Now Reading
Heading for the Hills
74

Heading for the Hills

by The MoleSeptember 19, 2008

You guys all know what’s up – the futures that is. I personally will take a huge loss today as I still have over 30 positions open which will get practically killed in the first minute of trading. The market is hugely oversold already but that won’t keep it from pushing up in my mind. After much trepidation (and surprisingly sound sleep) I decided to ‘head for the hills’, meaning close out all my puts and probably load up on some index calls (yikes – the horror!).

There is a possibility that we push up and then drop but quite frankly, that’s what I thought would happen during yesterday’s rally. All worldwide markets made record gains overnight and I expect a huge bounce today. The TNX is at 37.75% 37.92% right now – 3.25% jump – that is HUGE. Also, the Yen is starting to drop right now – another bad omen. Either way you turn it, today will be a tough day for the bears. I recommend to sit things out if you are in the enviable position to sit in cash right now.

Good luck.

UPDATE: I just took a major haircut – courtesy of the PPT changing the rules mid-game – AGAIN. Well, it seems they might have just broken the equity markets today – take a look:

Would YOU like to buy this option?

Would YOU like to buy this option?

Obviously, nobody in their right mind is going to buy this option. And admittedly, today is a unique day and I don’t expect to see this past today. However, this sets a signal and I think many people will just walk away at this point and not return to the equity markets for a long time. As the (slightly modified) expression goes: You can screw some of the people sometime, but you can’t screw all the people all the time.


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 the usual social media waterholes.
Enjoyed this post? Consider a small donation to keep those evil deeds coming!

BTC: 1MwMJifeBU3YziDoLLu8S54Vg4cbnJxvpL
BCH: qqxflhnr0jcfj4nejw75klmpcsfsp68exukcr0a29e
ETH: 0x9D0824b9553346df7EFB6B76DBAd1E2763bE6Ef1
LTC: LUuoD6sDWgbqSgnpo5hceYPnTD9MAvxi6c

  • http://investingadventures.com Jorge

    Did you jump ship or hold off? Looks like we're pulling back just a tad, heh.

  • molecool

    I can see that and expected a pull back. Took a HUGE haircut this morning and my account has been slaughtered. Thanks PPT!

  • Rolie

    could still be part of the ABC correction from 15 July – A into 11850ish, B down below 10500 (can finish beyond 11850 in an expanded flat), C up towards 12000 and maybe beyond…we shall see!

  • jcoors

    I would have stayed in. I think we're approaching a crash of epic purportions.

  • molecool

    Easy to say now, pal. We could have as well bounced up in a major way. Hindsight is 20/20.

  • https://www.evilspeculator.com berkshire

    We should get a push down towards the end of the day as LEH(MQ) starts liquidating itself.

    Hope you all survived this act to “prevent market manipulation.”

    Skål!

  • jcoors

    Sorry Mole about your losses…you're the best out there. Who's going to buy in this market? No short SELLING? I won't be surprised if we finish down today at least 500 points. Just like Moon has been predicting, a top or bottom on friday or monday….

    Unfortunately, I can't do anything. Ameritrade won't function. Fucking POS.

  • molecool

    I don't call this a market CORRECTION – I call it a market ERECTION.

    (trademark pending)

  • C.C. Rider

    Agreed.Shorted NDX 1700 Oct puts at the open.Close to a double already,would like to see a gap fill to 1700 today. 😉

    Also shorted COF at $58, Oct $50 puts.

  • https://www.evilspeculator.com berkshire

    Really wanted to grab ICE up $15 and LVS up $7, but internet was conveniently down this morning.

    What a day…

    Skål!

  • http://www.FinancingIdea.com Fork_Master_Serg

    Dude, I missed it! Ameritrade was so slow I did not short any
    Some put options are up 50-100%
    Dam slow ameritrade!!

  • jcoors

    Are you getting back in?

  • babydoomer

    They killed me yesterday, when my positions were correct for the market we had – until they changed the rules and blew me away. Have you heard why trading was halted in SKF? Does it have to do with the ban on short selling? You can trade UYG, the inverse of SKF, but they won't let you trade the downside. What gives?

  • babydoomer

    I'm with you, Serg. Ameritrade has been skunky for days now, slow or blanking out.

  • http://www.FinancingIdea.com Fork_Master_Serg

    my overlaping count still stands til we exceed 1261.16
    http://forkoholic.com/images/spxcountc1.jpg

  • jcoors

    AMERITRADE STILL DOWN FUCK TAHT POS JESUS FUCKING CHRIST. I'm not down any money but I want to put my entire account into shorting this market. I think we end down today 500+.

  • https://www.evilspeculator.com berkshire

    My guess is that these ETF's are suspended because these ETFs are an incarnation of shorting. I had not heard about it, though not surprised.

    Why don't we just set a floor like Pakistan. Say 10K, and not make it illegal for stocks to trade under that level.

    Damn (once) free market.

    Skål!

  • https://www.evilspeculator.com berkshire

    Would not surprise me at this point. The market only had so many shorts…and once those are covered, it will just be liquidation bringing the market down.

    Until the tell us we can't sell either….

    Skål!

  • https://www.evilspeculator.com berkshire

    I would like to caution anyone who can not daytrade away from getting sucked into this insanity. It IS expiry, and strange things happen.

    Could we have made a killing this AM, yes, but who is to say the markets don't push up into the end of the day as the rest of the hedgies start liquidating. Step back, breathe, make sure you stops are in, and enjoy what is left of your weekend.

    If you CAN daytrade, be sure to take profits quickly as they come. You don't want to get caught with your pants down while there is a frisky PPT lurking around.

    I wish everyone the best of luck today….It WILL pass, the question is when. The markets will still go down, to lower lows, and then what. Preserve capital here so that we can load up when we have a direction…whichever way it may be.

    Skål!

  • ZigZag

    Etrade is slow too! I couldn't do anything this morning! Bastards!

  • molecool

    FYI:

    Hello Tom:

    I'm sure you're having a tough day today and wanted to send you a thank you note for keeping TOS running while most other trading platforms ground to a slow halt. The sheer volume pushing through your system at the open today must have been insane. I personally had over 35 orders in the queue at the bell. TOS is and remains the premier trading platform on the planet – period.

    I also want to strongly encourage you to make TOS possible for trading international markets. It frankly would be tough to go back to anything else. But even more so I also think that the long term survival of your own company is at stake as many traders will now turn their backs to the U.S. equity markets. I for one cannot justify trading in an environment where the rules are being changed at whim every single week. So, in the name of many traders I communicate with on a daily basis I strongly encourage you to aggressively push forward with enabling international markets on the TOS platform.

    BTW, I am taking the liberty to post this to evilspeculator and slopeofhope – thus encouraging other fellow traders to convey their regards and opinions in this matter as I am sure that most of them are now considering to look for greener (trading) pastures.

    Thanks again for all the great work.

    Best,

    Molecool
    EvilSpeculator.com

  • http://www.FinancingIdea.com Fork_Master_Serg

    I watched cycles and could not figure out how we can get low on 19th but a higher than July low 🙂
    Never doubt the cycle! :)) Now I know

  • T.B. Aurelius

    Turtle
    You have spoken, 101 trading manual.
    Phrase “Preservation of capital is #1” kicks in now.
    Plentiful trading opportunity is ahead.

    The other turtle!
    If you want to take something off the table, I believe time will come soon enough.
    This seems to be the time to sit tight.
    Even if this is going to be longer term rally, unsustainable spike needs a reaction, in my view…

  • molecool

    From jsmineset:

    1. Today's reported potential infinite bailout of all and any portends, if adopted, is the largest increase in dollars outstanding since the Jurassic Age.
    2. It closely models actions undertaken regarding the production of currency liquidity seen in the “Weimar Republic.”
    3. It is reported now that more than 1000 hedge funds are on the rocks. This has the potential for a significant financial impact.
    4. The only way to hide the numbers from the statistics produced by the suspected actions of the Fed is to value the indebtedness purchased at 100%, claiming a wash transaction.
    5. The only conclusion is that when the smoke clears and the advertised actions have been adopted, nothing more dollar negative than this has ever occurred due to the potential expansion of T bills and therefore dollar supply explosion.
    6. Gold is the only currency with no liability attached to it which, as you have seen recently, will be selected as the currency of the people.

  • jcoors

    Hope I'm right! I bought a large number of frontmonth QQQQ and XLF puts.

  • molecool

    The spread today is insane – would not touch this. But let us know if you bank some coin on this.

    1+ for being ballsy

  • balljet

    Time to RELOAD!!

  • molecool

    Ha! Can you post some charts here?

  • molecool

    TOS was flawless – see my thank you letter to Tom Sosnoff below. They are f..ing heros.

  • molecool

    See Berk's comment above. The MMs will have you for lunch. Sit this one out – seriously. This is not about guts – Berk and I are willing to pull the trigger even in the darkest moments. But the spreads are insane and the MMs will wipe the floor with any remaining speculators today. If you're in cash – stay there.

    Of course I'm not your pappi – so, go ahead and do what you must. I sincerely wish you can prove me wrong.

  • jcoors

    I just don't understand who would buy stocks in this environment.

  • molecool

    I know – at this point I'm not sure what to tell people. They might come up with some extended uptick rule forcing you to hold your shorts and even puts. Again, they can keep changing the rules as long as there is no outrage.

  • molecool

    Sorry, but I can't see anything on this chart. All lines….

  • molecool

    It's alright – my revenge will be UGLY and extremely PAINFUL.

  • Hard Rain

    What's wrong with being a MM? I have been selling options in this environment and loving it. Yesterday, I sold a $600/$590 November put spread on the RUT for $2 credit. I sold the short strike for $17.72 when the VIX was as 41.5. Today, that short strike is selling for $5.45. Sure, that spread could get run over in the next 62 days, but I now have 145 points to play with. And, yes, to balance that position today, I was able to sell the $800/$810 call spread for $1.80 credit to balance it out.

  • molecool

    Nothing wrong with MMs – and I'm sure they're having fun. You are simply taking advantage of a situation and so would I. But that doesn't mean I'm going to send my guys into the line of fire either 😉

    BTW, market makers are people who are determining the bid/ask spread. They are actually running the market – it's different from being an option seller. Anybody can sell options anytime.

  • http://www.FinancingIdea.com Fork_Master_Serg

    Bethesda, MD, September 19, 2008 – Due to the emergency action announced by the Securities and Exchange Commission on September 18, 2008, temporarily prohibiting short sales of shares of certain financial companies, Short Financials ProShares (SEF) and UltraShort Financials ProShares (SKF) are not expected to accept orders from Authorized Participants to create shares until further notice. Unless notified otherwise, shares will be available for redemption by Authorized Participants as normal. The shares of these ProShares are expected to continue to trade in the financial markets today, but may trade at prices that are not in line with their intraday indicative values.

  • http://www.FinancingIdea.com Fork_Master_Serg

    that's the goal ;-)) you won't see the forest behind the lines! ;-))

  • http://www.FinancingIdea.com Fork_Master_Serg

    can send you private message but don't know how.
    is DISQUS accepts pm?

  • molecool

    WOW – that is major. People are going to stop trading those inverse ETFs now as they will be fearful of government intervention.

  • calibear

    “prevent market manipulation” nice way to call it. I waiting to get my revenge.

  • http://www.FinancingIdea.com Fork_Master_Serg

    count in trash! 1261 has been breached!

  • molecool

    Great…

  • balljet

    Thanks, I do appreciate the advice.. I did get a .05 spread..

    Good luck, it is brutal out there..

    I traded eminis yesterday and felt like I was battling Sumo wrestlers.. I was beat up..

  • mimi66

    anyone going long on oil?

  • molecool

    I think everyone's licking their wounds today, mimi. Let me just say that I'm can empathize with your dad today 😉

  • mimi66

    ummm…I bought SSO yesterday…

    If this continues next week…he may break even on C and PFE.

  • molecool

    Just install jing (http://www.jingproject.com) and you can share links easily.

  • http://www.FinancingIdea.com Fork_Master_Serg

    dude, I have a website if you didn't notice yet

    by private I mean – I don't want to share it with masses :p

  • DMS425

    Ha, that is great.

  • DMS425

    I ilke the idea and did buy some this week. What the government is doing is inflationary, but then again they are very worried about Deflation.

  • DMS425

    Nice call so far.

  • DMS425

    Downtrend lines on the S&P and Dow have not been breached.

  • jcoors

    Lost a good chunk of change on my XLF and QQQQ puts today. Ah well…

  • http://www.FinancingIdea.com Fork_Master_Serg

    For Bears only: due to US government intervention in equity markets Elliott Wave community temporary suspends 1/4 overlaping rule til futher notice :))

    China forces us into complex correction
    Looks like wave 2 in China was a Zig-Zag so 4 should be complex
    So now Wave 2 in US will be complex :))
    http://forkoholic.com/images/fxispxsaga2.jpg

  • ZigZag

    In case anyone missed this from the other day…

    Trader's Almanac – Week after September triple witching awful – Dow down 14 of last 17. Historically September has closed poorly…

  • ZigZag

    “Failed Bank Friday” strikes again!!! – Ameribank has gone bye bye this evening…. 🙂

  • Bartholomy

    September 19 2008

    There were significant developments overnight. The U.S. Treasury and the Fed unveiled a mammoth
    rescue plan that is reminiscent in essence of the 1989 Resolution Trust Corporation (RTC) and the
    1933 Home Owners' Loan Corporation (HOLC). We are back to our drawing board and will reassess
    our asset mix strategy since we perceive these extraordinary developments to be a major
    turning point to limit the downside risks to financial markets. Even if the involvement of
    authorities will not prevent the U.S. from experiencing a recession, it will certainly limit the length and
    its amplitude. Using the previous seven business cycles as a guide, it is worth noting that equity
    markets rebound about three to six months before the economy and corporate earnings do (with
    returns of the stock market of nearly +30% six months after the trough). In the meantime, here are
    the details so far.
    The proposed plan has three major components:
    1- Creation of an $800 billion fund to purchase so-called failed assets. The program would let banks get rid of
    mortgage-related assets that have been hard to value and harder to trade.
    The way it could work is by setting up bulk auctions to buy mortgage assets from financial institutions. The auctions would
    be for set dollar amount purchases. Companies that want to offload the hard-to-sell assets from their balance sheets bid
    to sell to the government at a huge discount. The company willing to sell at the lowest price wins.
    Banks will likely have to crystallize large losses because the new plan will take the assets at a discount (it should, in time,
    make a profit, whereas RTC lost $125B) but the gain is that they avoid the fate of Lehman.
    2- Creation of a $400 billion pool at the Federal Deposit Insurance Corp. to insure investors in money-market
    funds. This liquidity injection would ease the pressure on short-term U.S. dollar money market funds.
    The plan would have to be approved by congress, but House Speaker Nancy Pelosi, said late Thursday night that
    lawmakers expected to get the proposal from Treasury in a matter of hours. She also mentioned that “We hope to move
    very quickly – time is of the essence.”
    3- Temporary ban on short-selling on Financials. The Securities and Exchange Commission announced it would
    temporarily prevent investors from making bets on stock declines in an attempt to stem some of the worst stock-market
    slides in years. The SEC, which had convened a late-night commission meeting Thursday to consider several items, said
    in a statement early Friday morning it is halting short selling on 799 financial stocks. The ban, which is effective
    immediately, is set to last for 10 days, but could be extended for up to 30 days.
    Strategy: Using history as a guide, we note that both HOLC and RTC resulted in steep stock market rallies between the
    time there were announced and he time they actually were adopted. In 1933, the S&P 500 gained 92% in the four months

  • http://www.for-really.blogspot.com Jana

    Very informative, thank you.

  • C.C. Rider

    .

  • lisa

    But Fed can make people sell gold off too by manipulations. Nothing is safe now. Fed can save the market for a while but not for long. Remember July banning shorting 12 financial stocks? Soon the covers finished the financial stcoks tanked again. This is second time let's see how it will end up. My guess is worse than ever.

  • http://www.FinancingIdea.com Fork_Master_Serg

    SEC bans frowning

    In an unexpected move intended to prevent the continued slide of financial stocks, the SEC has banned all forms of frowning, scowling or cursing with regards to stock market activities.

    “We needed to find a way to keep speculators from forcing valuations of our insolvent financial institutions to zero” said SEC Chairman Christopher Cox. This move follows another earlier move today in which the SEC banned short selling of nearly 800 financial stocks.

    “Stopping evil shortsellers from making us recognize when companies are bankrupt is at most a stopgap solution. What we really need is to change the attitude of investors in America. Once they recognize that our failed institutions are actually too big to fail they will realize that the only failure was our attitude”.

    “People need to start treating our venerable financial institutions with a little more respect. Until shortsellers forced them to open their books, our bankers have never let us down”, said Treasury Secretary Hank Paulson, “In fact, some of my best friends are bankers.”

    One of the foremost experts on the great depression, Fed Chairman Ben Bernanke, added “It is not possible to have a depression in America if everyone just keeps smiling.”

    What’s the next move in the government’s unconventional bag of tricks? “Which is worse: an evil shortseller or the financial analyst that recommended a stock be sold short?” speculated Mr. Bernanke, “These people are advising and inciting others to commit criminal shortselling activity and should be punished. We really need to be hearing only positive things to help us through this time of crisis.”

    The Bush administration gave its blessing to the new moves, “We all just need to completely forget about this nasty episode, start smiling and buy lots of stocks

    http://www.financialsense.com/fsu/editorials/20

  • molecool

    Probably due to excessive short selling today. Oh wait – that's illegal now – so, who's the next scapegoat? Sun spots?

  • molecool

    You're very chatty today – I take it you were mostly in cash?

  • molecool

    🙂

  • fuzzygreysocks

    Howdy Mole!
    For the benefit of your folks over here that ain't over there, I thought I'd shoot this across your bow:

    **Note to self: Self… the day these thingies make viscious stabs down anticipate govt shenanaigans and go long.

    A wee lackOfaith on the 17th, but the ugly slide began MON the 15th.
    http://stockcharts.com/h-sc/ui?s=$UST1M&p=D&yr=
    http://stockcharts.com/h-sc/ui?s=$UST1M&p=D&yr=

  • molecool

    Damn – that is BRILLIANT 🙂 Can I use this for my weekend update?

    In return I can offer you a wonderful market 'tell' indicator which I however cannot chart due to a missing feed which I cannot locate in any charting software I have access to. So you have to do it manually:

    1) 30 year US treasury yield: http://tinyurl.com/4tjeey
    2) Moody's Baa Corporate Bond yield : http://tinyurl.com/3w9ogt

    Now deduct 1 from 2 and you arrive at a negative number. The more negative the higher the probability that equity markets are about to drop. If the gap narrows equity markets are due for a pop, however it seems that the 'tell' is more reliable in advance of market drops. I wish I could chart this as a line in TOS but I can't figure out how to get the Moody's Baa yield as a feed. The treasury feed is TYX and just looking at that one is often a good indicator – for instance:

    http://screencast.com/t/2npSAdqI

    (should have looked yesterday – sigh)

  • Hansons

    As of Sept 22 the SEC will ban all sales of Financial stocks for a period of 3 weeks. Meaning you can buy but you cannot sell.

    Forthwith any unduly selling of stocks related to financial companies will prompt executive order #658453, which will allow the US government to render that individual and have him/her transported to Guantanamo Bay for an undetermined period of detention.

    President Bush is confident and believes that most American people feel that this is necessary, which will make us all safer. As he puts it these future detainees are “bad people and are unpatriotic”.

  • fuzzygreysocks

    Well… Of course it's brilliant!
    Remember: I'm a smart a$$, not a dumb a$$. 🙂

    >> Can I use this for my weekend update? << Sure!
    I wanna see what you and anyone else can contribute to the idea, tear it apart, whatever.
    That's why I like to plop these things in front of folks.

    I looked at a few dozen bond candidates @ stockcharts and can't find anything rendering a fair substitution for the Baa corporate bonds. In all my spare time I'll occasionally try some more because I like the fundamental differential spread idea. Thank you, for that li'l acorn.

    And your observations on your jing graph confirm my observations on the short-term bonds.
    In fact, the 15th should have run all of our attentions from yellow to orange. The 17th was orange to red alert where we all should have drastically scaled out of short positions.
    I got toasted on SKF.
    Had I figured out this BS a week earlier…

    Every little advantage helps.

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

    Hi mole…

    do you have an email or something?

    or can you write me clicking here:

    http://kontactr.com/w.php?id=7436&referrer=http

    I wanna ask you something privately.

    best,
    2sw.

  • molecool

    let me know if you got it

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

    yes, thank you

  • maya

    Hi ZigZag
    I always read your blogs and appreciate your work if it's ok I would still like to e-mail
    my e-mail is kutekirina@yahoo.com

    thank you
    maya

  • maya

    Hi ZigZag
    I always read your blogs and appreciate your work if it's ok I would still like to e-mail
    my e-mail is kutekirina@yahoo.com

    thank you
    maya