Thursday, February 26, 2009

Please don't wake me from this dream...

Where every day we gap one way or another large and every day we reverse!

Please don't wake me up, because if its a dream, I really don't want to wake up to find out!

I have to say it again, this is (knock on wood!) the EASIEST MARKET I have ever seen, sans 1999 to 2000. I am dead serious. People look at this market and think its horrible, its so hard, but it's a VERY tradeable market. I said it last night, it follows ALL our rules. It's almost like I wrote the playbook!

Today was a gimme, a total gimme. We gapped up large on no news, the banks rallied hard on no news. Who the hell is dumb enough to buy that move? Seriously, who is buying these stocks other than very bad traders, and sucker investors? Not me, hopefully not you guys and certainly not our clients!

Today we ROCKED, we had BAC for about 10% short, GS for a big move short, TRV for a nice move short.

You know what's sick, tomorrow we may gap up again! I mean, why not? They just gap us up nearly every day and it just gets shot down. Yes, at some point we will get a very nice tradeable rally, but as you know from reading this, it'll more than likely happen when everyone has thrown in the towel and lost all their money!

The rally in the banks is simply short covering out of fear the government will devise a plan to pump up the stock market while saving the banks. While I guess that's possible, its highly improbable unfortunately. And, even if it happened it would be a very short term shot in the arm. Hence, the problem with government intervention, folks! EVery move they make we go lower and lower. It's insane, even my 7 year old daughter knows that if something doesn't work 30 or 40 times in a row, you stop doing it or you do something completely different! Yet, every day we come into work (trading is my office!) and every day there is more nonsensical news out of the White House or the Fed. Do they honestly believe what they are doing is correct? Denial is a powerful thing, so my guess is YES, they believe it. Obama thnks this will work, he has put his legacy this early behind these plans. I think it's very foolish, but maybe I'm wrong. I sure as hell hope so!

Thing is, I don't think anyone thinks 5000 on the DOW is laughable to anyone now, is it? We're barely holding 7000 and that's with the government throwing the kitchen sink at us! What happens when and if all this stuff doesn't work, or they figure out that they really do need to Nationalize the banks (they 100000% do at this point)? I think 5000 might be a dream in 2 or 3 years. We could be looking at 2000s. Remember, it was barely 20 years ago when the DOW was 2000s!

OK, so for tomorrow, we just keep following the Gap play, let them gap us up again on no news and we'll just sell it again. The banks look WAY overextended here unless some real news comes that is very good. The recent rally (which we caught most of!), was the best 1 week move EVER in the banking sector on a % basis! Do you realize how sick that is? That could only happen in a very bad Bear market as the only way those kinds of moves happen are when shorts have to cover in a big way.

I'm going to point out four stocks that are trading extremely poorly;


All are well off their 52 week lows in a short span, but they are all making drastically lower lows. MS and SPG are green every day, but usually end up red on the day, even as GS stays green most da

ys. There is very heavy put buying in these names as well, particularly MS and WFC. For a name like WFC to be trading this low, it says a lot about insolvency. Now, again, it is possible they come up with something to save shareholders, but chances are equity has to be severely diluted. That's why C can't get to $3s, I think its almost a mortal lock to end up worthless or close to it, like FNM, FRE and AIG. That's best case scenario. Watch the stocks above tomorrow, if they gap up on NO NEWS I think you have yourself a winning short trade if you manage it correctly and use a stop if the trade goes against you. You can also trade SRS or SKF if we gap up and they are gap down. Both have been making huge moves off gap downs, particularly SRS which was way down and finished way up. As you know, the commercial real estate sector in my view aren't even remotely near a bottom.

It's kinda scary that we keep gapping up. This is very reminiscent of 2000 to 2003 where nearly every day Boohyahhead and Kuddlebear would say how we are bottomed and going up and every day nearly we'd gap up and then sell off. Again even as I write this the futures are up, even though DELL missed badly. I guess the people buying things pre market and post market must be smarter then I am. At some point they will be right, but Gawd bless, they will lose a helluva lot of money 75 times to make money once!

That, my friends, is pretty poor business plan, eh?

See ya on the other side,



*I want to clear up one thing. I think they need to Nationalize the banks NOW, BUT if I had my way they would have let them all fail, they'd let GM fail, they'd have let AIG, FNM, FRE, etc, etc, fail. I would not bail out home owners, I would not bail out any business that has a model that can not succeed. I only think they should Nationalize now because of the ridiculous and horrible road they have embarked upon. Horrible and very very VERY dangerous. I've talked extensively about this here and elsewhere. I do not think this is going to have a happy ending. I pray I am wrong, but that's all I can do because the road they have gone down due to special interests and poorly thought out plans is just so so horrendous and so disasterous that it can't possibly end good.

What continues to disgust me more than anything are the lies that keep pouring out of all sides. Are we stupid? Are we dogs? Because that's how I personally feel when I get lied to to my face. GM was in Washington today begging for more money that will be wasted, more money that will be paid for through higher taxes. GM is DEAD, it should be allowed to die. There is that Stephen King line from Pet Cemetary - "Some things are better left dead". Add the line "first and foremost GM!"

It's simply INSANE what they are doing. And now the master plan is to tax the "rich" more? Let me tell you something, I would GLADLY pay more taxes if the money wasn't going to bailout GM and irresponsible people. GLADLY. I can live with socialism, but I can't live with money being STOLEN from me by leeches! That's what they are doing, they are stealing money. And, since when is someone rich if they make $200,000 or a family makes $250,000? Seriously, in New York you can barely survive if you make less then that. I couldn't possibly afford my life if I had no savings and was living off my salary of that! OK, you may say "well, then Waxie, you need to adjust your lifestyle!". Fair enough, but then you'd have to have a mass exodus out of New York City of anyone who isn't super rich. Doesn't that defeat the purpose? Either tax the very rich, meaning people who make let's say $750,000 or more, or stop bailing out dead companies and irresponsible homeowners! Stop bailing out the banks! Stop it! Last I looked that is THEFT, and I don't know about you all, but I don't like being stolen from!



thomas said...

The interesting thing is that Obama in his book, "The Audacity of Hope," recognizes failure as a way to clean things up. The fact that one has worked hard or done "all the right things" is no guarantee he/she will not be taken out as dead anyway. However, employees in failed industries such as car manufacturing and all the others simply aren't going to face the sad reality as long as Uncle Sam is willing to play their game. Obama doesn't want to pull the plug on their respirators.

cyberczech said...

Waxie, you are the man. I was only reading your blog last year, and in only 9 months my account was up 126% - for real! Just joined the Ninja plan this week, I absolutely love the chat room!!!

If anyone is holding out on joining Trendfund, I'm here to tell you I'm satisfied after only 4 days.


SilverSurfer said...

You da man Wax. Just began reading the blog a couple weeks ago. Spot on! Wonder whether those with $$$ who voted for BO would do so again. I think many were in denial when he said he would spread the wealth even though it's gonna be more like spread the poverty.

From what I've seen in the short time I've been reading here, your calls have been awesome. I know it didn't start two weeks

What's your take on gold/silver long term given the moves our government is taking? Do you think the $ will collapse at some point?



Waxie said...

I think GOld and Silver are trades like everything else. :)

I think you can trade in and out of it. It should get beaten up pretty badly at some point and get a major drawdown, and then should get a super move up past $1200 to $1500 levels. The problem I have with Gold is that its all in your mind, its fiction, it doesn't really have any intrinsic value. If there was some major disruption people assume it would go crazy higher, but do you really think you'll be bartering with gold if that happens? I don't. BUt, itsgood for trades, that is for sure!


In Debt We Trust said...

Waxie, what do you think about the BOJ's announcement that they will be buying Nikkei shares?

I thought that US short sellers had it bad but imagine being a short seller in Tokyo!

Do you think Obama and his minions will imitate the Japanese by buying NYSE and S+P shares? US traders are already very suspicious of the "PPT" action in the futures market (especially on those gaps you talk about). But for the govt to openly announce they are buying equities? How do you trade something like that?

My guess is that if it were announced then treasuries would sell off hard.

In Debt We Trust said...

Waxie, if C (or any other stock) stays below $5, aren't mutual fund managers obligated to liquidate positions to meet conservative mandates?

Somehow I doubt fund managers keep FNM and FRE in their fund anymore.
I am not - nor have I ever - worked in the fund industry so I was hoping you would know more about that.

mauiman said...

Ok. here are Cramer's own words: "No one can make a dime with this administration"...

Ok, Waxie, everybody is wanting to know this: what were your profits for the month of February?

Waxie said...

Profits for February are more than January I think. I've done quite quite well. Hopefully can keep it up. If I did this every month for a year I'd retire! :)

Kevin Scobey said...

Waxie, right on about letting failing businesses fail. I think it was Stossel who said something like, "when you pay for something, you tend to get more of it." What do we expect to get from giving money to failed businesses besides more failed businesses? I'm sure its a similar frustration that got Rick Santelli all worked up, which then inadvertently led to the arising of new "Tea Parties" all across the country.