Saturday, June 06, 2009

More sideways chop...

Friday the market traded in a very narrow range, which lately has been status quo. Volatility has dried up a bit, which is normal in a bullish market. That means we have to adjust our trading schemes.

Its kinda like a boxing match where one guy is throwing haymakers and missing, you have to keep jabbing and moving rather then going toe-to-toe. Taking small gains isn't really my style, but we have to adjust as best we can and some of the trades I'm making are large lots which I'm taking small gains. FAZ, FAS, SRS, SDS all move decently but you aren't going to get $1+ on them 95% of the days either way. And intraday they are providing good scalping opps. Again, that's not our typical style, but that's what this market is offering.

Intermediate term trades remain swinging and getting larger moves if you are on the right side of the trade. Some small caps are just kicking butt.

Also, I've played and called a couple of spec stocks lately, some have paid off handsomely and some don't or haven't moved much. SD = huge winner, TIE = same. We're in CEGE, which I personally own 200,000 shares of, and it's break even basically. Stock has had nice insider buying from multiple execs and owners at higher prices and they are in same sector as DNDN which has been on fire. These small biotechs have been performing very well lately so we should pay attention. I can afford to play a spec stock like this, but key for any trader is risk/reward and money management, so if you don't have excess capital you may want to consider whether you can afford to play a spec stock. CEGE could see $10, but it also could languish for a very long time at $.50 or less if I'm wrong and you just tie up your capital. Remember, we want stocks that move, either way, more then stocks that just hang out and never move.

I've mentioned this before, but seeing Jim Rogers the other day on CNBC say the same thing was great. At the beginning of the year I said DOW should see 5000. We hit 6600, which was very low already, but the caveat was and remains that the Fed keeps printing money and that leads eventually to inflation and eventually leads to higher prices on everything. That includes stocks. Rogers stated he wouldn't short the market because it could go to 20,000 to 30,000. I doubt that, but the reasoning he gave is same as I said, dollar has to weaken at some pt and inflation must creep in long term. Maybe it'll take 1 to 2 years but it'll happen I believe and we can't be the last people to notice. Stocks will go up if the dollar is very weak. I think we will ultimately fall no matter what but short term the FED is propping this market up, not down and we should respect that and go WITH the tape, not against us.

I'm long CEGE, TIE, YHOO and watch RTP, if it can bust and hold $200 it should see $250 in a jiff.

RULE!

Waxie

4 comments:

mcroghan said...

Waxie,

Thanks for your thoughts. I really missed your blog over the past week or so. I hope you are healing well and getting recharged! :)

Mike

In Debt We Trust said...

Waxie, it might be a bit early to jump on the commodity bull wagon. Oil contracts remain in contango although the spread has been narrowing b/t front month and future contracts. I personally think Government Sucks (GS) and JPM launched that bullish oil memo in order to pump their own positions (and short their own clients; evil bastards).

Plus, we are in the middle of a dollar backtest that could last until next week's treasury auction results.

ROY said...

Waxie,

Imo, the bear rally since Mar 09 is driven largely by inflationary-fear induced short-covering, ie, folks buying stocks & commodities to hedge inflation...

I see signs of USD strengthening after nonfarm data, & that implied stocks & commodities is gonna see a BIG selloff as long inflationary trades starts unwinding, deflationary risk rise due to reality returning!

Only when the mkt starts to realise DEFLATION is the reality can the market adjust to the TRUE equilibirum...

Rgds

mauiman said...

Ok..This is extremely speculative and I hate airlines...lousy unions! BUT, BA has the 787 jet which is highly overdue..and may end up showing its new 787 jets in the Paris Air Show on June 15(4 days before O.E.)... So, what about buying BA June 50 Calls, 1% rule? Very RIsky..