BOUGHT TMV
Added TMV at 22.77. More on this tonight. Short long-bond position/long yields.
ALL OUT INDEX SHORTS
Sold last of the SPXU. All out. 1225 is way more than I expected. My thesis was off...to say the least. Currently holding DZZ, EUO and large cash position.
RISK ASSESSMENT WEDNESDAY
Risk assessment Wednesday is here. On Monday, I said that I would wait until today to make a decision as to which way I would allocate the portfolio based on price action. I've decided to take down my short exposure. Continue to hold onto half of my SPXU position for the time being. I have also shorted gold here in the form of a long position in DZZ at around 4.33-4.34 in the premarket. I spoke about gold being near a top on August 21st here. A couple days after that post gold had a substantial slide on even more substantial volume. The manner in which it fell and the subsequent retracement of that move down has me thinking the opportunity for profit on the short of gold has potential to be substantial. I'll have charts tonight. As for the general markets, I don't want to see the S&P 500 move over 1220. There are a large number of traders thinking that the 1240-1250 level is a slam dunk short. There's a problem with that type of consensus thinking. I believe that the S&P has to either stall out here or the move will be above and beyond anything I suspected a couple weeks ago or even today. I'll have to move to the sidelines if the strength continues. Managing risk in a treacherous market. I'll have more later...
PUNKS JUMP UP TO GET BEAT DOWN
Today I was the punk and I got beat down. Not a pleasant day in the least bit. Comes with the territory, however. Needless to say, my recent assessment of the markets was off. It doesn't mean that one should be jumping to the bull side, thinking that we have put in a solid bottom. Wednesday I will be assessing risk in the portfolio and decide whether to reduce short positions. For now, I have held onto all inverse ETFs. I also added EUO today at 16.55. A long US Dollar play. I would like to add more to it if the opportunity allows. I talked about the USD in the weekly chart review yesterday. Today was a ripper extraordinaire. I'll now go and tend to what is left of my...
POSITION UPDATE & 3 REASONS BULLS HAVE NO CHANCE IN SEPTEMBER
One more allocation into SPXU coming tomorrow morning. My last. I have a time frame in mind for holding these short positions (in the form of inverse ETFs) of two months. I would like to find a better entry than I did today. But if I give up a point or two, then that is fine. I'm not trying to catch the bottom or top tick. Just building a position in an area that I feel will be rewarding in the months ahead. QE3 will make no difference. The market will continue going down, unless the Fed announces a diabolically radical plan to reverse course. That's not going to happen. I think the chances are slim that any QE3 program is announced on Friday, however. As we go into September, there are two major events on agenda...actually, three major events: 1. The 10 year anniversary of September 11th. This is going to be a reflective period for the country. From a psychological standpoint it is going to bring to light all of the failures of the past 10 years. One way or another the attention will be turned to the economy. The fact that we have basically been standing still since the events of that day. A sensitive market and injured psyche of its participants will certainly not find the news inspiring. While it will not create massive downside, what it will do is put a ceiling on any rally attempts. 2. Earnings warnings. Before the October earnings periods, there will be a host of companies lowering their forecasts in September. This earnings warnings season should see more companies step forward than any of the past few years. 3. On September 30th a Federal budget needs to be passed by Congress. We went through this several months ago and the government was shutdown for a period of time. This time it will be worse. And this time the ramifications to the psyche of the country will be very real. Members of Congress on both sides are still damaged, holding onto resentment as a result of the debt ceiling debate. They will be more determined than ever to hold onto their positions, without chance of compromise when it comes to passing the budget at the end of September. Very simply, this means a budget will not pass. Government will shut down come October. The shutdown will bring into the spotlight the ineffectiveness and dysfunctional nature of government. It will cause doubt. It will cause people to question and reflect on all that is wrong. That's just the psychological damage. There will be numerous fundamental ramifications of government shutdown, as well....
ADDING SPXU
Doubled up my position in SPXU right off the bat here. 20.20 entry roughly.
LOOKING FOR INCREASED SHORT EXPOSURE
I'm looking to add to my inverse ETF family no later than mid-day Thursday. More than likely I will be adding a good amount tomorrow. I don't feel that the current strength lasts more than a few trading days at most. We'll be through the August lows within the next week or two. September and October will be brutal months for the bulls this year. The market has too many bulls lined up for castration to let go of its grip going into the 4th quarter of the year. It's simply not going to let up. These short bursts, similar to what we experienced today, may be as much as bulls get until late October or...
SHORT-TERM THINKING WILL HAVE YOU SLEEPING WITH THE FISHES
"And right here let me say one thing: After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I’ve known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine that is, they made no real money out of it. Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance." -- Reminiscences of a Stock Operator by Edwin Lefevre This famous quote by Jesse Livermore is perhaps the most valuable piece of information from this investment classic. I bring it up because of the epidemic of short-term thinkers that participate in the financial markets today. I have no doubt that most of them are unsuccessful, as the odds become increasingly difficult to overcome the shorter your time frame. The access to infinite information that we enjoy has also caused individuals to become short-term in their frame of thinking. It's the mental plague of modern day society. We do not stick with any thought or idea for longer than a few minutes before we move on to a new piece of information. How can this trained form of thinking not end up seeping its way into our investment or trading regimen? The answer is that it cannot. It makes its way into your trading decisions, often times without you knowing. It comes in the form of overactive trading, excessive analysis, indecisive thoughts, erratic ideas and loss of capital.It makes the financial markets more irritating than anything else. If short-term thinking doesn't ruin you today, I promise that it will tomorrow. The duty of the modern day investor is to filter out information and only rely on the pertinent facts. The facts as I see them today: 1. The financial sector in the United States and Europe is effectively broken. 2. The Fed and ECB realize that their influence in...
THE BEAST IS RUNNING AWAY FROM YOU FOR A REASON
I added some SPXU to the mix today. I'm done with adding short exposure for the time being. I don't usually add into declines like today. However, these aren't usual circumstances. Therefore, I am acting in unusual ways in order adapt. I wanted to elaborate on my Quick Thoughts article from this morning. I have an illustration below that will help demonstrate my thinking. In short, there were too many eager sellers (myself included) waiting for 1220-1240 as a point to either lighten up longs or get short. The market, in its infinite wisdom, knows this. It also knows it doesn't have the power to move up through that level and punish investors so that it doesn't make itself into easy prey. So what does it do? It runs away. It runs as fast as it can to the downside. It doesn't give sellers a chance to get in at anything resembling advantageous pricing. That kind of running shows the markets hand. It tells you, as an investor, that the market finds the downside a bit too valuable to give away cheaply. It's giving you long side exposure as cheap as you want for a reason here. It's not because it loves you either. I wouldn't be adding if I didn't think the downside was significant...even from here. click on chart to...