Monday, August 30, 2010

market timing and 3X ETF's

I knew I was either going to look like a genius, or a total idiot today!
I wish I knew what is going on in the UK, but whatever it is it's causing flight to safety in the dollar.

I received a large donation, last week, and when I thanked him, he said it was the least he could do, because after all I am the "Prophet of Profits", and sometimes I do feel like I'm predicting the future, but the future is today - the news just hasn't hit the street yet - and Greek default, that's bigger than Lehman defaulting right? Right

I was kind of amazed when my trading account hit a new high again today, even though today's sell-off didn't result in a new low on the SPX, but this is what happens when you short the proper sectors, and allow 3X ETD gains to compound in a momentum trade. Compound gains are what give FAZ, and other 3X ETF's, the ability to go from $100 to $10.

 It's as hard to hold into a rally (in a bear ETF), as it is to hold through a dip, and at some point you start getting that nagging feeling that you're getting just a little too greedy, until the anticipation starts keeping you up at night, because you know that once the larger trend changes, the same ETF's you fell in love with, is also capable of taking 40% of your money in just a few hours.

The other reason it's easy to get shaken out, is that we technicians think we're so damn clever, that we can time every move thinking "we can get back in a few bucks lower", but after getting burned enough times doing this I believe this is just another excuse to psych yourself out. You get nervous and sell, and then you're afraid to put the trade back on. It's self defeating! If you were able to take profits when you saw the $VIX selling off on Friday, and then chase the short trade today, you're a better trader than I am. I've always said, "I'm a better chartists than I am a trader". It takes time to master anything, and some never do. I will.   

I've achieved a certain comfort level trading 3X ETF's, but I also understand the risk. If I wasn't so impatient (greedy) I'd trade something less volatile, but the time is short.

Saturday, August 28, 2010

Runnoff and timelines

Many charts are conflicted, and that points to an unstable market, and a possible playing out of the so called Hindenburg Effect/Omen. When I say conflicted, what I mean is; IBM has topped, while AAPL has bounced off support. At the top of wave 2: The dow topped at a lower high, while the SPX hit a new high. The VIX is way over-sold, while Treasuries are near all time highs.

A crash is coming, and it's just a matter of time. Sometimes I use the word crash to describe a steep sell-off, but here I'm taking about a crash in which curbs are triggered (maybe over several days), and it's been a while since we've seen that kind of action. 3 1/2 years. I actually prefer not to see a crash, because 3X ETF's seldom see the gains they would in a more sustained sell-off, plus a 4000 point crash would likely result in several months consolidation (more sideways action), and we've seen enough of that!

Respect for your elders: I was fortunate enough to watch my father trade in the decade-long '70s bear, so at least I have some second-hand experience, while most fast money traders have known nothing but upside, and quick recovery, their entire adult lives, I'd like to think I'm more of a realist.

It may take many years to reach absolute bottom, and this is evidenced by history. Even the puny debt bubble of the 1920's took nearly 3 years to unwind, and the market didn't recover for more that 20 years, and we are following the same plan (higher taxes and more government spending)! How much longer is this one going to take?

Commercial building momentum is just now beginning to slow. To top this off we have an entire generation of investors (the baby boomers) who are all about to run for the exits at once. Nothing the corporate government media complex says is going to convince these old timers to gamble what little they have left in their retirement savings, on the roulette wheel that is the casino stock market.

I only hope that the house of cards stays glued together long enough, to provide us with a volatile trading environment, for the next few years, because if the derivatives market crashes, so goes the swaps market, along with the whole kit 'n kaboodle.

Monday, August 23, 2010

Perma-bulls', Pontificators, and crooked politician's

Blagojevich said he needed the $50 he received for each autograph to support his family. But he also said it was "a way to get out among the people," presumably including some who could be on another jury. Full story

So, $50 will get you a corrupt politicians signature, or access to the best charts on the Internet.

Trade the market you have, not the one you want:

The perma-bulls' and the pontificators', (on CNBC) continue to argue with the market, and will probably do so all the way down to dow 1000.

I still see them arguing with the so called "flash crash", and now making claims that it was intentional, when the SEC has officially stated that they found nothing wrong.

The flash crash, proves the markets are unstable, and if Jim Cramer really cared about his fans - more than his own ego - he would have told them to "get out", a long time ago.

The fact that Jim Cramer is so popular, or that there even is a cable show called "mad money", while the market has remained flat, over the last 11 years, points to the overwhelming bullish public mindset. It's not logical to claim that investors are overly bearish, while at the same time Jim Cramer's popularity continues to soar.

I wish I had $20 for every time I heard someone on CNBS, announce that "we won't see a double dip", as if the worst financial crises in 70 years ended in only a few months in 2008. A collapse of the global financial system, may have been temporarily avoided, but that condition has hardly even begun to filter down into the rest of the economy. It took decades to get into this mess, and it's going to take decades to get out of it.

The market is not valued according to past earnings - propped up by deficit spending in the govt sector - it's valued on future earnings, and those future earnings are questionable at best.

And what about the M&A story. Sounds Bullish, but if the cash on the corporate balance sheets isn't spent, it's going to be taxed, and without acquisitions, there won't be future growth. I'm sure most folks are completely unaware that during the last great depression, acquisition became a necessity, and i expect entire sectors will be consolidated into the hands of a few...

Ignore GE owned CNBS, and the crooked politicians who helped get us into this mess. Once we get to the point where people roll their eyes when you talk about the tremendous gains to be had investing in US stocks, rather than continuing to beat a dead horse (investing their hard earned money in it, only to lose over the long term), we'll find a bottom in the US markets.

We're not there yet