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Tom Au on Roubini and the Patty Hearst Affect The market is now overvalued and SHOULD fall. B...
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- Roubini and the Patty Hearst Affect (1 Comment)
Posts by Themes
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Choppy Toppy (just when you thought you'd had enough, you find a way to miss the little thing you were waiting for)...
Over their, beyond the hill
Lies the Picnic still
So much self doubt out there tonight. I really have to chide you.
Self doubt is almost as bad as conviction - even worse in other fields; just not as bad here.
The right amount of self doubt as a trader is essential, typically. It saves lives. Superman is going to get hit by a bus at some point .
But too much self doubt is not any advantage. Far from it. If you have such a condition, vacations are the best thing. However, if you find yourself still passionate (let's say inspired), even though slathered in doubt, you may not need a lengthy break. One should be working when inspired. That's where breakthroughs are born.
If you're exhausted and defeated and have no such spark, absolutely, the only thing keeping you from certified self-destructive would be a mandatory, self-imposed break; certainly in this field. In this place (this special game of the 21st century whereby everyone is playing whether they like it or not, since it dominates our civilization; so you might as well play it, right?). In this place you do not want to impose self-destruction. It's bad for you - it's bad for evolution.
Anyhow, I'm just posting to say something fresh and I'm even a little cheeky (Chichikov!) right now. If we were surfing, resting upright and looking out, I'd be pointing at something right now and personally I'd be moving to where I could take advantage of it, or at least paddle to where walls of water wont be face-planting and pummeling me then cartilage first into the coral.
The Dollar's been holding like a rock. Like a stone under water.
Trish has not done a lot for us with the stock market lately, but she has branded the US Dollar quite sufficiently now and this has possible negative implications for stocks. I say possible, because she cannot go a day anymore without very brightly mentioning the tight inverse-relationship the USD and equities hold, and just how sad and weak is the state of the buck. Therefore, if you fade Trish fully (and she is the genius here) it's possible the Dollar could de-couple that relationship and both Dollar and equities rally (not out of the question).
If Trish is worth her salt, and I'll argue again that she is, then this weak Dollar may or may not punch-down once more, proving everyone right that the Dollar is pawned - before punishing them all at once. Just for being right when everyone and their ancestors were on the same side of the ship.
It's the punishing them all part that I am more or less now convinced of.
Maybe this is the first, next wave down then for stocks (assuming we don't see any de-coupling). If so, the first slice is usually the deepest (for the short term anyway).
Yes, that last part is even meaningful. If I know little in the way a market behaves, I know that strong stocks and strong markets, correct sharpest (short-term) on the first real slice down (subsequent waves create higher-lows for some time after). And important, we haven' yet had a real slice down, presently. So far the market has been bought rather abruptly for several attempted declines in a row.
This last decline though was different. There was real blood in the water late Wednesday and volume that hour was stronger than any force we've seen recently. On top of that is was the half-dozenth or so distribution day for the major indices in recent weeks. And, importantly again, the time-duration of selling was even briefer (encased inside of two hours between late Wednesday and early Thursday).
Momentum, for now, has peaked (and it broke down on Wednesday). Even if prices are still able to make higher-highs in the next couple of days., which will get a lot of the party on one smart side of the ship - momentum has already changed directions.
So I suppose I have a (fluid) script in my hand right now (though I'm not memorizing any text!). I might even be inspired a little myself just not and this is why I am up so late and psychological risks in sharing such thoughts; I'm not yet sure.
Or perhaps I am about to get walled - just for saying as much.
Goodnight.
Looking Lower (shift to net short)
What I really meant earlier today, when I alluded to conflicting cross currents and I didn't want to speak, was that the market was setting up for a dramatic late day reversal ;)
I've got a special talent. Something causes me an uneasy feeling before the hammer actually hits and this has saved me from more than a few drubbings; as I am ready to scramble as soon as somebody sneezes. Seriously, I get irritable for no apparent reason, I start breathing irregularly, sweating palms while singing 29-psalms and my spleen begins to hurt. Friends and family nearby do not know what to make of me.
I didn't want to say anything about it earlier, because this happens pretty much daily!
For better of for worse, I am net-short now, holding fewer names (7 tidy-longs and 2 large-shorts) and I do not consider today's action anything less than...nasty.
That's right. I'm as good as bear tonight. I'm in the lifeboat with the rest of you suckers now. I picked up several whole salmon from Whole Paycheck and I'm looking to gnaw raw on these amazing, tasty creatures while watching my favorite Herzog movie on HD.
My downside target for this leg down is - Oh, piss off. Targets are for losers. I'm inclined to trust that some amount of downside is now in store, but I don't even like that much conviction. Let's just say it does go lower, for the sake of argument. It will go lower and lower and even lower, until it stops going lower and then it will go higher or sideways instead.
End of target.
I'll try to be more or less in-line with this (letting you heroes make the calls and such). I'll give you bears this, though - There was something altogether worse about today's higher-volume failure than anything we've seen in, well, weeks!
Seriously, I didn't like it.
But I want to make this clear: I've shifted beyond neutral and into net-short territory for the primary purpose (thus far) as to afford taking on new entry-stabs long as new set-ups develop. In this fashion, I can initiate, add or re-load leadership longs without worrying so much about the overall market; as I will try my best not to get too far again into net-long camp until I think the bull is back, or at least until I perceive selling as tepid (since this is a bull market I am aloud to get a little in front of the trade, going long, as that is trading with the larger trend. When I make fun of you geniuses for getting ahead of the trade it is because you are anticipating a change in the larger trend AND going against the larger, existing trend, and that is wreckless if not stupid).
If we see but a brief correction, then I've managed to accumulate leadership names for a new swing higher (simply covering short hedges then once the market improves). Whereas if the market continues taking lives I hold onto my short position(s) and simply play damage-control with the longs (dumping accordingly and trying again until it is clear these set-ups are mostly failing).
These new set-ups usually have a reasonably close benchmark underneath, which makes the risk vs. reward favorable. For example, an extended leadership name can be bought slicing down to support (buying near previous highs from earlier consolidations, near key moving averages, or by using other entry-tricks of the trade maniacs like me have accumulated) and I can use that level as a benchmark then for stops (normally I use benchmarks on a closing basis, unless volume is heavy enough to clearly signal a breech; in that case I don't wait for the close to unload - i just take lumps and move on).
I'm heavy into SRS now, so there will be no nodding off during the session tomorrow. Someone once(!) said the next shoe to drop is commercial real estate. Well, the previous generation of SRS fans are long dead and buried now, but I tip my glass now in their honor.
If you're going to drink that much vodka it is better not to sleep on your back.
-Total Position: ~1.5-to-1 net-short, considering levered TWM and SRS hedges
-54% invested overall
-Pure-longs = 31%
Currently Long (according to size): RKT (5%), HRBN (4.9%), WATG (4.6%), OWW (4.5%), ININ (4.3%), HMIN (4.2%), CHBT (3.4%)
Currently Short (according to size):
-TWM-long (Russell 2k Dbl-short, 15.7%)
-SRS-long (US Real Estate Dbl-short, 7.6%)
(Note: inverse-ETFs TWM and SRS represent being dbl-short their respective index).
Futures Accounts: Short 30% Dec BR Pound, from 1.64785 ave.
Retail Hell (a trader's guide)
More of the same today. I'm not making much long-side money - since I'm so sick-conservative.
No problem. Not today. Today I'm shopping Sunday underwater hunt-and-grunt getaway packages. I can't leave yet, since I'm keeping on hand tomorrow night for the 90-minute set of Bob Dylan Christmas songs, but after that I'm out of here.
I know you guys like PCLN as a short (I'm still avoiding such frisky behavior, conservative as I am), but I'm a big customer of their product. I love arriving to far-flung corners of the world between 11Pm and midnight local time and getting home a couple of hours before the market's-open on Monday.
Given my consumer habits (I'm gnawing on organic pigs knuckles just now, while warming last night's spaghetti, below), I'm pretty much the worst example of "going with what you know." 3-piece woot suits and rubber-band harpoons aren't going to sway the mainstream anytime soon.
What I've noticed though, as far as retail, is that if the stock is hot and I would never consider myself a likely customer of the product, I'm inclined to like the stock even more. Case in point at the moment would be ULTA Salon/Cosmetics (ULTA). The fact that the website is a gross violation of common sense and decency, gives me that much more confidence they are onto something I want to be a part of. Similar big winners of the past include things like Nutrisystems, Coach, Dress Barn, Chico's (love the fat-velvet look, btw), Ross from Hell Stores, Dollar in my pocket Tree, Big Stores (god save me), True Religion, Barbie, Clap-on Clap-off, Klic-Clack, ZZZ-best Carpet System and Nordic Track!
I think Nordic Track was symbol CML at the time; one of the greatest ride-it up and short-em-down plays from the 1990's. Rubber-band technology (a favorite of mine, harpoon in hand) was the death of them. We loved Nordic Track dearly, but I was going to break my legs on purpose before getting on one of those rat traps.
You are correct, I still don't have much to say regarding the current market. In fact, I'm pulling in a couple of names long today (stepping out for now on SXCI, BCSI and I have silly-priced orders higher-up for a few others). I'm going to get smaller (likely, at least) and prepare for the inevitable underarm armageddon y'all been warning me about.
Actually, earnings begin flooding en mass starting Tuesday. I don't expect anything in particular, especially since I try to not expect just on principal, but given the lack of spirited direction on either side of the market at the moment I see no reason to have my neck out very far.
Undersea however, I intend to extend all appendages; bandaged or otherwise; apperati or not; and expect the worst.
-Total Position: ~2-to-1 net-long
-65% invested overall
-Pure-longs = 50%
Currently Long (according to size): DGW (7%), HRBN (6.7%), SWM (6.2%), WYN (5.3%), ULTA (5%), CLW (4.5%), HMIN (4%), CFSG (3.9%), PTI (3.8%), RINO (3.3%)
Currently Short (according to size):
-TWM-long (Russell 2k Dbl-short, reloaded today, 10%)
(Note: inverse-ETF TWM represents being dbl-short the respective R2k-index).
-TER (5.2%)
Futures Accounts: no current position