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Dr. Fly

18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.

Morning Notes

Despite Europe and Asia’s debacle I believe we could be in a bottoming process.

With yesterday’s volatility we are witnessing the rearrangement of positions by momo’ traders and hedge funds.

As you may be aware Bernanke has been busy working the media with a speech at the FDIC Board Conference. In short he will extend the discount window to investment banks possibly into 2009. The last statement of this nature gave hope to the markets and an opportunity to rally.

Also the “beard” said that Fannie and Fredddie will have to raise more capital. Freddie is expected to raise $5 billion+ before the end of the summer. These capital raises along with the avoidance of some accounting rules should help confidence within the market place.

As of right now the markets in Europe are starting to rally back, in part due to the “beard’s” speech. I would venture that we may see some weakness today, but similar action to yesterday with a follow though to the upside.

With a pullback I’m looking to buy some ROM, and possibly a high flyer or two like BIDU, RIMM, or GOOG. For a safer momo’ play one could try the QQQQ, DIA, or SPY. If your adventurous then you could try the ETFs that give you double upside like [[DDM]], [[QLD]], & [[SSO]].

GLT

by GW

[youtube:http://www.youtube.com/watch?v=ygOaNo3M_Hw&feature=related 450 300]

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Reversal of a Reversal….Begining Another Reversal near the Close

The market reversed itself twice today. Now a new revesal has begun. At a key number too.

With a close above 1251 S&P we now look to break 1260, then 1271, and then 1283. Mind you with market Sybil here we could test the 1251 area and the 1235-45 area and then the 1216 -24 support level.

It would seem were finding some footing here in the 1250 range.

Looking at the [[ROM]] it was strong all day despite the volatility.

I have said this before [[DUG]] is an evil whore. She will screw you every time. I’m still long TSO for my oil correction phase. Let us pray oil gives us some  breathing room.

I still have the stomach, for now, to hold my UNH, SY, GLW, SNHY, & TSO.

 Days like today are great examples of making decisions in the first half hour and last half hour of trading.

This market action suggests that trading programs are both short and long the same stocks at the same time.

This one goes out to the banks: Have a great day.

[youtube:http://www.youtube.com/watch?v=KdmLmIArqWM 450 300]

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“The Gods Must be Crazy”

Oil is selling off hard here, but the market too is having a 200+ point reversal. With that in mind [[DUG]] is looking good for a trade.

We have now broken 1249-1251 S&P. With a close below this level were are really looking at 1216-1224 as major support.

If your long and wrong it is time to stop out and let the dust settle.

With that said, getting short here is probably the best option. I have not been listening to the news all day, but this type of market activity suggests that the shit is going to hit the fan. A big shoe is going to drop out of the sky and people will be saying ” The Gods Must be Crazy! ”

While were on the subject of crazy who’s idea was this anyway?

http://www.guardian.co.uk/environment/2008/jul/03/biofuels.renewableenergy

GLT

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Bear Market Rallies

Everyone knows were in bear market territory. Do not let these rallies fool you into thinking that things are getting better.

http://business.timesonline.co.uk/tol/business/money/property_and_mortgages/article4261369.ece

Our last rally off the March bottom lasted quite a while. The rally that has begun today may not last so long this time around. If oil has follow through on today’s correction then the market will respond in kind by rallying. Make no mistake the damage has largely been done in regards to high oil prices.

Regarding oil in general: we are seeing the beginning of a meaningful correction…I hope! Oil selling off should take this market higher so we can absorb more bad news to come over the next month as earnings season kicks off shortly.

An interesting comment today was that foreign companies have been worrying about a rise in labor costs and of course input costs. They are not so worried about food inflation, but I would venture to gather that inflation will not subside as quickly as Ben Bernanke would suggest. Remember when oil was $90 a barrel the “beard” told congress that he expected it to subside.

Get ready for bank failures and I seem to remember my cousin (a fixed income portfolio manager) saying do not be surprised of pundits talking about depression.

Check this article out:

http://online.wsj.com/article/SB121494953423420859.html

 Given oversold conditions we should give this move up some room, but this will be an opportunity to get lost money back if your long and give you a shot to short your favorite names. Despite the market upside this morning [[SKF]] and [[SRS]] seem to be going up as well. Definitely a sign of things to come!

At this point trading the upside should be limited to sector trades or the DIA, SPY, and or QQQQ’s and not individual names.

By using this approach your giving yourself opportunity to get out quickly without getting smashed if the market turns suddenly. The sector ETF will give you more diversity and hopefully not make you subject to mass liquidation of an individual name.

Considering [[COF]] today; I’m going to open a short on a close below $37.40

Update1:15 pm~ could not wait till the close for this dog [[COF]].

GLT

 

 

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Are you committed?

 Click chart 2x for a better view.

Pay close  attention to the chart above. Notice how we are retracing the footsteps of the ’29 debacle. Scary if you ask me.

Back from Boston. I got to thinking how do I lighten up on my concerns? Perhaps distraction.

So I go to a poster gallery to see some fine art from the Hippie Love Movement.

Enjoy a little seafood at lunch and then catch a review of Cole Porter.

The whole time I’m thinking what’s the market going to do Monday?

Why am I thinking this? Well partly ‘cause I’m long and wrong. I’ve got a 35-40% cash position, a small short position, and some how I keep thinking is this going to be the big one?

You know where Fly kicks old man market down the stairs.

Is the RBS guy or the multiple reports of systemic failure going to pass right here and now?

At any rate, I’m going to set my limits and say if the S&P breaks this 1239-1246 level I’m going to have to consider stopping out of long positions. To protect myself I’m going to try and sell some covered calls. I’m betting the premiums are low right now. If some how the S&P holds this mark I will also use the dollar index as a key to reducing exposure.

We really do not want to see the dollar break 72.03 on its index. If it does the final warning will be a break of 70.96. The difference between these two numbers is quite a bit so of course this is a red flag outstanding for the next couple of weeks of trade. Mind you Peter Schiff (who has been right all along) believes the dollar could go to 50 on its index.

I believe A’dawgg and some others went short on COF. A break of $37.41 for a closing price sets up a nice short down to $25. Any short sells can be made in the $41 – $45 range. I like this idea considering this:

 http://www.informationclearinghouse.info/article20196.htm

With oil down and the futures pointing higher we could see a snap back rally, but this is dangerous territory for the indices and concern for EXTREME CAUTION! Let us face the facts with GE and other multinationals selling off lately the market is telling us this is the time to reduce exposure.

GLT

by GW

[youtube:http://www.youtube.com/watch?v=A27FF2T2z2k 450 300]

 

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“Finally made it home, but I don’t got the key to get in.”

This is not quite home, but perhaps this may be a leg up to the next level of payed tab blogger. I’m not sure myself yet, so we’ll see how the next month goes as far as traffic is concerned.

I’m hoping mrkcbill has not gotten carried away here and forgotten to turn over the key to the KINGDOM!

I do understand your longing to be with nymphs and to dine from the finest silver the Fly has out fitted the castle with. No more rib eye din din, crystal, and 75 year old Hennessy for you…you go now! I had to storm the castle and evict mrkcbill; sorry to startle you out of your nymph dreams.

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“Is there Gold in dem hills son?”

Just as a side bar I found about a lb. of Chanterelles yesterday. I’m one to appreciate mushroom picking through out the spring and summer. Fortunately I was taught by a certified master chef of what edibles can be found in my neck of the woods.

WARNING: Do not attempt to pick mushrooms if you never have before. Worse than loosing coin you could die.

I might say the same about stocks but most sentiments I look at are suggesting a short term bounce. My gut tells me we will have a series of false rallies followed by one last kill down to 1216-1227 area. Of course we need to break the 1246 -1260 area first.

This requires a catalyst…What it may be…well I could see a potential JPM style bail out in LEH. Being that LEH is a part of the Federal Reserve inner circle perhaps we see a merger of equals or another slick BSC on a silver platter to sure up its capital base.

Perhaps we have our first regional get taken back to the wood shed. Or perhaps a foreign bank goes down like a UBS or RBS.

Maybe this recent downside action was nothing more than portfolios being arranged for the new quarter…you know based on earnings outlook and the whole “how do I avoid inflation in the market blues.”

I tried to get a chart up, but had some problems with the media center. Someone must be on a cigarette break or something. We still have minor support at 1272 S&P, stronger support @ 1246-1260, and major support @ 1216 – 1224. If we see a break of the 1216 area I guess RBS was correct and we see the 1050 -1100 area. Again with out a true alarming catalyst I do not see that happening at the moment.

For today’ action I do not expect much since everyone will be waiting for tomorrow’s unemployment report. Statistically speaking the unemployment rate has not been that of what we normally find during recession. This still spells some hope for the bulls, but let’s face it here we have had some of the worst performance in the history of the stock market.

This morning ADP report was larger than expected and continues to show gradual weakness going forward.

As far as stocks are concerned I would remain neutral for now. I have been buying SNHY recently with prints in the high $31’s -$33.50.  I’m still waiting for EME to come in a bit. That fucker will not give me prints in the $25 range which leads me to believe that there is good strength in this company.

Yesterday I added a small piece to my UNH and GLW positions, but considering the markets I bought lightly.

To top everything off keep your eye on oil this morning, it would appear as if the speculators have been loading shorts up via USO and other products. I still feel that the upside in oil is tired here and a small correction is needed before we resume the longer trend upwards. I would not be surprised to see oil tick down to $125 -$130 p/b. This might open a buy opportunity in USO. I would look to buy initially @ $107 with a tight stop. Since I feel this way if you picked up HK, PVA, or CHK for the recent shale plays I mentioned, this would be a good time to take some coin off the table as they have had a nice move.

I’m not a day trader, but today I’m picking [[ENER]] and [[TSL]] as day trades.

GLT

by GW

~10:30 am update: Okay I’m not a day trader. Doubt you bought into ENER & TSL but a stop here would be appropriate.

[youtube:http://www.youtube.com/watch?v=re2Fl8d22lI 450 300]

 

 

 

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