Thursday, July 24, 2008


It's begun...

Tonights class went well, hope many of you made it. You can get the archive still if you want it. I think we have some good ideas that will pay off handsomely. Unfortunately, when the Dow is 8000s it's gonna be pretty bloody.

We had a total trend down day Thursday. Early on, I have to admit, I was looking for a bounce, but then it quickly became apparent that we weren't doing anything but falling. Trend days are usually the easiest trading days because you can pretty much pick a spot on any bounce and just follow the direction of the trend. We shorted AAPL late day for roughly $2.50, and we were long SKF via calls from the day before anyway (another 100% winner in a day!).

You'll notice that oil practically pinned the $125 strike price for the monthly expiration. It's a handy trick to have as you can trade things around strikes when you have something hovering around a specific strike. I got asked about oil a lot today for whatever reason. I'm kinda neutral on it right now, but I do think there's a decent shot it retraces to around $100. Too many people still look at it as something that has to go straight up, and the govt is really trying to assert itself to push it down. LONG term I think it's $250. I'm a peak oil theory guy. And, unless there's world peace unfortunately there will be a lot of supply disruptions. It's interesting, the commodity trade was so crowded it had to tank hard. Having said that, it's unlikely that we've seen the last of food commodity madness. There's simply too little food and too many people. Everyone is supply/demand. So, there ya go, my sorta meaningless info about oil and commodities, without committing either way. Why? Cause I really don't have an opinion this instant, so I prefer to not make something up.

As far as the overall market, I suspect we'll get at least an attempted bounce Friday. Friday is often a day people square up their positions ahead of the weekend. We'll see, but I stick to my thesis that any rally is shortable here. Upside remains pinned to under 12,000 and downside is limitless. I guess there's a chance we get a rally higher than 12,000 but I would indeed be surprised - very. I will say I have no idea who was buying MER at nearly $35 thinking it was a bargain! I know the shorts had to cover, but funds were in there as well. Oy, thats painful, these stocks are simply not going anywhere for a long while. Yeah, ok, they will get massive squeezes at times, but the overall downtrend is going to be hard to truly break for a while. Snap back rallies in Bear markets tend to be violent. We got that and we'll get more of the same. A sustained bull run doesn't happen all at once, it kinda creeps up on ya usually and is a stutter step move, not all at once. The economy is getting worse, not better. I'll really refrain from going off as usual on what the powers that be are doing in destroying any real hope we have of a real sustained economic rebound. Every day there is another insane and insepid bill someone is trying to get passed, or that does pass that is just setting us back more and more. It's like a confederacy of dunces. I really think they should just make it so you can't short the market AT ALL. In fact, just make it so that the market has to go up only, just shut down the markets if a single seller of stock emerges. Lunacy, sheer lunacy. It would be one thing if it were to help, but it can't possibly help.

You want to know what to do to get the economy out? Let it tank hard and fast and then rebuild. Delaying the inevitable just means it lasts a whole lot longer. Sucks, but truth.

See ya manana!




TheBeerGuy! said...


Didn't think you'd like the question I asked yesterday but that's what should be expected when making such claims.

I'll give you this much, you're no Tokyo Joe merely in business to pump garbage thinly traded stocks for your own benefit. At least you stick with mainstream plays.

I do agree with you regarding the probability of a continued downtrend in the overall indexes although some of the earnings lately haven't been that bad aside from the financials and we're do for a rally. Very easy to get whipsawed in this market, for the average guy AND for those highly experienced.

Know what worries me the most? The continued influx of foreign investment especially from middle-eastern concerns. At this point the market needs whatever it can get although down the road, if nothing is done regarding the dollar, our banks, major corporations (GE just the other day in fact with Abu Dhabi) and markets will be dictated to by those whose wardrobe consists of white sheets.

My prediction, crude continues to crack, visits $100 for a while, the market pops and all the talking heads on the tube are waving the All Clear To Buy Flag. At that point, I'd be a big Put buyer.

Good Luck.

Gan said...

Tech usually begins its rally every do you believe it will crack inspite of this seasonal-cyclical advantage ?

Waxie said...

I think we should get a rally NOW in techland. Figure 730 to 750 on the ER, so I would wait on much of that short. Fall for tech sometimes is true, but remember that most of these stocks are underwater and end of year selling of losers may get intensified this year. We'll see soon enough.