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Pop Goes The Weasel
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Pop Goes The Weasel

by The MoleOctober 28, 2008

I’m going to be fairly quick tonight, as things actually just got a lot easier on the charting front. First, after four failed attempts it was crystal clear to me this morning that we would not cave anytime soon. Glad I went into cash on Friday – great timing there IMHO. Anyway, the Yen had been ‘talked down’ overnight by the Japanese who are getting freaked out, and although it tried to rally a bit equities completely ignored that and kept on pushing blissfully higher. The situation in bonds is actually very interesting – somebody passed me this email which is currently circulating the City of London:

Gut wrenching declines in US and global equity markets during October coupled with bond market outperformance will undoubtedly require MASSIVE monthly asset rebalancing by US pension funds –- rotating OUT of bonds and INTO stocks. This may have a profound “short-term” impact on performance of risk assets since the required rebalancing appears to eclipse even the large rotation after the 1987 stock market crash. As a very simple example, we asked our quant colleague (xxx) to analyze a balanced portfolio targeting 40% domestic bonds (SBBIG Index) and 60% equities.

We assumed that the equity portion is comprised of 75% domestic stocks (MXUS Index) and 25% EAFE international equities (MXEA Index). The attached rebalancing calculations based on closing levels last Friday (Oct 24) suggest that US pension funds would need to reduce bond holdings by a WHOPPING -4.1% while increasing equity allocations by a corresponding +4.1%, all by the close of business at month-end on Halloween Friday (Oct 31).

Price action could be bloody scary given terrifying poor liquidity in these markets. For historical perspective, the second largest monthly bond-stock rebalancing rotation was 3.4% in October 1987. Most importantly, US equities did manage to stage a +10.5% during the last four trading days of October 1987 while bonds struggled. As it turns out, that marked the bottom for US equities for the next month and probably helped stocks find some needed footing in 1987.

Bottom line: BEWARE the potential bounce in risk assets due to bond-stock rotation this week. FX risk trades may also tend to recover a little lost ground.

I guess the secrets of high finance continue to escape me – stocks have sucked so fund managers are compelled to move their assets out of bonds to buy even more stocks. Some folks also mention the Japanese short sell ban plus the expected interest rate hike. Whatever – more band-aids on the pig won’t make want to kiss it. Nevertheless, money clearly keeps moving out of bonds, as the TNX closed at 38.2 today, which gives credence to the bullish case. Supporting the bears is that the spread between Moody’s BAA and the 30 year T-Bond yields appears to not be narrowing, which has been a very reliable indication of bullish rallies throughout the past few months. For instance, last time we the spread getting narrower was in late April and throughout May as we traced out intermediate (2) of primary {1} of c (a consolidation rally). Of course these things are not black and white and it is possible we keep rallying going forward and witness a narrowing of the spread as we climb wave (4).

Here’s a special chart for all of you Born Again Bulls out there. Baltic Dry Index is now in triple digits – nothing is getting shipped right now. I call that a perfect economic environment for sustained bull rallies 😉

The U.S. Dollar TED spread also keeps widening again – meh, probably doesn’t mean anything, does it? Who needs inter-bank loans anyway?

Let’s look at my obligatory SPX chart. If any of you leeches wonder why I didn’t jump in on a 900 Dow point rally: Mainly because I still see a good chance for the triangle case to play out as shown above. The wave count obviously changes (to something else) after today’s tape. And there is actually still upside potential left if we happen to continue on that path – I give it a 40% chance as of tonight.

Another possibility is that we have been tracing out a larger series of 1,2s and that we drop almost immediately and don’t look back – I’m giving this scenario also a 40% chance. The remaining 20% go to what the majority seems to be expecting at this point – a monster rally that won’t quit. Not impossible no, but I cannot give it more than 20% as of tonight. If we push up tomorrow the probabilities would obviously be skewed towards the upper range scenarios.

Gold is actually starting to resemble something I can count again. I have taken the liberty to put up some preliminary labels – they might change of course going forward. Yes, I still think we hit 600 and it seems the downside move should continue once we reach equality on wave (c). FYI – if we push down from here I might have to revise the lower target, as commodities have the nasty habit of painting extended 5 waves. FYI – equities traditionally paint extended 3 waves; doesn’t always happen of course but a good example is our recent {3} of 3 of (3) in the SPX.

BTW, I have kept the long term trend set to down tonight, but if we start rallying hard I’m considering to change it to up. Although we are in a secular bear market which should go for years I want to keep the definitions useful for us option traders. And a multi-week rally would be long term for most of us, n’est-ce pas? However, if it would help to add a ‘medium term‘ indicator in between the current two, please let me know. Perhaps I should put up a poll, so I can gather a consensus. Let’s try the democratic round first, before I impose my will on everyone else. Just like when it comes to the House voting for bailouts, right?

That’s it – I have to attend to my spousal duties now – tomorrow should be extremely interesting. For the record: I actually am hoping for the monster rally as it would be making things a lot easier for all of us. But that doesn’t mean it’ll happen – one can hope of course. Until tomorrow my loyal leeches.

Cheers!


About The Author
The Mole
Mole created Evil Speculator amidst the chaos of the financial crisis in early August of 2008. His vision for Evil Speculator is a refuge of reason, hands-on trading knowledge, and inspiration for traders of all ages and stripes. You can follow him and his nefarious schemes at various social media waterholes below.
  • http://www.evilspeculator.com berkshire

    OOOh OOh, I know the answer… $BDI can go to ZERO…that's it, pretty sure there is a floor there.

    Skål!

  • molecool

    Well, I doubt anyone is going to ship stuff for free – LOL :-)

  • Gumbo YaYa

    I think the bulls shot their wad today. They may have a little more for the first few hours tomorrow, but I am expecting a pull back before we go higher. That would be a good time to rebalance the portfolio posture. Nice base has formed, but we still haven't broken out of the range just yet…tomorrow will tell.

  • http://investingadventures.com Jorge

    Yup.. too high too fast. Almost a repeat of the 14th.

  • toad37

    I'm with you Mole, scratching my head at the insanity of a rally. But, as traders, we don't worry if it makes sense right? We just want to be on the right side of the trade.

    As usual, one million thanks for the post. Thanks for the time and effort to keep it going.

  • C.C. Rider

    Molecool and Berk,

    Thanks again for the service you provide. Even tho I haven't had a cheap floozie lately! I agree with your scenario that there is an 80 percent chance of a lower low in the not to distant future. Tomorrow would be a good start and is a real possibility. Here's a clip from McHugh's nightly take…

    The stock market crash potential scenario has not been eliminated Tuesday, but stocks would
    have to dive immediately Wednesday for that to be occurring. We show both the bullish and bearish
    scenarios in several charts tonight. While it is tempting to place the odds for the bullish scenario above
    50 percent, based upon Tuesday’s amazing rally, if you study the S&P 500 chart at the bottom of page
    9, you’ll notice that prices were stopped cold by a descending tops trend-line Tuesday. It shows a fascinating
    pattern that wave 5 down has formed a Descending Bullish Triangle that needs one more
    sharp decline to complete, that could take the S&P 500 to 750ish. At the bottom of page 12, the NDX
    sports a similar pattern, adding power to the imminent crash scenario. Strange markets at this time

    While I would be the first to admit that right now, that FEELS like a longshot. I don't discount that entirely just past on the action of the market the last 10 days.

    Again, thanks for being a grounded force in the realm of hubris all about. Every DOG has his day!

    CC Rider

  • b_rad

    As always, good analysis, only time can tell..tomorrow should be an interesting day. I'm net long, but short conviction.

    why is it that some indices like $BDI, $USD etc are only found on certain data providers, i.e. not the one most of us use?

  • localandbitter

    Forgive me, I am still a novice, former bulltard, have psyched myself out on a lot of correct trading ideas this year, and have paid a lot in “tuition”…

    All the bears seem to have gone bullish. I'm surprised at their sudden levels of conviction, while their skepticism has brought them success of the last year or two. While the technical indicators do indicate oversold conditions, fundamentals still look dismal.

    Is it possible that some actors in the markets acted upon the consumer sentiment trough correlations with intermediate bottoms to shake out the weak shorts? Over the last few days it appeared quite difficult to open new positions, long or short.

    Todays action appears bounded by the same ranges as trading on 10 October when you like at the SPX. Technical indicators for the day are starting to show overbought conditions at the close. But it is doubtful that things will go to zero.

    It seems like the prudent course of action may be to “stay away when the market is gay” or probe forward with longs in battered, but good companies and remain short on companies with questionable future earnings (e.g. consumer discretionary and luxury retailers).

    What do you think ?

    … still looking to get that A

  • http://kkmoney.blogspot.com kkmoney

    does this wave count make sense to anyone? http://kkmoney.blogspot.com/2008/10/decision-po

  • http://www.evilspeculator.com berkshire

    Timeframe…it is all about timeframe. Some of us have turned bullish (such as myself last night) but only for a short period of time. To me, this rally may be quick, but at some point I will be bullish for the long term. Staying away is very recommended unless you feel very confident trading intra-day.

    Skål!

  • http://www.evilspeculator.com berkshire

    that would most likely represent a wave 5 ending diagonal (one count version) of what I had suggested last night.

    Today, I lean more towards 4th wave flat, but the ending diagonal still holds weight.

    Skål!

  • C.C. Rider

    Must be net long, eh!! Fugetaboutit!!

  • C.C. Rider
  • Bartholomy

    Great analysis my evil friends…
    Those institutions rebalancing is true.
    I also cashed partial profit on bonds… then, bought stocks and sold related calls.
    This is great, we can buy stocks very cheap.
    We will exit soon from the triangle boundaries.
    I believe in election rally, despite that (5) is missing in the count.
    Good luck

  • http://www.hervey-bay-holiday.com kea11

    Great analysis here again. Thanks – need to formulate a low risk plan now.

  • http://kkmoney.blogspot.com kkmoney

    you ever follow this guy? he seems pretty good, though im not as well versed in these different patterns as you guys

    http://just-charts.blogspot.com/

  • BigHouse(Aka Mr Vix)

    Looks like dow futures off 167 over night

  • http://www.beanieville.blogspot.com beanieville

    Ultimate Bears' Last Stand
    http://tinyurl.com/6dtfj2

    They got nailed by the BatWings Formation!

  • GEO

    Molecool,

    This could be an answer to your question – http://stephenvita.typepad.com/alchemy/

  • http://groups.google.com/group/monitoringthemadness/ johneeboy3

    What Berk said. Point up.

    I'm bullish too… for a day or three at most I reckon. Something in my guts says 'ball-tearing rally for the bears' (a,k,a, a 'flat' in EW terms). A fresh set of eyes over the charts in a couple of days should be quite revealing as to the longer term (that is, longer than 3 days 😉 ).

  • http://groups.google.com/group/monitoringthemadness/ johneeboy3

    It will indeed, Gumbo…. or should I call you 'doc'????

    Did I get your alias correct? Does hairy legs ring a bell?

    I'll sound like a complete idiot if I'm suffering from a case of mistaken identity, but your avatar is too similar to one I've seen elsewhere 😉

  • GEO

    “900 Point Rally and Then What?” http://realestateandhousing2.blogspot.com/

  • minion of the ppt

    Here is long term chart of the BDI – we are sitting below direct cost now so ships will get decommissioned. To bad the industry is still in the process of overbuilding, so shipyards will go down the drain next.
    BDI now is an indicator that there are more ships than cargo, but not a reliable indicator for the actual amount of cargo shipped. Credit killed the economy.

    http://www.generationaldynamics.com/ww2010/bdi0704.gif

  • minion of the ppt

    Hasn't the triangle morphed into a pennant? You've almost drawn it like one. Unless we break out significantly to the upside today, they way ahead is clear.

  • http://www.blog.donnaklinenow.com Donna

    Many thanks for the excellent analysis. I learn more everyday. Also how about a Big Thumbs Up to Moony for the 'Exaustion' call? Excellent.

  • http://www.evilspeculator.com berkshire

    Oh you…You should at least wait until after the fed calls a top…

    Skål!

  • JanRosannadan

    Mole/Berk…

    Thanks again for posting these charts. They have helped me greatly. Perhaps we will rally through the Fed announcement….then what.

    Bear hugs,

    Jan

  • http://www.evilspeculator.com berkshire

    For more than a year now, every fed decision has been followed by a steep, short-term rally, but has eventually fizzled out, and led to more decline. I would expect about the same. The fed rally could last for a few days, or could be done by the time the speak, but either way, it will most likely be volatile.

    Skål!

  • Growler

    Thank you Mole and Berk for your analysis and generousity.

  • http://investingadventures.com Jorge

    Wonder what would happen if the Fed didn't cut rates today…

  • http://www.myspace.com/181419967 JZT_CHIL

    Yes, thank you Mole & Berk… and for “whooping our a__” with your admonition & advice to Fergie & Ukla yesterday: Re: “Coulda woulda shoulda – forget about it.”
    Great assessment last night – you can't just get that from anywhere else…

  • Growler

    Yes…I didn't think it my place to say anything but indeed, portfolio management is extremely important. This is a BUSINESS and should be treated like one.

  • molecool

    Daytraders need to be especailly disciplined. It's extremely easy to get sucked in by the momentum and attempt to chase the market. There is a reason why 9 of 10 people who try their luck at trading lose everything in the first year.

  • Growler

    Yes!

    Never, Ever, Chase The Market! If it doesn't come to you then don't trade it.

  • molecool

    If you look at my DJI chart I posted a few weeks ago you will notice that starting in January, every intervention was met with less of a response. The first one (rate cut) resulted in a one month rally, the next one a week, the next one a day, the next one a day as well. The last one ($850 bailout) resulted in a drop.

    Think about that and then ponder how much of an impact a cut from 1.5% to maybe 0.75%/0.5% will really have.

  • molecool

    NICE AVATAR!

    1+

    Yeah, it's starting to look like a pennant now, true. Well, we'll know for sure very soon. Frankly, I'd be happy to kick it to the curb.

  • molecool

    Damn it – I was actually hoping for a bull rally this time and then you show up 😛

  • Gumbo YaYa

    Sorry to disappoint, but I am not licensed in the medical field, but that doesn't prevent me from performing a little surgery on the market every chance I get.

  • http://www.evilspeculator.com berkshire

    I agree that the momentum was waning, but that does not mean we can completely ignore it. I mean…we rallied nearly 1000 points yesterday on what?? These things can come out of the blue, and we know that upside is the favored direction by the pres and his working group (as they like to call it).

    And I am talking about FED MEETINGS…not bailout action. Intervention is different than scheduled maintenance.

    Skål!

  • molecool

    Pretty much reflects what I have been reading in the last few weeks. It's so bad that they can't even junk the vessels for steel – cost are too high and they have no cash. What the chart does not reflect is inflation, as it was obviously trading at $1500 in 2001 – I assume that as profitable back then. I would love to see an 'inflation adjusted' chart of this.

  • Ukla the Mokk

    I am out of my near fatal accident with GS. As of the close yesterday, the trade had all but erased all of my ~17.5% profit for the month of October, posting a $770 loss. I managed to get out at almost the low so far today, and have suffered “only” a $370 loss. This is still a costly blow but I'm still up exactly 10% for the month. Humbled and cautious, I am going to sit out at least today and just watch.

  • molecool

    As a consolation – small accounts are very difficult to trade. Keep at it, but yeah watching right now is a good idea.

  • http://investingadventures.com Jorge

    You're telling me.. f%$ing PDT rule.

  • molecool

    Pivots baby, pivots. And don't be afraid to admit a loss – don't get emotionally involved in your trades. Tough lessons to learn as people can tell you about them but everyone seems to have to learn it the hard way. Kind of like raising kids – they have to go through their own motions. Some never learn.

  • molecool

    CLEAN CUPS!

  • C.C. Rider

    So Mole, What's your drop dead line in the sand? Here's mine. Give or take.

    http://www.screencast.com/users/texana44/folder

    http://www.screencast.com/users/texana44/folder

  • molecool

    The point I am trying to make is that, if the market rallies, it will not be because of the rate cut. Per your point above, btw – the rally came out of the blue, not because of a Fed intervention.

  • http://www.evilspeculator.com berkshire

    Thanks. Unfortunately, there is a very real and emotional side to this that rarely gets touched on. Most of us will freely admit that conquering the emotions is the hardest part, but are rarely qualified to offer the support that Ukla or people in a worse predicament need.

    Therefore, those of us who have been in that position or one worse than that should step up and offer the words of encouragement (not so much condolences), and ways that the trader can keep there head high and continue on in the field. Ask almost any professional and they will tell you that at some point they blew up an account. Some of us, however, do not have the luxury of just opening another account and going from there. Those of us without that luxury are forced to dig DEEP inside, and pull out every last thread of discipline and get back on that horse. Working SLOWLY and surely, taking only the choice set-ups, and following along strict (and likely reworked at this point) rules.

    The main message here, and Ukla had it, is that you CAN overcome this. As I said last night…Any profit is better than the millions of people that are sitting on FAT losses up to this point. The experience is NEVER fun and ALWAYS humbling (if it is not, stop trading now!!).

    If anyone ever has trouble with the emotional side, you should not feel embarrassed to let it out. Most of us have been there at some point, or could offer something to help. To me, it is all about community. And this is one great place for community to come in and be supportive.

    Thank you for the thank yous. We really do try.
    Skål!

  • molecool

    That's good stuff – 1306 seems like what's holding this (among others).

    1+

  • molecool

    CLEAN CUPS!

  • Ukla the Mokk

    So is there something to be said for adding to your position if the underlying goes against you but hasn't moved past your point of “the trade has officially gone wrong” point?

  • http://www.evilspeculator.com berkshire

    We are both talking about two different things. They are related, but not the same.

    One could make quite the argument that the rally was in anticipation of the fed meeting. Was it stronger than usual…sure. But if you look back, you will see we often rally for at least one day up before the fed.

    Skål!

  • http://www.evilspeculator.com berkshire

    The point that I was trying to make to Jan, was that the market will most likely rally after the fed meeting. WHY??? I really don't care. Just that that has been the pattern for more than a year now.

    Skål!

  • Growler

    Yes Yes and more Yes!

  • http://www.retracementlevels.com 2SWTrading

    Correct setups for today are here:
    http://retracementlevels.blogspot.com/2008/10/g

    Plus, you can receive daily the correct setups in your email, if you want, read the post on the blog.

    For all the lazy traders around…
    😉

  • Growler

    I wouldn't but thats me. I find hoping for the best but planning for the worst works well for me.

    I need all the stars to align before going in. This means overall market internals, indicators, price action, etc. If all don't line up, I'm out.

  • Growler

    I put a taser right near my desk. If I make a move without performing due diligence, I taser myself….. : )

    “Don't taze me bro” !

  • Growler

    Exactly….!!! I'll admit it, I'm a freaking mess. I'm two bad trades away from going postal! http://en.wikipedia.org/wiki/Going_postal

    In all seriousness, handling the emotions is something I've been working on for a long long time. I've tried numerous ways to handle wins and losses including suppression, which for me, only builds until I find myself running around the neighbor hood with my pants on my head. (not really).

    I can't even pretend to have the answers but I will continue to search. I want to reach the point where real trading fees like paper trading.

  • http://www.evilspeculator.com berkshire

    I guarantee that when you risk is properly managed, and you have invested what you are comfortable, trading feels like paper trading.

    For me personally, the big winners are the hardest. I just want to take my money and run. Losses I can deal with…I can trade my way out of a hole, I (personally) have a hard time watching me trade myself out of a gain.

    Really the easiest approach is to be fairly balanced with risk managed. That way you don't care if the market goes up, down, or sideways, you will be okay. (of course…then trading starts to get boring which is another issue entirely).

    Skål!

  • Growler

    I have the same issue with winners which explains why I'm most comfortable closing out before the end of the day.

    However, even though I risk less than 2% of my port I still “feel” the trade (no matter how inconsequential it may be).

    Maybe I'm just overly cautious?

  • MT

    Macd is at a bulllish crossing. False move or is this puppy running near 1100 towards MA50?
    Keep an eye on TRIX, if Trix confirmes a bullish crossing, 1100 is underway.
    If Trix fails : Zig zag is complete (your w4) or Berks ED is playing around.

    All clear for bears If VIX doesn't drop below 60, otherwise we have three peaks in VIX, wich is bearish.
    1000 SPX is make or brake.
    Sorry no chart, but even for mr Magoo it's clear.

    Thanks for sharring your view and charts with us.

  • http://www.evilspeculator.com berkshire

    Maybe I am over-aggressive. Right now my only trade take up about .75%, and I am perfectly willing to lose it all.

    But that brings up a point. I started out trading OTM options where “the entire premium defined my risk.”

    Frankly, only recently, when I have started trading OTM options that cost 1K+ have I not been willing to risk the entire premium (when I started similar options I traded were between $100 and 250$ a contract, now I look for between $500 and $1K). Now using the full premium for my risk is too much, but I can no longer hold out for the 500% winners I could get with a $100 contract, because seeing options worth 3-5K is tough for me. Though, admittedly, I am only 24 and have not seem many pay-checks worth that much (still very easy for me to think it is ALL paper money).

    With time though, it seems to become much less affecting for me. Also, right now is a very emotionally charged trading environment, which means almost everyone is paying more attention (perhaps more than they should) to their positions.

    Anyway…we are all different. If you are feeling your frustrations vent them, because that is almost always soothing for someone else. And I know too many people in the postal service for you to go postal! :-)

    Skål!

  • Growler

    I am even more impressed now that you're only 24. I'm about 10 years older and have only recently learned the true casualties of risk.

    Not to toot my own horn, but I've made a lot of money in the past (other job) and seen it all come crashing down (external circumstances but related to the credit industry). It's humbling, embarrassing, aggravating and extremely informative. Money can be fleeting if you let it.

    I guess because my wife's job is very vulnerable (“green” industry start-up) it may make me a little to hesitant. Regardless, this is a very important conversation and I have no qualms spilling my guts for you guys.

  • http://www.evilspeculator.com berkshire

    Thanks…I was quite the risk taker early in my trading career as it “technically” was not my money. However watching you account go from an 80% gain to almost 70% loss over about 1 year is humbling and frustrating almost to the point of quitting.

    And my view is a little whack still, becuase I am only 24 and have no firm grasp upon the “bigger picture.” Only now am I starting to see the light.

    I completely understand…About 3 weeks ago, I almost quit to take on a “real” job. Fortunately, I didn't and trading produced the rewards in those 3 weeks that it was supposed to. Trading under ANY time limitations is at best very hard. Keep with it.

    And thanks for not shying away when the age comes out. Many people would REALLY blow me off then.

    Skål!

  • Growler

    Re: Age…Are you kidding!? Berk, I have complete confidence your generation is gonna save the world.

    My generation however, is still stuck on heroin and Pearl Jam. : )

    And yes, a 70% loss is quite large. But it really seems like you've got your head on straight and know what the F you're doing. Congrats Berk.

  • Growler

    Once last thing regarding age. (Clearly you can tell I'm passionate about it). Anyone who gives you crap for being too young (with intelligence) is a dumb f*&^.

    Guess who got us into this mess? A bunch of RICH FAT OLD WHITE GUYS. Just goes to show you what they know. (i.e. NOTHING)

    Believe it or not I used to be a comedy commercail and music video director. I was always told “you're too young” blah blah blah and got absolutely no respect from the unions and crews. In the end, the naysayers will be nothing more than that. Those who take chance INTELLIGENTLY and with RELFECTION will be always rewarded

  • http://www.evilspeculator.com berkshire

    Completely agree with that. I have just taken a decent bit of flak regarding my age and trading style, especially if I mention the two together. Right now, most of them are just nay-sayers. But I don't want to scare off anyone who thinks (now) that they are following the advice of some silly 24 year-old.

    When I talk to people, even folks who have been in the business for a long time, it is very apparent to me that they have little or no clue about what is going on, but screw it if I am gonna waste MY time telling THEM that.

    Anyway…thanks for the support. And my generation will have to save the world, because the next one is gonna be worse than mine…

    I'll keep my fingers crossed.

    Skål!

  • http://z-stock.blogspot.com/ zstock

    The market never did price in SPY Q4 losses of 11%. I guess that's out there in the future. So more new yearly lows 3 or 4 month's out.

  • http://evilspeculator.com molecool

    Daytraders need to be especailly disciplined. It's extremely easy to get sucked in by the momentum and attempt to chase the market. There is a reason why 9 of 10 people who try their luck at trading lose everything in the first year.

  • Growler

    Yes!

    Never, Ever, Chase The Market! If it doesn't come to you then don't trade it.

  • http://evilspeculator.com molecool

    If you look at my DJI chart I posted a few weeks ago you will notice that starting in January, every intervention was met with less of a response. The first one (rate cut) resulted in a one month rally, the next one a week, the next one a day, the next one a day as well. The last one ($850 bailout) resulted in a drop.

    Think about that and then ponder how much of an impact a cut from 1.5% to maybe 0.75%/0.5% will really have.

  • http://evilspeculator.com molecool

    NICE AVATAR!

    1+

    Yeah, it's starting to look like a pennant now, true. Well, we'll know for sure very soon. Frankly, I'd be happy to kick it to the curb.

  • http://evilspeculator.com molecool

    Damn it – I was actually hoping for a bull rally this time and then you show up 😛

  • Gumbo YaYa

    Sorry to disappoint, but I am not licensed in the medical field, but that doesn't prevent me from performing a little surgery on the market every chance I get.

  • http://www.evilspeculator.com berkshire

    I agree that the momentum was waning, but that does not mean we can completely ignore it. I mean…we rallied nearly 1000 points yesterday on what?? These things can come out of the blue, and we know that upside is the favored direction by the pres and his working group (as they like to call it).

    And I am talking about FED MEETINGS…not bailout action. Intervention is different than scheduled maintenance.

    Skål!

  • http://evilspeculator.com molecool

    Pretty much reflects what I have been reading in the last few weeks. It's so bad that they can't even junk the vessels for steel – cost are too high and they have no cash. What the chart does not reflect is inflation, as it was obviously trading at $1500 in 2001 – I assume that was profitable back then. I would love to see an 'inflation adjusted' chart of this.

  • Insect Overlord

    I am out of my near fatal accident with GS. As of the close yesterday, the trade had all but erased all of my ~17.5% profit for the month of October, posting a $770 loss. I managed to get out at almost the low so far today, and have suffered “only” a $370 loss. This is still a costly blow but I'm still up exactly 10% for the month. Humbled and cautious, I am going to sit out at least today and just watch.

  • http://evilspeculator.com molecool

    As a consolation – small accounts are very difficult to trade. Keep at it, but yeah watching right now is a good idea.

  • http://investingadventures.com Jorge

    You're telling me.. f%$ing PDT rule.

  • http://evilspeculator.com molecool

    Pivots baby, pivots. And don't be afraid to admit a loss – don't get emotionally involved in your trades. Tough lessons to learn as people can tell you about them but everyone seems to have to learn it the hard way. Kind of like raising kids – they have to go through their own motions. Some never learn.

  • http://evilspeculator.com molecool

    CLEAN CUPS!

  • C.C. Rider

    So Mole, What's your drop dead line in the sand? Here's mine. Give or take.

    http://www.screencast.com/users/texana44/folder

    http://www.screencast.com/users/texana44/folder

  • http://evilspeculator.com molecool

    The point I am trying to make is that, if the market rallies, it will not be because of the rate cut. Per your point above, btw – the rally came out of the blue, not because of a Fed intervention. I call them interventions because Fed meetings almost always result in such.

  • http://www.evilspeculator.com berkshire

    Thanks. Unfortunately, there is a very real and emotional side to this that rarely gets touched on. Most of us will freely admit that conquering the emotions is the hardest part, but are rarely qualified to offer the support that Ukla or people in a worse predicament need.

    Therefore, those of us who have been in that position or one worse than that should step up and offer the words of encouragement (not so much condolences), and ways that the trader can keep there head high and continue on in the field. Ask almost any professional and they will tell you that at some point they blew up an account. Some of us, however, do not have the luxury of just opening another account and going from there. Those of us without that luxury are forced to dig DEEP inside, and pull out every last thread of discipline and get back on that horse. Working SLOWLY and surely, taking only the choice set-ups, and following along strict (and likely reworked at this point) rules.

    The main message here, and Ukla had it, is that you CAN overcome this. As I said last night…Any profit is better than the millions of people that are sitting on FAT losses up to this point. The experience is NEVER fun and ALWAYS humbling (if it is not, stop trading now!!).

    If anyone ever has trouble with the emotional side, you should not feel embarrassed to let it out. Most of us have been there at some point, or could offer something to help. To me, it is all about community. And this is one great place for community to come in and be supportive.

    Thank you for the thank yous. We really do try.
    Skål!

  • http://evilspeculator.com molecool

    That's good stuff – 1306 seems like what's holding this (among others).

    1+

  • http://evilspeculator.com molecool

    CLEAN CUPS!

  • Insect Overlord

    So is there something to be said for adding to your position if the underlying goes against you but hasn't moved past your point of “the trade has officially gone wrong” point?

  • http://www.evilspeculator.com berkshire

    We are both talking about two different things. They are related, but not the same.

    One could make quite the argument that the rally was in anticipation of the fed meeting. Was it stronger than usual…sure. But if you look back, you will see we often rally for at least one day up before the fed.

    Skål!

  • http://www.evilspeculator.com berkshire

    The point that I was trying to make to Jan, was that the market will most likely rally after the fed meeting. WHY??? I really don't care. Just that that has been the pattern for more than a year now.

    Skål!

  • Growler

    Yes Yes and more Yes!

  • http://www.retracementlevels.com 2SWTrading

    Correct setups for today are here:
    http://retracementlevels.blogspot.com/2008/10/g

    Plus, you can receive daily the correct setups in your email, if you want, read the post on the blog.

    For all the lazy traders around…
    😉

  • Growler

    I wouldn't but thats me. I find “hoping for the best but planning for the worst” works well.

    I need all the stars to align before going in. This means overall market internals, indicators, price action, etc. If all don't line up, I'm out (or rather, never get in)

  • Growler

    I put a taser right near my desk. If I make a move without performing due diligence, I taser myself….. : )

    “Don't taze me bro” !

  • Growler

    Exactly….!!! I'll admit it, I'm a freaking mess. I'm two bad trades away from going postal! http://en.wikipedia.org/wiki/Going_postal

    In all seriousness, handling the emotions is something I've been working on for a long long time. I've tried numerous ways to handle wins and losses including suppression, which for me, only builds until I find myself running around the neighbor hood with my pants on my head. (not really).

    I can't even pretend to have the answers but I will continue to search. I want to reach the point where real trading fees like paper trading.

  • http://www.evilspeculator.com berkshire

    I guarantee that when you risk is properly managed, and you have invested what you are comfortable, trading feels like paper trading.

    For me personally, the big winners are the hardest. I just want to take my money and run. Losses I can deal with…I can trade my way out of a hole, I (personally) have a hard time watching me trade myself out of a gain.

    Really the easiest approach is to be fairly balanced with risk managed. That way you don't care if the market goes up, down, or sideways, you will be okay. (of course…then trading starts to get boring which is another issue entirely).

    Skål!

  • Growler

    I have the same issue with winners which explains why I'm most comfortable closing out before the end of the day.

    However, even though I risk less than 2% of my port I still “feel” the trade (no matter how inconsequential it may be).

    Maybe I'm just overly cautious?

  • MT

    Macd is at a bulllish crossing. False move or is this puppy running near 1100 towards MA50?
    Keep an eye on TRIX, if Trix confirmes a bullish crossing, 1100 is underway.
    If Trix fails : Zig zag is complete (your w4) or Berks ED is playing around.

    All clear for bears If VIX doesn't drop below 60, otherwise we have three peaks in VIX, wich is bearish.
    1000 SPX is make or brake.
    Sorry no chart, but even for mr Magoo it's clear.

    Thanks for sharring your view and charts with us.

  • http://www.evilspeculator.com berkshire

    Maybe I am over-aggressive. Right now my only trade take up about .75%, and I am perfectly willing to lose it all.

    But that brings up a point. I started out trading OTM options where “the entire premium defined my risk.”

    Frankly, only recently, when I have started trading OTM options that cost 1K+ have I not been willing to risk the entire premium (when I started similar options I traded were between $100 and 250$ a contract, now I look for between $500 and $1K). Now using the full premium for my risk is too much, but I can no longer hold out for the 500% winners I could get with a $100 contract, because seeing options worth 3-5K is tough for me. Though, admittedly, I am only 24 and have not seem many pay-checks worth that much (still very easy for me to think it is ALL paper money).

    With time though, it seems to become much less affecting for me. Also, right now is a very emotionally charged trading environment, which means almost everyone is paying more attention (perhaps more than they should) to their positions.

    Anyway…we are all different. If you are feeling your frustrations vent them, because that is almost always soothing for someone else. And I know too many people in the postal service for you to go postal! :-)

    Skål!

  • Growler

    I am even more impressed now that you're only 24. I'm about 10 years older and have only recently learned the true casualties of risk.

    Not to toot my own horn, but I've made a lot of money in the past (other job) and seen it all come crashing down (external circumstances but related to the credit industry). It's humbling, embarrassing, aggravating and extremely informative. Money can be fleeting if you let it.

    I guess because my wife's job is very vulnerable (“green” industry start-up) it may make me a little to hesitant. Regardless, this is a very important conversation and I have no qualms spilling my guts for you guys.

  • http://www.evilspeculator.com berkshire

    Thanks…I was quite the risk taker early in my trading career as it “technically” was not my money. However watching you account go from an 80% gain to almost 70% loss over about 1 year is humbling and frustrating almost to the point of quitting.

    And my view is a little whack still, becuase I am only 24 and have no firm grasp upon the “bigger picture.” Only now am I starting to see the light.

    I completely understand…About 3 weeks ago, I almost quit to take on a “real” job. Fortunately, I didn't and trading produced the rewards in those 3 weeks that it was supposed to. Trading under ANY time limitations is at best very hard. Keep with it.

    And thanks for not shying away when the age comes out. Many people would REALLY blow me off then.

    Skål!

  • Growler

    Re: Age…Are you kidding!? Berk, I have complete confidence your generation is gonna save the world.

    My generation however, is still stuck on heroin and Pearl Jam. : )

    And yes, a 70% loss is quite large. But it really seems like you've got your head on straight and know what the F you're doing. Congrats Berk.

  • Growler

    Once last thing regarding age. (Clearly you can tell I'm passionate about it). Anyone who gives you crap for being too young (with intelligence) is a dumb f*&^.

    Guess who got us into this mess? A bunch of RICH FAT OLD WHITE GUYS. Just goes to show you what they know. (i.e. NOTHING)

    Believe it or not I used to be a comedy commercail and music video director. I was always told “you're too young” blah blah blah and got absolutely no respect from the unions and crews. In the end, the naysayers will be nothing more than that. Those who take chance INTELLIGENTLY and with RELFECTION will be always rewarded

  • http://www.evilspeculator.com berkshire

    Completely agree with that. I have just taken a decent bit of flak regarding my age and trading style, especially if I mention the two together. Right now, most of them are just nay-sayers. But I don't want to scare off anyone who thinks (now) that they are following the advice of some silly 24 year-old.

    When I talk to people, even folks who have been in the business for a long time, it is very apparent to me that they have little or no clue about what is going on, but screw it if I am gonna waste MY time telling THEM that.

    Anyway…thanks for the support. And my generation will have to save the world, because the next one is gonna be worse than mine…

    I'll keep my fingers crossed.

    Skål!

  • http://retracementlevels.zstock7.com/ zstock, Pro Select!

    The market never did price in SPY Q4 losses of 11%. I guess that's out there in the future. So more new yearly lows 3 or 4 month's out.
    Berk, I'm glad you decided to stop messing with OTM option strikes. Wait till you have 5 years experience, that'll be my advice.
    Here's a test___
    GE,CSCO,INTC__of these 3, only 2 of them have properly working OTM strikes. Which two companies Am I talking about?
    And what do you think I mean by properly working strikes?