Nothing much to report about this tape. This is a classic reaction to a low-volume rally. The “Turkey Rally” from last week lasted all the way until Friday! A really impressive move.
… but really? were you really expecting a Turkey to roll up a boulder that far?!
Now, we are simply unwinding that low volume staircase. I am taking this opportunity to cover many shorts I entered last week, including FSLR, SPWRA and MELI, and debating what I should do about FXP… yeah, I’ll sell that knife. (note, I just covered all FSLR which accounted for nearly 1/2 of my profits on this sell-off. Therefore, I am holding majority of the SPWRA short for a possible next leg down in the market. There are many ways you can scale in and out of trades. For the moment, I prefer to scale out of sectors instead of stocks.).
If you are bullish, you want this kind of selloff. You NEVER EVER want a rally to start off with very low volume. You need to flush out those foolish bulls (“Sisyphean Bulls”) and get aggressive long after a follow-through day (= volume) instead. But since the Turkey Rally was quite drawn out, I really cannot be that bullish for the rest of December. Anyway, I’ll keep an eye on the Vix to get a better read on things in the coming weeks.
Dow is currently down -360. Vix at +13.6% and will move up.
Update: The Dow is now down -450 points … I would avoid entering any day-trade shorts here, as the market is waiting for the close for more volume.
I’m getting a lot of requests for Meredith’s Report on the Banks/Financials, in particular Citigroup. If anyone is interested, I have it in .pdf form (I got it from my twitBuddy Raznick). It is a must read for investors in the sector, and covers the effects of TARP Capital in the light of C’s bailout. There’s also an analysis of BAC, C, JPM, WFC, GS, and MS credit card securitizations.
This report is 37 pages, and i’m still on page 12 or something, but i hope to get an opinion up and a strategy up by the end of the year.
If you want a copy, email me. ..
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Exited a lot of shorts into this sell-off. Buying some commodities.
GIO
GREAT calls with your spwra,irbt,ostk,and cpf.
FIRE!!!!!
In resisting the urge to make a trade this morning, I had to do something with these itchy fingers so I’m making an entirely unnecessary post.
I bought up quite a bit of diETF’s on Wednesday and Friday (on margin), so I will probably cut back on those also. However, my gameplan is for further declines in the near future, so I hope to hang on to most of my positions. As always, I’ll let the market dictate.
Vix at mid-50s was a SUPERB short entry point. Will blog about this later, but I posted the strategy on Friday. So far, a “complacent” Vix @ 56 led to a -400 point selloff..
http://ibankcoin.com/gioblog/?p=2397
.. waiting for the close to get a better feel on this market.
Aloha Gio,
Wondering what your thoughts are on the year end coming… do you think the market will tank as a result of hedge fund managers selling stock off to claim capital losses?
Regards,
Kevin
Hi Kevin… that’s an interesting thought. I haven’t checked the total distribution days in November yet, but it looked like we already had a lot of institutional selling early November.
I am waiting for the second week of December to find direction. I expect volume to pick up in anticipation of quadruple witching day.
As for today’s tape, watch the close. It needs to rally for the bulls to have something to hold on to. Right now, we are simply unwinding the nonsense Sisyphean Rally we had in the final week of November. If we didn’t have that false rally, then I would have been more bullish heading into the turn of the new year.
-gio-
Gio,
One more quick question…what is meant by the quadruple witching day?
thanks in advance,
Kevin
Here’s a link to that definition. http://www.investopedia.com/terms/q/quadruplewitching.asp
I’m just betting December’s quad-witch day will be a good spot to look for action.