DEC 21st: PORTFOLIO POSITIONING
During the trading day I tweeted the following: I opened the first leg of an intermediate term short position in crude oil today via SCO. I plan on adding the next leg during the first half of January. It's a small position (less than 10% of portfolio) to start. You can read about the macro reasons crude should be up or down from here on countless other sites. My focus is on the price action. Light sweet crude has a significant amount of overhead resistance above the $104 area. In fact, it is what I like to call a "generational area" of supply. Meaning that the market will gravitate towards this area and then become overwhelmed with supply, eventually suffering a significant failure. The initial failure occurred on November 17th, with no further attempts following this failure point. Since that point crude has carved out a series of lower highs and lower lows. I expect a move back down to $80 during Q1 2012. Target of roughly 65 on SCO. There's plenty of time to put on this trade over the next few weeks I am guessing. Don't get your panties in a bunch thinking crude is going to tank tomorrow. Intermediate term trade is 1-3 month deal. Holding a medium sized short-term position in EDC (roughly 20% of portfolio) and a small intermediate-term position in SCO as of the close...
4 THINGS THE BULLS WOULD ABSOLUTELY HATE TO SEE GOING FORWARD
Now that I've spoken about what the market should do going forward, let's talk about what the market absolutely, unequivocally should not do: 1. A move below 1235 on the S&P 500 will be a warning signal. A close below 1235 on the S&P 500 will be a very strong warning signal. 2. A gap up tomorrow that reverses back below the upside trajectory line in this chart will be a strong warning signal. 3. A sideways consolidation lasting the remainder of the week and preferring to remain beneath 1240 is a sign of weakness. 4. A strong reversal off of the downside trajectory and 200 day moving average on the S&P 500 could yield to another break into counterfeit territory. You have to think about this way: The market, as of this moment, has caught the Christmas rally crew off guard by once again gapping up and putting together a strong trend day forcing shorts and potential longs to chase the market up. If the Christmas rally has legs, it will continue the practice of forced chasing without allowing participants the opportunity to get long at a discount. A generous market that seems accommodating to all of those who missed out on this rally today should be held in deep...
THE ANATOMY OF A COUNTERFEIT MOVE BULL REMIX
We saw a substantial move back above the upside trajectory point take place today, completing what should be the third and final counterfeit move before the downside trajectory line and 200 day moving average are taken by the bulls. Here is the chart outlining the counterfeit move from this weekend. The following is an updated chart following today's move: click to...
DEC 19th: PORTFOLIO POSITIONING
During the trading day I tweeted the following: Took a roughly 4 point loss on DGP and a 7 point loss on AGQ. Glad to put these trades behind me. Still holding onto EDC and will likely continue to do so until the end of the year. I can't see myself being overly active for the remainder of 2011 unless we get some extreme action one way or another. Following a triple digit percentage up year in 2010, in 2011 I am underperforming the benchmarks. For awhile in October-early November it looked like I would be able to outperform. However, the second half of November and my slip up in December have ruined my chances. If you've managed to be active in 2011 and are enjoying profits...congratulations. This has been an extremely difficult year for nearly everyone. I get the feeling that 2012 will be a lot more...
THE 5 CHARTS THAT WILL HAVE YOU SINGING THE CHRISTMAS BLUES DURING THE WEEK AHEAD
click chart to enlarge
3 SCENARIOS FOR THE WEEK AHEAD WITH 3 DIFFERENT OUTCOMES FOR 2011 PERFORMANCE
The current state of the market is grounded in a propensity to deceive and then runaway before investors get a chance to react. That's all there is to it really. It's a sloppy range that has been on the verge of bending and breaking in both directions a dozen times. Each and every time a group of investors get sucked into believing that an actual multi-month trend (remember those?) would appear and provide some consistency. That's when the buzzer flashes and hopes turn to nightmares. We're at a point now where the expectations of a Christmas rally have been dashed somewhat with the recent weakness in the averages. However, each time the market catches a bid it seems that traders are jumping on the Christmas rally bandwagon. The desperation to be on the right end of performance is causing a chase the bids mentality that the markets loathe at their deepest levels. Hence the propensity for moves that gap up and away to a point where traders can't pull the trigger because of the the hollow ground beneath them. The deception involved has grown more sophisticated as the participants have been narrowed down to a field of short-term orientated traders who are relying on similar technical information to make the next trade. The market is adapting. The Christmas rally will begin on a late schedule this year just as everything else has been late in 2011. Rallies come in the last hour of half hour of the day. The majority of gains (or losses) take place at the end of the month. It seems that everything has been back end loaded this year. Traders aren't willing to make the real decisions until either their day or even more so their month is on the line. What will happen when the day, month and year all line up this year for the final week of trading? Will traders become apprehensive of evaporating further capital and just pullback? Will they become more aggressive to gain performance and jam the markets in the final week of trading? Will they become skittish and just sell everything in sight? I think the answer lies in the action that will take place in the week ahead. Let's look at the different scenarios: 1. A sideways market this week: This will likely give way to apprehensive trading into the final week of 2011. There won't be much in the ways of incentive to either press or take the foot off the pedal. This type of scenario has us closing right around the 1200-1220 level to end the year. A negative year for the S&P. 2. An...
THE MOST IMPORTANT CHART I’VE POSTED THIS YEAR
The magnitude of the opportunity that awaits those who take advantage of this obvious counterfeit move will be substantial. A double digit percentage gain in the S&P 500 over a one month time frame is how this should resolve itself. The resolution should take place over the next 1-2 weeks, with a majority of the gains taking place in January. Here's the chart: click to...
QUICK THOUGHTS
I have a lot to discuss with respect to the current markets. However, I have caught a nasty stomach virus that has made my wife and kids see me in a different light as I have essentially been making out with a toilet over the past 24 hours. I will be posting a few pieces of data to support my current bullish stance this weekend. I do think there is a good possibility of a break below 1200 taking place next week before we get into the meaty part of a rally that takes out the much talked about 200 day MA on the S&P 500 and goes much beyond. I am positioned for it in EDC, DGP and AGQ. I would like to add to my equity exposure substantially if we move below 1200. If not, I will look for points to increase exposure along the way. Bottomline: The Christmas rally will come now that everyone doubts it. This has been a "last minute" market for the second half of the year with a bulk of important moves taking place either in the premarket resulting in gaps all over the place or in the last hour of trading. I expect the last minute status of this market to be reflected during the month of December, as a majority of the gains will come in the final quarter of the month. Illustrations and lots more information this...
DECEMBER 14th: PORTFOLIO POSITIONING
During the trading day today, I tweeted the following: I am now holding EDC, AGQ and DGP. This is a market where you are punished severely for being a day or two early. I do, however, expect the snap back up on all of these issues to be as equally...
RISK ASSESSMENT WEDNESDAY: A LESSON IN HUMILITY
If there is one guarantee I can make to you about the market, it is that it will humble you. It will do so on as consistent a basis as you allow it. Meaning that until your methodologies catch up with your ability to understand yourself fully, thoroughly and unequivocally, you will continue being humbled frequently. I was humbled today. It was not just a humbling experience, but a mental rape as well. The mental rape comes with being 100% correctly positioned for this on Monday and being shaken out due to tightening my risk too much. And why did I tighten my risk? Like Pavlov's dog, the market conditioned me with the choppy moves of last week to be afraid of giving back my profits. It worked. I turned into a zombie when I saw my profits slipping away yet again and took profits. In fact, I talked about this very phenomenon during my weekend post. To add insult to injury, I was obviously early on the my gold and silver bets. Needless to say, today wasn't one of my best trading days in 2011. One of the worst, in fact. Looking forward, I have to wonder how the market is conditioning its participants currently? There was a very strong consensus that believed in December seasonality trumping all else just last week. GONE. There was a very strong consensus that believed that Fed action would mark a decisive turn for the market. GONE. There was a very strong consensus that believed we would break the 200 day moving average on the S&P and move to 1300 before year end. GONE. What we are left with, at present, is a black hole of depression from a majority of those who manage money. Some guys are wrapping up their years early, not willing to deal with this madness for another two weeks, risking whatever assets they have left. Others are attempting to deal with the volatility, mostly unsuccessfully. 99.9% of professionals are light here. Exposure is minimal for obvious reasons. Today we got a very solid look into an area that is supposed to remain in the databases of the prime brokerage houses. There were hoards of rats abandoning ship today. And judging from the volatility in the various currency pairs and commodity markets, it seems that hedge funds were parked in everything from oil and gold all the way to copper in an attempt to extract their incentive fees in a highly challenging environment. As these trades so often do, they all fell apart in one quick swoosh. Hedges were removed, currency exposure trimmed, commodity exposure shunned all in a matter...