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I had a conversation with a friend today. Smart guy, reads religiously, but hates religion. Somehow we got on the topic of peak oil. I tried to instill the fear of life without fossil fuel on said friend to no avail. I asked him in curiosity, “How will we fix this?”. With a completely serious face, he answers “Haven’t you heard of electric cars?” I was fucking thrown aback, this is someone I view as being above average in intelligence and he says electric cars?!
The entire concept of where electricity comes from is foreign to him. Like it comes from thin air or solar power. He then goes on to tell me, he has faith in human intelligence. I told him, I have no faith in politicians. End of conversation.
It seems to me, people are out to lunch. Completely fucking numb to reality and the majority couldn’t be happier. I try to impart what little knowledge I have and most of the time, people think I’m lying. “That doesn’t happen here!” or “That can’t be true!” they’ll say. Little do they know, it does happen here and it will continue. I generally cut these types of conversations short, out of sheer anger. “What’s monetize?” my friend will ask, with a stupid fucking confused look on his face. “Fractional reserve lending?”, “Mortgage securitization?”, or “Government Guarantee’s?. Money is power and the vase majority could care less. I find it pathetic.
Moving on to the markets, we are in a scary spot. We are nearing the end of this rising (bearish) wedge.(Post here and Chart here) I believe the stock market is about ready to snap back to reality in a big way. Complacency is the norm and once again the pigs will be led to slaughter. If we moved about 1,350 on the SPX, I would have to reconsider my current view. Watching many short and long plays, but waiting for entry points.
I always ask myself, “What is the HARD trade?” If you can’t possibly fathom owning stocks, then it’s reasonable to assume stocks have a lot of upwards potential. When you can’t resist throwing up the virtual high-five over stock gains, then chances are large that we have a lot of downwards potential.
It seems to me, the hard trade; is not trading at all.
There is no question we are in a bull market, but strangely enough it seems everything is in a bull market. Bonds, Equities and Commodities. I’m trying to determine if the weakness in the EU is masking weakness in the US dollar. When I look at gold and silver, there is no question in my mind; The US dollar is weak.
I have also mentioned my love for gold and my belief that it had seen a bottom. I still believe this today and the price action has confirmed these thoughts. While gold hit my price target, I can still see it heading higher.
The question is where do I go next? Banks look weak in my opinion and serve as my canary. Therefore, I’m being extremely careful here. I would also mention bullish sentiment has gotten quite extreme. I’m watching for breakouts as usual, but will be doing more watching then anything else.
I’m watching AMZN very close. I see a broadening top(Here).
This looks like we may be at a short term top, but who knows. I’m just sitting around watching. I’ve taken up a small short position in AAPL and will be contemplating further shorts. I’ve been watching CAT and if this isn’t a top, then I haven’t a clue what is. We’ll have to see where it closes of course, but currently it looks shortable at this level. I want to be careful not to fight the market here and will be looking for some type of confirmation, but my gut tells me we are at a top.
We could trace to 1,290 on the SPX and still continue this uptrend. This would be a healthy retrace in my opinion. I will be watching these developments closely and acting as the market directs me.
UPDATE: Head and shoulders on SPX(5-min). My min. projection is 1,300.
What really happened today? Did stocks just roar higher, or did the US dollar just collapse lower? I guess it’s “risk on”?
FED action today was no surprise, America is stuck between the realities of a economy that will not grow and a debt burden that will not shrink. This is something I’m sure you’ve all heard, “We’ve entered the zero bound, blah blah”. The zero bound being the realization by central planners that all roads lead to either currency destruction or depression. The options are shitty, hence we’ll get a shitty policy. The easy road is the one traveled by politicians and the Japanese experience should serve as a warning.
Bad things are on the horizon for Japan, but I can’t say they look any better for the global economy. The EU is stuck, the US can’t grow, Japan is in trouble and China is just waiting for any of the preceding to jump off a cliff, only to follow. Maybe I’m just being a pessimist, maybe I’ve been reading zero hedge too much, or maybe I’m down right wrong. One thing is for certain, uncertainly is the new normal.
Amazingly in the face of it all, Equities are breaking higher as if this were 1999. I’m not quite sure what memo I missed, but I’ve happily tagged along for the ride. Although, I liquidated my positions last week, I have been playing short term break outs in all types of nonsensical names. From short side plays on the NFLX failed break higher, to long side plays on stupid JPM type stocks. This is crazy and I want off this ride. I would love to just sit back with some Warren Buffett type of long term investments, but cannot help thinking we are completely doomed come tomorrow.
While equities are all over the map, gold continues to act accordingly. I’ve had constant thought of selling all possessions and buying truck loads gold bars. However, I ditched the plan, as I may have trouble hiding a large amount of gold bars from the resistance when civil war breaks out. In reality, all “risk off” assets currently look good, with gold looking the best. I currently hold no positions, as I’m waiting for the sky to fall, but I will continue playing short term positions in a number of different names.
Apologies for the hiatus, but my life is all sorts of crazy right now.
As I have previously mentioned, look out for failed breaks. A failed break has an emotional aspect and will be the single thing to start a large downward move. I’ve been watching banks as a sort of “leading indicator” for these failed breaks. If bank stocks fail to move higher, it would constitute a failed break.
Watching; GS, JPM and BAC(among others) for these failed breaks.
**Currently hold no positions**
If you are currently sitting at your trading desk wondering how on earth you missed some of these breakouts, don’t worry there will be more. What ever you do, NEVER CHASE. You’ll end up like a dog chasing the car he can never catch, except unlike the dog; The car will most certainly reverse and run you over before leaving you behind. This is something I learned rather quickly, if you miss a breakout point and enter late you will generally get shaken out. If you manage to maintain your position, it was through pure luck or absence of a trading system. I’ve been missed breakouts left, right and center the last several weeks, but have not chased. I blame these missteps on distractions that I will correct immediately.
Moving on, there are still break out chances yet to materialize from this other worldly rally. I say other worldly, because there is nothing on this entire world that could be pushing stocks up. Must be positive economic numbers coming out of Mars or possibly Saturn that I have yet to hear about. Yes, yes I know, “markets bottom on bad news and top on good news”. Except I don’t believe we have heard any truly startling news. Sure we had some weak economic indicators that have since turned mildly positive, sure our housing market is showing signs of life, but Europe is completely dead and our debt situation in beyond alarming.
The breakouts I’m talking about are as follows; NFLX above $99, RIMM above $18(if you missed the previous breakouts), AMZN above $185(you missed this one today, but a pull back to $185 should be bought IMO), AAPL above *$427*(I’m slightly worried about the action and won’t play this breakout, seems destined to fail), a handful of banks are getting ready to break either this week or early next week and MSFT (broke out, but pulled back to breakout point today).
These are some breakouts I will be watching this week.Good luck on your trading.
UPDATE: Did anyone see this article? http://www.bloomberg.com/news/2012-01-18/s-p-500-profit-season-has-worst-start-in-years-chart-of-the-day.html
I take this seriously and my calls are serious in nature. RIMM ripped heads off yesterday, but fortunately I knew that would happen. I can say that RIMM is set for a pull back, but if you have built a position, then you may want to let your winners run. RIMM is turning things around and this is evident from the action on the chart.
In the markets, AAPL just broke out. AMZN and NFLX look soon to follow and quite frankly I’ve been asking, Why are these stocks breaking out? Honestly, I haven’t the faintest clue. I’ve been trying to run thought experiments, but can come to no solid conclusion. The closest thing I have to a theory, runs as follows. The demand for US risk assets has increased in massive proportions, due to the demand from European investors. As European investors not only get capital gains, but also gains on the exchange as the euro crashes.
Stay agile as per the usual. This is a train heading for a brick wall and things will turn ugly, but before they do I might as well enjoy the ride.
Simple. The market will crash on failed bullish patterns. Believe me, the market won’t crash when everyone expects it. The market will crash when the majority is unprepared and complacent. The break above October 2011 highs on the SPX would be bullish and a failure could precipitate a crash.
I personally hold many ill thoughts towards the market and I have to constantly remind myself that, my ill thoughts mean nothing. I have participated simply because the market looked good, but a failed break above 1,292 would only add to my bearish thoughts. I’m getting close to throwing my stupid long positions out the window. They are serving me extremely well, yet I can’t help but sense weakness.
Once again, I find myself watching those garbage Canadian banks. If RY were to break below $50, it would most certainly head towards zero(or at least the 30′s). Making me outstanding profits in the process. I will be watching them closely, for a short position. This depends on price action obviously, not some crazy theory I have about the Canadian housing market crashing.
As for long positions, I’ve been watching NFLX closely for a long above $99. I’ve also been keeping a close eye on RIMM. While I missed my buy point on RIMM, I will be taking a position on strength. I’m watching many stocks for breaks higher, but those are the mentionable ones.
As always, I will trade with the tape and distrust thoughts from everyone, including my own.
In my eyes, RIMM has been a buy for the last month, but due to my strict set of rules I was unable to participate. Currently, my rules say buy(yesterday) and so should yours. This is a serious matter and I won’t sit idle as this stock rips higher. Above $15.86 RIMM is a buy, a breakout I was watching closely. However, I didn’t watch it closely enough as I was sidetracked with other bullshit and missed my buy point. Silly me, but it does happen and once again my rules do not allow me to “chase lost gains”.
While, I believe the sell off with RIMM was overdone, it was totally deserved. If you haven’t been paying close attention RIMM has been turning out complete piles of shit. In contrast, the competition has been putting out pure gold for years. What the fuck did they expect? I believe RIMM has life left and if you do as well, you may want to give them a second chance. Keep in mind, I would not buy at these levels. I will be waiting for a pullback to start a position.
In the market, I’m watching all types of wild shit. I’m watching stocks breaking out and buying those breakouts, while seeing stocks breaking down and selling those breakdowns. This is the key, a slow and steady rise to the top.
UPDATE: Head and shoulders forming on NFLX(5MIN CHART) Going to short on break.
UPDATE2:I did not start a long RIMM position, but will be looking to do so come Monday