them accountable for their bullish comments
SV, you misspelled “bullish” — the “i” should come after the “sh”
Is ICE fickle today, or what?
Drano –
Reluctant buyers today. Chopped me off some BBT down around high $23s.
SV,
You don’t need to call CNBC. They had Schiff on last night.
Matt
If we close that gap today, that would be a big move.
Everything is nearing a 36MA. This should be interesting.
That’s on a 5min time frame.
Hey George,
what are you in besides BBT? SDS or did you switch to SSO?
George
Did you have an opportunity over the Holidays to produce the document outlining your trading stategy? You thought I had forgot didn’t you? I have gathered that there is a 15 Minute Master, but I haven’t figured out how it is used. Wait till the Stochastics on the 5 minute are below 20. When the 1 minute MACD breaks above zero jump in. How close did I get? Or did your new plan make all the old stuff null and void?
String
Hi Stringm;
I have worked on it more, but not completed yet. I recently came up with an additional strategy where I trade multiple time frames of the same stock simultaneously by simply using MAs. I’m testing that out now, real-time, and it is working great. It keeps me busier, but that’s okay. Also, I’m trying to figure out the best way to set my screens up with this new “strategy”.
However, getting into and out of the trades remains the same. This additional process is more profitable although there could be some drawdowns on occasions.
Hello all, I don’t even watch CNBC or any day time financial show for that matter – most of it is BS as we all know. Occasionally though, they have guys like Faber, Rogers or even Chanos. I am not a Schiff fan but I respect his ability to call a decline for a couple of years now. The problem is he is locked into the straight to hyperinflation camp yet we are clearly watching deflation take hold. While anything can happen, all signs point to a lopsided bet on deflation as the proper one for at least another 2 years. We may, if we are very lucky, have a temporary “recovery” in Q1 through Q3 09 which might create a short,, very weak stint of inflation although even this is a long shot. Anyone following a straight to hyper inflation camp has seen a huge drop in wealth in the last 12 months and more to come regardless of any bear market rallies. I prefer people who are not locked into one view and who are willing to monitor a fluid situation and invest accordingly.
I think this market will correct some more but then the final leg in this bear rally will come into inaguration or stimulus signing, so it should not last longer than the first week of Feb. If SP makes it to 990′s I will short with stop a bit above 1006 – give/take a couple of points.
Stay safe.
JO
Hey George,
it would be great if you could describe again how you get out of trades. What is the sign to sell.
Stringm;
There are several methods to enter a trade using my method. They all, for the most part, require a higher time frame from the one being traded to confirm a good entry.
The 15 minute is use as a price “pivot”, if that is a good description, which shows the immediate direction. I use both the 15min stochastic and MACD. The stochastic can, and will, cycle somewhat within a MACD. So, the MACD shows overall direction while the stochastic within it shows the immediate direction.
Example. BBT this AM is nothing but down according to 15min MACD and stochastic. However, I spotted the 1min turning up which was confirmed by the 5min stochastic and MACD which started turning up. I got an OK scalp. Just think if that was a setup where higher time frames had bottomed and were turning up together.
And, BBT will do it again where they all bottom and turn up, or begin to do so. Remember that price starts with the lower time frames, not the higher. Checking higher time frames tells us what the lower ones are doing because it is not always obvious.
Stringm;
In the BBT example, I also meant to say that the 15min stochastic turned up during that time which gave me the clue it was a good entry.
There are some folks on this board that have the uncanty ability to know, or figure out, market and stock direction based upon a number of things.
I don’t have that ability. In fact, I’m terrible.
I have to use something mechanical within the realm of probabilities. Then I follow the rules and I don’t worry about the outcome because I know if I do it over and over again, I’ll profit, even if blindfolded. I have drawdowns occasionally, but my method always gets me out with a profit – mainly because I trade mostly “pairs”.
K, you are right, that 917 is an important number. Go back and look at a monthly chart from 2002. monthly open and closes were at 917. It’s a battle line.
Close to a double top on 5 and 15min SDS.
I’m looking for ~$70 on SDS but it’s having a hard time busting through the 60min 36MA.
Charlie;
If price is under the 36MA, I use the stochastic cross or touching 80. If price has advancd above the 36MA, I use either the MAs crossing, like the 3 and 13, or wait until the MACD goes to zero.
That’s the basic, of course if the higher time frame MACD or stochastic is positive, I will stay in.
So far, the Q’s have an island reversal gap. They gapped up and held up yesterday, and have gapped down and stayed down today.
Charlie;
I’m trying to type and trade – lol – I will need to read what I wrote to okay it. Basically, another method is follow the MACD once in a trade and it goes above 36MA. This keeps in the trade longer.
CHarlie, look at the BBT 1min, then see the 5min “approved” the trade. If the 5min clears its 36MA then I’ll use that one to follow the trade. If not, I’ll let the 1min take me out with MACD. See, the stochastic is not reliable after price crosses the 36MA, so something else like MAs or MACD needs to be used. Or, just scalp and get out, then back in.
The reason stochastic is not reliable after a point is because it will “cycle” within that time frame although it is really moving up – that’s the importance of the higher time frame.
George
OK thanks for sharing. I will keep observing your comments and if you do come up with a written outline be sure to share.
String
Scalping is perfect in a ranging or choppy market. Even better if catching a longer move, of course.
ICE has been nice twice today.
George
One more thing, what are the parameter settings you use for MACD and Stochastics, and are they the same for the 1,5, 15 minute charts/
String
Stringm;
Well, the higher time frames need a more sensitive setting so use a lower setting for stochastic. I use 8,3,3 or anything that follows price closely and this depends upon the charting platform you are using. Main thing is to follow price – doesn’t have to be exact, but I am used to mine, so when I see a change I know immediately what it means.
That BBT trade was exited on the MACD. I got .20c. Hey, I’ll take it!
While I’m waiting on SDS to go to 70
Wow, you’d think there was bad news or something. I’m ready for a mini-MOAR, perhaps some more BBT and ICE if they cooperate.
I agree, George. WTF just happened. We may see $70 on SDS before 3 pm at this rate.
Matt-gic, you S U R E called this one! Don’t know how it will end but beautiful right now.
Pooh, possible spike high in SDS.
SPX is back-testing its newly formed 13 and 36MA on the daily.
Thanks George.
I think the market hit an air pocket around 1:40pm. Volume dried up and we just ran out of bidders. This is common at the end of an extensive rally.
Matt
called AAA and got my car out of the scam place. paid $60 for “diagnostics” . called my friend over. took the ignition cylinder out got the new one at toyota dealership $130.. bought my friend breakfast/lunch.. $200 all together. HA 3x that bastard wanted for a part that was in PERFECT shape.
so bad half of the day start. i get home and see S&P -26.5 YAY?
I’m back in the black.
Now please show me an 8 handle SPX. 
love the 4 handle on the VIX
from yesterday…
admin Says: January 6th, 2009 at 1:20 pm
“You would have to put a gun to my head to get me to be long here.”
last time you said that Matt you weren’t lying haha so today was really no surprise for me or many of us.
Cramer will call “foul” today and pound shorts along with inverse stocks.
A little more downside and BBT will be off the charts running into the floor.
Yeah.. it just took a few days for this sell-off to come into play.
Matt. thanks for the upgraded stomach. I needed to learn to take a punch when the setup called for it.
feeling like you want to short a stock? NTCT
it went up on earnings breakout but thats all the fuel it has got in my opinion
I just took profits on my SPY puts. I made 30% and don’t want to jinx myself by being too greedy. I still have large mounds of SDS and QID though, as well as a short position in the futures.
There’s your $70 on SDS George!
Your welcome Newbie.
Yeah, Buzz… I’m happy. Sold it, too.
can i call DiBS on 894? if/when we get to 8 handle?
Potential bear flag on SPY 1-minute chart over past 8 minutes.
SPX 15min support at 50SMA?
SPY held up and it looks like shorts are taking profits.
either way i sold SDS. QID and SRS left. (got SPY on the other account still. will probably get taken out tomorrow at open by the automated system