Joined Jan 1, 1970
509 Blog Posts

Keep Your Eye On the Ball

The markets are serving up nasty pitches. Wicked sliders or stinky cheese with hair, if you will.

Keep a viligant watch over the spread on 2’s/10’s in treasuries and the Philly Bank Index (BKX) today.

If the spread widens and the BKX falls, the market will go down (unless it gets in irrationality mode and believes government sweet talk).

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I See Dead People

Today was a reversal of fortune for the unfortunate stock bulltinas. Nothing like getting your nuts chopped off, you falsetto singing, penny stock egregios. Prepare for death by sabre.

Get a clue. We are stuck in a trading range. The whole month of May we have not seen range expansion, as this market has traded within a 7% range all month. And, volume was higher on the downside today, which should be a disturbing development. Comprende?

I was selling early in the day, reaping profits.

Thankfully, I emerged unscathed, actually up almost 1%, on the day, due to my market neutral posture. I’m still on with 48% gains ytd, currently at 44% cash, and 18% net short in my model portfolio. If you can afford it, you can read the write up in The PPT.

Off to the bunker to drink some lemonade and listen to opera music, while relaxing in my sable-lined lined hammock.

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Put Away Your Viagara

16 billion. That was yesterday’s global stock market volume. Although that number sounds “iBankCoin-like”, that is just about average volume for the past 50 trading days, so no big whoop.

Yesterday’s rally caught me by surprise, yet I am not beleagured or befuddled. I am market neutral, looking for cues as to when and where we will break out of this consolidation.

Currently, trading support on the SPX is the opening price of 886 on May 18th, which was also the low of the day (don’t just take my word for it, look it up). Secondary trading support would be 881, which was yesterday’s low.

As far as absolute support near term, it is 875, which Ragin Cajun had identified in one of his prior posts. We breakdown significantly below that, on big volume, and you can probably pull out a bottle of ketchup and stick a fork in this rally, as a pullback of 8% – 10% could occur from there.

Near term, resistance is 911 (odd, no?) with heavy resistance at 917, which is the 200 day MA. If we close above that today, don’t get all “Viagara-ed up” just yet. There is more resistance at 923 (May 20th high), 929 (May 7th high) and 944 (January 6th high).

Bull markets are defined in hindsight, not in foresight by chart chomping, Twitter oogling internets. 

However, if the market can break 944, then we could have a good chance of sprinting ahead to 1008, which puts us back in Novembers market numbers. Were that to occur, it would be a 51% rally off the March 6th low of 666. Even then, that would still be fairly consistent with the bear market rallies of the 1930’s.   

Look for the market to be rangebound here. I think it is highly premature to conclude that this consolidation over the past 3 weeks is near done. For the market to rally another 2 – 3 months, we need to see a healthy pullback to “oversold” territory again. Obviously, we are not there yet.

So, with that said, if you’re looking to trade, you’ll need to play the sector rotation game, thus increasing your chances for losses. Just be forewarned that you’ll need to be quick on your feet to take profits, and then move to the next area of attention just to survive a butt-kicking. That type of environment just might characterize the whole summer, as we could get stuck in a trading range as volume declines, and traders periodically wipe the boot prints off their asses.

A break above the May resistance numbers, especially January’s high of 944, would effectively be the breakout of this consolidation that the market Bulls are looking for.

I, on the other hand, will watch and wait, sitting on 48% gains ytd, and may end up sipping on lemonade, whilst reading books in the shade and comfort of my hammock this summer.

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Testing, Testing, 1….2….3

Do not be fooled by funny little numerical expressions like, “up 200 points!”, or “look at the 200 day moving average!”

This market is at a critical juncture as we head into June, and volume is meager.

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Remembering The Greenback

Is capitalism dead? Will the U.S. Dollar sink into a bottomless cesspool?

Much of the marketplace has been wielding the homo hammer on the greenback lately, and for reasons quite obvious:

….the Obama administration’s policies and decisions on how to handle the financial meltdown / looming depression.

In short, the marketplace and those who tenaciously cling to capitalism see this current president’s financial moves as a direct attack to its family jewels.

One example: GM

This most egregious move to force a once great American institution to fire its execs and institute a government / union hostile takeover, while leaving the creditors and bondholders with dust, is nothing short of socialism cloaked in gay pink robes.

Does anybody in their right mind believe that the government and the UAW are fit to own 89% of GM? All our current government can do is run up astronomical deficits and blame the previous administration for keeping us safe from terrorists. Very responsible and wise behavior, no?

Even Bill Gross, PIMCO bond guru, has flat out said that it appears that it is but a matter of time before the U.S. loses its AAA credit rating….and, so goes the dollar.

When pools of capital see Obama raising taxes, closing loopholes, vilifying corporate CEOs and taking over domestic businesses, what do you expect? Do you think capital will gladly remain poised for a few rounds in the Octagon with the Obaminator and the far-left machines? If your answer is yes, I have some beachfront property in Wyoming I can sell you.

In short, commodities are going up, not necessarily because of huge demand, but because of where the dollar is headed.

So where is capital fleeing to?…..commodities and English-speaking commodity producing countries.

If you’re wise, you’re already in or considering such things as GLD, USO, DBA, DBC, FXA, FXC, EWA, EWC. Even EWZ is worth considering due to its younger, energetic workforce and its orientation towards open foreign trade.

Many of you are short term traders. You play hot stories, hot stocks, Chinese solar burritos and penny-wise, pound foolish stocks. You know the risks of the game.

However, for the longer term big picture, I see us living amongst zombie banks in a zombie economy, and I will use whatever firepower is necessary to keep “The Living Dead” away from me.

Turn that thought into practice.

(Disclosure: no left-wing radical socialists or jump-shooting politicians were physically harmed in any way by this post, only possibly offended.)

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Alpha Buys: TWM

Since many small, cheap stocks bearing “fleas of death” were giving me a migraine today, I ended up bringing in more damage control via TWM @ $48.87.  

Despite the face melting carnage in NLS and PWER, I was down only about 1% today. However, even though my foray into these “El Cheapos” yesterday (see The PPT post) may have been ill-timed, it was a calculated risk that I was willing to take, due to a healthy dosage of TWM already on the books. Accordingly, rather than admit defeat in PWER, which has handed me a 20% loss since yesterday, I’ve decided to keep the dirty little welfare dependant miscreant. Compassion can be a weakness.

Herein, today’s action was to move to maintain a bearish posture.

Basically, my Optimal Alpha portfolio is 1% cash, 63% long equity and effectively 72% short equity (via TWM), for a net short equity position of 9%. Remember, cash pays you nothing. It’s not worth it. It’s like asking the ugliest girl at the prom to dance with you. 

Still maintaining returns of 48% ytd, I might add. But, regrettably, FLY is losing me money (no offense intended to Mr. Horatio Clawhammer).

Rather than post the results in The PPT, here’s the rest of this free public service announcement:

Ticker Shares Cost Basis/Sh Cost LAST Total Position (FMV) % ▲ Gain (Loss) %CHG TODAY
SUMT 1,000 $3.82 $3,820 $4.87 $4,870 27.49 (0.20)
ARO 150 $25.58 $3,837 $32.55 $4,883 27.25 (0.25)
VPHM 375 $4.98 $1,868 $6.19 $2,321 24.30 (0.96)
HTGC 1,200 $6.46 $7,752 $7.94 $9,528 22.91 0.00
EBAY 150 $14.02 $2,103 $17.15 $2,573 22.33 (3.16)
UEC 2,500 $1.42 $3,558 $1.66 $4,150 16.65 (3.49)
CLS 650 $5.56 $3,614 $6.29 $4,089 13.13 (3.23)
DM 600 $11.87 $7,122 $13.27 $7,962 11.79 2.71
MOT 650 $5.55 $3,608 $5.89 $3,829 6.13 (3.28)
TWM 1,100 $48.03 $52,832 $49.04 $53,944 2.10 2.49
CAF 125 $33.55 $4,194 $33.78 $4,223 0.69 (5.80)
OPWV 3,000 $1.70 $5,100 $1.70 $5,100 0.00 (4.49)
NLS 3,000 $1.69 $5,070 $1.68 $5,040 (0.59) (11.58)
WIND 650 $7.56 $4,914 $7.47 $4,856 (1.19) (0.40)
TLM 325 $15.59 $5,067 $15.07 $4,898 (3.34) (1.63)
CENT 450 $11.12 $5,004 $10.51 $4,730 (5.49) (1.31)
FLY 650 $7.50 $4,875 $7.02 $4,563 (6.40) (5.77)
KNOL 200 $8.33 $1,666 $7.67 $1,534 (7.92) (4.72)
MOS 100 $58.55 $5,855 $53.35 $5,335 (8.88) (6.11)
BMA 300 $16.99 $5,097 $15.42 $4,626 (9.24) 0.06
PWER 3,400 $1.48 $5,032 $1.18 $4,012 (20.27) (14.49)
Cash     $1,614   $1,614    
  TOTALS   $143,600   $148,677 $5,077  
Current Gain (Loss) YTD:           $48,677  


Enjoy the remainder of the day, bulltards.

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