Weighing The Week Ahead: What Lies Beyond The Cliff? [View article]
Good column as usual. Good advice to steer clear of Kudlow and CNBC. CNBC policy seems to be "misinformation"..... any current news event to be the causation for what markets might do that day...imagine: a fiscal cliff clock as the entire explanation of end of the year buying, selling, tax losses and gains, fund positioning, global government policy and interest rate shifts, and so on. It is too ludicrous!
Dueling Talking Points On The Fiscal Cliff [View article]
David, your normal first chart (5 min SPY) has always been of interest. Today, the "U" shape is normal, just as it's inverse on other days is normal. The "U" is of course buying on weakness---and is bullish. The inverse is selling on strength---and it is bearish. Another way to look at these patterns is viewing them as large institutional market makers balancing their books at the end of the day. The "U" shows the market makers going into the close short delta and buying stock to end the day delta neutral or delta hedged. The inverse pattern involves the opposite scenario. A better view of the institutional maneuvers during the day is the one minute chart (with volume) which shows levels of support and resistance being tested and supported by institutional buy and sell programs. A more detailed one minute view occurs in the individual stocks making up the index. This is what day traders like to trade, and every intraday shows lots of patterns---head and shoulders and cup/handles---with large swings. But, getting back to the "U" intraday pattern: weakness being bought is bullish for the time being and as long as it continues the S&P, which is now consolidating sideways, should keep going up. Traders now appear to be targeting the upside S&P 50 day MA along with resistance at about that level. If bulls (the daily "U" patterns) continue, those levels will move higher.
2 Things To Do And Not To Do When Your Investment Thesis Proves Wrong [View article]
Actually, I think you were mostly correct on the analysis, but premature on the timing. Timing is tough. After watching for the last several weeks as bullish stock buying programs outmaneuvered bearish selling programs, using extremely low volume to accomplish this, and in the absence of any good news whatsoever, I can see how you might miss the timing part. Nevertheless, I think your analysis will come true, perhaps by the turn of the year. So, I am sitting on my hands, cash and corporate bonds for the most part, until the problems work themselves out. You are not alone in forecasting a pullback. I think the only real questions remaining are the timing and depth of the pullback. Finally, I think 142 on the SPX is likely to be the top, so you will not need to redo your thesis.
Weighing The Week Ahead: Counting Too Much On Central Bankers? [View article]
As usual, a very competent analysis. I try to read your stuff whenever it becomes available. Thanks and keep up the good work. To sum up my positions: I have no bets against you in the market, and I have no plans to make any such bets in the next 72 hours. But I may initiate a position if either: a) Fed or ECB acts; or, b) Economic conditions deteriorate further. If both "a" and "b" occur, in effect cancelling each other out, then I will be on the lookout for your next analysis.
The Start Of The 2012 End Game Is Upon Us [View article]
Great article. I had not forgotten your earlier April forecast. Although I have also been lately getting more into short positions, I am still of the opinion that governments, market makers, large traders, etc. can manipulate and move the markets, for many months if they want. So, I think it is within the realm of possibility that something like Eurobonds, a Merkel reversal, Euro deposit insurance, dollar printing or some other such mechanism could frustrate your forecast for awhile. There will surely be economic problems. But whether all of the G20 will be incapable of doing anything to mitigate the crisis is hard for me to accept right now.
How To Recover Your Losses In Bank Of America Faster [View article]
Nice article. Sitting on more BAC, C, GS, JPM, MS and a few others than I would like, all with losses. Recovering with some option spreads. Hedged with some index spreads. Selling some calls, too. But, I had forgotten about the strategy you mentioned. It would work well, could be easily managed, and does not cost anything to enter. Thanks for bringing it to my attention.
Using SPY Options For Portfolio Protection: Looking Back, Then Ahead [View article]
Great series of articles. Thanks. Outside of the weekly options, I pretty much try to hedge in a similar manner: 1) SPY, IWM, QQQ, and EEM ETFs 2) Only debit spreads, calendars and diagonals. 3) Long puts 3-4 months out and ATM. 4) Short puts at the near expiration and ITM. 5) Exit positions if they will fall outside of breakevens. 6) Roll positions out if breakevens look OK for another month. Now I tend to look at the spread risk curve to "place" the risk in the area where my long positions need protection (downside).
Reading Bond Market Tea Leaves for Economic Signals [View article]
"So, when the blue line is very high (i.e., when the Fed is very tight) and the red line is very low (i.e., when the yield curve is flat or inverted) that almost always signals a recession ahead, because it means that money is becoming exceedingly scarce. Conversely, as is the case today, a low red line and a high blue line are typically indicators of a business cycle that is still in its early stages, and money is in relatively abundant supply." One must assume you misspoke in this as the conditions described are RED-BLUE IDENTICAL POSITIONS. Not your intent I would guess.
Oil and Gold Commitment of Traders Tell a Story [View article]
After reading the article and all comments, I must say I have no clue who is right and who is wrong, however, some comments got me laughing out loud...it was a good read as literary critics say often.
Commodities Poised To Rally? [View article]
Upside Breakouts Everywhere [View article]
The Small, But Important, Flaw In The Tepper Analysis [View article]
Weighing The Week Ahead: What Lies Beyond The Cliff? [View article]
Dueling Talking Points On The Fiscal Cliff [View article]
The "U" is of course buying on weakness---and is bullish.
The inverse is selling on strength---and it is bearish.
Another way to look at these patterns is viewing them as large institutional market makers balancing their books at the end of the day.
The "U" shows the market makers going into the close short delta and buying stock to end the day delta neutral or delta hedged.
The inverse pattern involves the opposite scenario.
A better view of the institutional maneuvers during the day is the one minute chart (with volume) which shows levels of support and resistance being tested and supported by institutional buy and sell programs.
A more detailed one minute view occurs in the individual stocks making up the index. This is what day traders like to trade, and every intraday shows lots of patterns---head and shoulders and cup/handles---with large swings.
But, getting back to the "U" intraday pattern: weakness being bought is bullish for the time being and as long as it continues the S&P, which is now consolidating sideways, should keep going up.
Traders now appear to be targeting the upside S&P 50 day MA along with resistance at about that level. If bulls (the daily "U" patterns) continue, those levels will move higher.
2 Things To Do And Not To Do When Your Investment Thesis Proves Wrong [View article]
Nevertheless, I think your analysis will come true, perhaps by the turn of the year. So, I am sitting on my hands, cash and corporate bonds for the most part, until the problems work themselves out. You are not alone in forecasting a pullback. I think the only real questions remaining are the timing and depth of the pullback.
Finally, I think 142 on the SPX is likely to be the top, so you will not need to redo your thesis.
Weighing The Week Ahead: Counting Too Much On Central Bankers? [View article]
To sum up my positions: I have no bets against you in the market, and I have no plans to make any such bets in the next 72 hours. But I may initiate a position if either: a) Fed or ECB acts; or, b) Economic conditions deteriorate further.
If both "a" and "b" occur, in effect cancelling each other out, then I will be on the lookout for your next analysis.
Stock Market Rising Wedge Breaks Down [View instapost]
The Start Of The 2012 End Game Is Upon Us [View article]
Although I have also been lately getting more into short positions, I am still of the opinion that governments, market makers, large traders, etc. can manipulate and move the markets, for many months if they want.
So, I think it is within the realm of possibility that something like Eurobonds, a Merkel reversal, Euro deposit insurance, dollar printing or some other such mechanism could frustrate your forecast for awhile.
There will surely be economic problems. But whether all of the G20 will be incapable of doing anything to mitigate the crisis is hard for me to accept right now.
How To Recover Your Losses In Bank Of America Faster [View article]
Using SPY Options For Portfolio Protection: Looking Back, Then Ahead [View article]
Outside of the weekly options, I pretty much try to hedge in a similar manner:
1) SPY, IWM, QQQ, and EEM ETFs
2) Only debit spreads, calendars and diagonals.
3) Long puts 3-4 months out and ATM.
4) Short puts at the near expiration and ITM.
5) Exit positions if they will fall outside of breakevens.
6) Roll positions out if breakevens look OK for another month.
Now I tend to look at the spread risk curve to "place" the risk in the area where my long positions need protection (downside).
Reading Bond Market Tea Leaves for Economic Signals [View article]
7 Stages of the EU Panic Cycle: Understanding and Profiting, Part I [View article]
Radian: Value in Mortgage Insurance With an Options Strategy [View article]
Oil and Gold Commitment of Traders Tell a Story [View article]