BEARS GET JUMPED: PUMMELING TO CONTINUE
Bulls are taking full advantage of the bears today. It's a trend that should last until the market close and into tomorrow. There are simply way too many bears that were caught off guard by this gap up. Whenever you have so many market participants that are forced to scramble in a hasty fashion, you get a sustained move in the direction of the scramble. In this case it is upwards. I bought into SSO yesterday. I did so as we approached the bottom end of my buy zone that I had been speaking of since June 5th. No plans of letting go of the position today. I think we are in the beginning stages of carving out a bottom right around these levels. It won't be a simple process. It will be confusing, scary and make people think we are going into a nosedive. That's how it always is and rightfully...
TRADE UPDATE – SSO
Buying the S&P here in the form of the SSO - 2X leveraged ETF at 48.75. Initial position. Have a little more to buy if need be.
AN ETF TO JUMP ON RIGHT NOW
I rarely recommend ETFs for investment. They are too unimaginative for my taste. In a world where you have thousands of stocks to choose from undergoing various forms of pricing illusion, delusion and misinterpretation, ETFs are a lazy investors way out. I recommended GAZ months ago. I still like it, as I think natural gas prices will be a huge beneficiary of the ramp in crude oil over the next few years. There is another ETF that I recommended months ago. At the time, I thought it was a little frothy in nature, saying that "I wouldn't be caught dead" in the ETF at that point. That was late February. Fast forward to June and it has pulled back more than 10%. The time seems right to dabble. The ETF is PXQ. I outlined it in this week's chart review: click on chart to enlarge PXQ and GAZ. Those are my favorite ETF investments for the time being. Over the short term, I may be buying some SSO or QLD for a short-term trade on a market bounce. I'll update the website if I make the trade. PXQ is a long-term holding...not meant to be a short-term trade. Upside here is generous in...
NEW HIGHS COMING IN MAJOR AVERAGES BEFORE END OF 2011 – POSITION YOURSELF ACCORDINGLY
On Friday the SPY closed right in the buy zone that I had mentioned in the weekend chart review. I'm not a fan of buying into a multi-week downdraft that has the attention of everybody from Wall Street to mainstream media going into a weekend. The reason being that the chances for Monday morning volatility following a weekend of investors digesting uncertainty are a strong possibility. I'm looking to buy either SSO or QLD. These are the 2x leveraged ETF on the S&P and Nasdaq 100 respectively. I may also add some calls into the mix. I'm going to be posting 10 charts along with commentary later today. I do feel that the opportunity to buy here is a very good one. I see this as a pullback within a consolidation for most of the averages. We're simply testing the lower range of the multi-month sideways range we have been involved in. It has caused everyone to go into a tizzy, which is the exact goal of such a move. On February 16th, when the market was at its peak, I handed out 5 ideas of which stocks to buy when the market corrects. In that article I wrote, "When the correction does come it will probably scare most of you out of all the confidence and anticipation you now have regarding buying the next dip. The market will make it look as scary and ominous as possible in order to get the maximum number of participants on the wrong side of the ship before it releases its fart gun, knocking everyone on their respective arses." How do you feel right now? I am willing to bet you are fearful. You were dying to buy and filled with regret in February. Now you are filled with fear and want to remain in cash. With the exception of FNSR - since it has some company related issues - I would buy any of the stocks on that list. I am already long GSIG. I am looking to buy more GSIG at the right time, as well. Wouldn't mind shifting the portfolio around to make it one of our largest positions, in fact. I would also include PSTR and BEXP on that list of five stocks. I wrote about them here. Plenty of opportunity here if you take your emotions out of it. The major averages will all see new highs before the end of the year. Position yourself...
ECONOMIC ARMAGEDDON: PLANNING ON THE WORLD COMING TO AN END WON’T MAKE YOU RICH
In today's segment of Armageddon watch: a new poll released by CNN shows that 48% of Americans believe that we're headed for another Great Depression. That's an impressive statistic. Think about that for a second. Another Great Depression. Not a recession. Not a deterioration in living standards that moves Earl out of his SUV and into a compact car. A Great Depression. Earl essentially thinks that within 12 months his 2010 Chevy Suburban is going to be traded in for a 1982 Chevy Chevette. I speak about the importance of knowing who is accompanying you in your investment adventures often. What I mean by that is you want to make sure that when you are running, it is the wolves who are running beside you and not the sheep. If you find yourself running with a flock of sheep, odds are that you are about to be eaten. You're clearly on the wrong side of the trade. The sheep are inevitably wrong not a majority of the time....all of the time. You know who the sheep were? The guys who sold out of the market in 1987 following the stock market crash and vowed never to invest in stocks again. It was the guys who thought we were heading for a depression during the early 90's and missed out on one of the greatest decades of stock market gains ever. You know who the sheep were? Your neighbors, yourself, myself. All of those who were buying tech in 1999 and 2000. We thought we were wolves at that time. Looking back on it, how much company did we have? Everybody was running with us. Wolves tend to stay in smaller packs. It's the sheep that can swell in ranks to the point where you can see a ball of white from outer space. You know who the sheep were? The guys who were buying 5 bedroom homes in the middle of the desert, with no money down and an income that couldn't support a house half that size. The guys who used their homes as piggy banks to buy yellow jet skis that ended up sitting in the driveways of the homes they couldn't afford. The ones who were under the impression that 20% per annum gains in real estate were the reality of the new America. You know who the sheep are now? All the guys who are buying into the gloom and doom of great depressions, economic collapse and a Dow Jones Industrial Average that will never break 14,000. A Nasdaq that will remain in the decade long range that people have become so used to that...
QUICK THOUGHTS
- I'm looking for 127.50 - 128 on the SPY to buy. Not sure if I'll get into Nasdaq or S&P derivatives if that point comes. Probably Nasdaq as that is the stronger average. I posted my thoughts on the SPY on Sunday night if you missed it. - LNKD scored a nice run today. Regrettably, I took the prudent route, given the weakness in the market, and sold out of my position on Friday. The overabundance of short sellers that are in the stock becomes very obvious on days like today. I continue to believe that the path of least resistance will be up here. I also believe that any substantial dip should be bought for a trade. Just do a better job than I did with it. Ok? - The question was asked: What would it take for me to get bearish on the markets? A break and close below the March lows on the S&P would do it. Not sure if I would become bearish. I would be neutral at that point. I'd become bearish if the markets held below the March lows. That would be a bad thing for the bulls. That's it for tonight. Working on a new article for Forbes. Should be posted within the next 24...
10 CHARTS THAT WILL KEEP YOU FROM BECOMING A MOUTH-BREATHING ZOMBIE IN THE WEEK AHEAD
click on charts below to enlarge
HOW SKEPTICISM GIVES RISE TO BOOMING BULL MARKETS
This article also featured on Forbes The past 11 years in the financial markets have taught investors that a) analysts, brokers and traders are all out to take advantage of them b) financial managers are liable to steal your money to finance yachts, expensive homes and odd pieces of artwork c) the financial system can collapse at a moments notice d) all bullish moves in the stock market are temporary in nature. During this time period investors have experienced not one. Not two. Not three. But rather a multitude of catastrophic economic events that have eroded the trust of the general investment public to a point where the boogie man is standing around every corner awaiting his opportunity to eat them. It is only natural that a great bull market would spring from such a devastating potpourri of psychological trauma. Disallowing all but a few investors the opportunity to get into the financial markets at a point where the potential to create wealth is at its greatest, while the threat of catastrophic losses has been greatly diminished. The psychological underpinnings that create support for the general markets here are based on the conditioning that the financial markets have done their utmost to impress upon investors over the past decade. It is similar to the effects of a haunted house during Halloween. You are trained to believe, and rightfully so, that there are scary things hiding behind paintings, corners and walls. You go into the haunted house with your guard up. Walking slowly to make sure that you don't run into anything that will cause you to lose your dinner. As you walk through the haunted house a ghost will frighten you at some point. A vampire will jump out at another. You can't help but sense that around the next corner will the most frightening ghoul of all. Bear markets brought on by financial catastrophe in the form of fraud, leverage and greed are the financial markets version of a haunted house. This haunted house, however, can last for years on end. The ghouls, goblins and vampires in the form of unregulated CDS contracts, overleveraging, Bernie Madoff, internet stocks and sub-prime mortgages are sure to rear their ghoulish heads again. It's right around the next corner. The popular thinking is one of safety and conservation in order to avoid the awful feeling of having your bowels displaced. The natural question becomes why do great long-term bull markets invariably arise from a haunted house type of market environment? It has nothing to do with fundamentals. It has nothing to do with the technical picture. It has everything to do with...
A SIDEWAYS RANGE MASKED AS THE NEXT GREAT, GREAT DEPRESSION
This article also featured on TheStreet and Fidelity For all the fury that this week had in terms of headlines that focused on doubt and fear, we remain in nothing more than a prolonged sideways range that has been with us since the first quarter of this year. If there is anything that investors should be focusing on that is it. You shouldn't be focusing on the headlines about this being the worst week in a many months. You shouldn't be focusing on the nonsense about how we're on the verge of a great, great depression. You shouldn't be focusing on the pessimism that has afflicted the middle-class to the point where a majority never expect the American economy to recover. Instead focus on what the market is telling you at this very moment. If you look at what the market is saying and what the news headlines are saying, they are painting two very different pictures. Let's use the alien abduction model to demonstrate this in action. Let's say that in January of this year you were abducted by space aliens and were just dropped off back at your house today. Curious about what has been going on over the past 5 months you look at the weeks headlines. Given the painful picture that is being painted by the financial media, you would automatically think that the Dow is surely down more than 10% this year. You would assume that we have resumed the bear market and stocks are the last place anyone would want to be. Unfortunately, most investors are acting as if they were just dropped off back to Earth and are only focused on these negative headlines, without looking at the rest of the picture. The truth of the matter, as told by the most reliable source of all (read: financial markets) is that the market is simply digesting the enormous gains of the past couple years. The Dow is, in fact, up on the year. The S&P is essentially unchanged for 2011. Yes, if you were overallocated to volatile, high-beta names then this week sucked for you. If this week did indeed suck for you and you failed to take the precautionary measure of making it less sucky as we enter a new week, then that is a YOU problem. It has nothing to do with the markets. It has everything to do with incorrect management of capital and improper allocation. I said it numerous times this week: If you underperformed the markets during the most volatile days, it doesn't matter if Ben Bernanke pulled you aside at your kids little league game and...