I gave a nice long speech in After Hours with Option Addict today. I shed a few tears, rallied the troops, tried to provide a little comfort and laid out some important thoughts about where we are, and where we are going.
Then I realized my fucking webinar didn’t record, and I left a good percentage of folks without a session to listen in to. So for that, I will recap.
We started the week with this chart and laid out the following market range. This is important, because of the trend implications…obviously:
After 07, I didn’t start investing again til 2009, like most others. I added investments in fall 2010, in late 2011, a select few in 2012, a few more in 2014, and a few here in the fall. From an investment standpoint, you don’t get fearful of these volatile moves, you appreciate them when thinking of the next 3-5 years.
I mention that because when I started investing, the idea was to play the trend until it fails. This is why I yelled from the top of my lungs to buy the market a few months back….but as we approach next week, price action will test the overall trend. Maybe we repeat 2008, like many are predicting…
Maybe it fails. Maybe it holds. But until you are certain, you should try not to let short term activity dictate your investment plans that are measured in years.
Traders are so inundated with information now days. Most of it pertaining to short term this, and short term that. Trading psychology is completely skewed to short term, and this psychology comes to a head during market volatility. People are quick to move on these knee-jerk emotions. Not I. I’ve learned that if I do this, it has a tendency to destroy wealth rather than create it. Times like these are when wealth is transferred from the impatient, to the patient.
As we approach next week, the trend holds, or it fails. My investment plan has always been to trim/cut investments when the trend fails. Heading into next week, if the trend fails, I will make some adjustments to my investment portfolio. If you’d like details, I will list them in the chat below.
We discussed trading in bear markets. The good news is that if the trend fails, you aren’t too late. There will be many moves to play for in the months to come. It’s crazy stuff, but like we laid out in August,
We also discussed the Global Inflection points I blogged about recently. We looked at the charts, all of which have traded into August-September balance…not beneath them.
If you are in the mood, travel back to late August, just to recap the commentary from the weeks after Monday August 24th. Recall all the bullshit in your twitter streams, news headlines and market commentary you were told then, and watch how the market behaved.
That same approach will be used again, starting on Monday.
Rest up this weekend. I will have a lot to talk about next week.
OA
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Trading and investing… not apples to apples.
Niner.
Didn’t mean to sound like a dick… it was just first thought that came to mind 🙂 have a great weekend. Rest up!
Sure. Thanks for the insight.
if you have to start a position for next 3 -5 year horizon what would be your top investment pick? $UA?
would you do 1/3rd here or 1/2 here?
thank you for sharing your analysis and thoughts!
can you please share few of your investment ideas for next 3-5 year horizon.
This is a sub service, not a freebie StockTwit blog.
Long term, buy VTI on pull backs.
wow. those are some interesting charts. looks like will need a bounce early next week to avoid trend break. Everyone is hollering at a capitulation crash on Monday to be bought. Makes me think we will get a big gap up. Just thinking out loud about the pain trade.
Never buy the first rally. Buy a failed gap up.
Today was the failed gap up, right?
That should make Monday fun
thanks for the level headed commentary Jeff!
Dang, really wish I had been in for this call. I think the Chinese deval threat is over for a while as it is counterproductive to propping up their market. I bought a little TNA and GASL today and am waiting for a rally to readjust some holdings.
Every 3 1/2 years HES dips down to ≈40 so it is in the buy zone price wise and time wise.
HES has a lot of cash in the bank having sold off their mid-stream business.
There could be another -%5 downside but it’s stretched really tight right now.
This is not a reprint from SeekingAlpha or StockTwits as I avoid following complete strangers.
Did you wait for breaks in the downward trend in 2009 to start buying?
Just finished reviewing my charts. I am happy with the 1/8 positions I took for the long term portfolio. Placed second 1/8 buys at or around the 200 period MA on the weekly chart for securities in an uptrend over the last two years.
Currently neutral on oil, but ready to feed the ducks more SCO.
Long bond is still in a slight uptrend over two years thus I am still aggressively hedging my TBT with call sales until I see a change.
I see Natgas exhausting itself here between /NG 2.49 and 2.75. I will buy a dip between 2.10 and 2.25 for an eventual move to 3.00. KMI was my best performing stock on Friday!
I am of the belief that the options market makers learned their lesson on 8/24 and thus we had an 8/24 moment spread over three days with perhaps a spillover into Monday.
Over 300 million shares outstanding for the open on Monday in USO. I wonder what kind of bounce they are all looking for?!
Just looking for oil to not go to zero
Canceled my limit buy order for SPY and looking to short next week. I reviewed many charts and have come to the conclusion that the bear market has started. Long oil, cash and short US stocks is the theme for 2016.
OA or anyone, XON chart? Possible aversion here?
Feels like we’ve been picking XON for months. It’s done nothing but crap out
Boom gap up.
Bond and Oil Traders:
TLT in pre market could not break out and is back in it’s channel. A break above 123.50 would suggest a strong appetite for risk off. Personally, I think the Chinese are creating a bit of a maelstrom to unload treasuries. However, I do believe risk off comes back Tuesday morning when the Japanese markets reopen
Oil: I have an offer of SCO 174.45. If hit, I would be long oil for the first time in a while. That translates into about 31.75 per barrell for the Feb contract whose options trade until 2:30pm on Thursday, January 14th. I expect oil to follow a similar pattern to last year as the oil producers attempt to keep the price elevated going into the first of each month to keep the credit flowing. Can the Saudis win this? Sure, but it’ll probably last into 2017.
Exit weekend to UA being downgraded with price target slashed by 40%?!?! Definitely wasnt in my weekend plans. Hope everyone else had a nice one!
I think I’ve reached capitulation on UWTI.
I’m on the razors edge. Stop getting close. I think capitulation is a common word this morning. This is probably the $FCX capitulation move. Looking to add another piece this week.
More I think about it, more I realize it’s not a smart area to dabble – Saudi pumping, Saudi oil going public, fed messing with USD, China slowdown, etc. What positive scenario am I actually waiting to see that will allow this to pan out? At this point, none. Can’t even think of one other than Iran/Saudi conflict escalation that affects the Strait.
I feel like that’s the main reason to hold. Everything you laid out is reflected in price and emotion. Feels like we’re being forced to sell here. I have a little more room from my entry so I am going to let it play out. But it doesn’t feel very good.
Oh, and Iran oil coming online within the next month:
“President Hassan Rouhani is looking to have the deal implemented before his country’s parliamentary elections next month. As the reasoning goes, getting the U.S. and other members of the P5+1 nations that negotiated the accord to certify its implementation would provide sanctions relief — including the unfettered resumption of Iran’s oil exports — which Rouhani would like to provide as an arrow in his political allies’ quiver during the election campaign.
The Obama administration also wants Rouhani and other so-called Iranian moderates to have this tool, particularly since the Feb. 26 polling will include the appointment of a new Council of Experts that carries an eight-year term and will almost assuredly choose Iran’s next supreme leader. This is why the Obama administration apparently has chosen not to respond in a timely manner to Iran’s recent military provocations — including, a ballistic missile test and a live-fire exercise near a U.S. Navy aircraft carrier in the Strait of Hormuz — ascribing such moves as attempts by Iranian hardliners to scuttle — or at least delay until after the elections — the nuclear agreement’s implementation and connected sanctions relief.”
http://www.kcentv.com/story/30893140/saudi-arabia-iran-conflict-will-crush-oil-prices-further
I am now long oil. Here’s my strategy. I have moved to a “buy above” strategy for SCO. I will buy above 172.50.
I fed the SCO ducks at 170.28.
If this is a fake out and oil shits the bed today, it will be an incredible fake out. What prompted this was the move in my portfolio at 10:30 (.25% increase) while oil did nothing.
I also started a hedge again with TZA against my TNA position.
Great fake out by the algos. I was wrong. Bot back 1/2 the SCO that I sold.
Wow, I gotta type that again. What an outstanding fakeout by the Algos!
Let’s see what 11:30 looks like
I did it, exited all UWTI.
Have a sell order for SCO in at 177.50. If hit, I will buy above 178.00
OA, as mentioned in your post, could you shed a little light on what changes you would be making to your investment portfolio if the trend changes? Or when you say chat, do you mean in AHWOA? Thanks in advance.
I’d book gains in a chunk of $FSLR to pay down my last two additions ($UA $AMBA), rather than add to them. Probably book gains in $MYGN and $BYD, scale back to half size on others like $LULU, $ZG, and $SPLK which combined are relatively flat.
Thanks for the insight OA. This is very helpful and beneficial in terms of portfolio management strategy. One quick follow up.. Outside of FSLR, when you say book gains, are you referring to exiting the position completely, or trimming down to half a position or something similar? Thanks again in advance, much appreciated.
Nevermind, after reading the comment in full context, I’m assuming MYGN and BYD would be positions you’d exit completely.
Sell order hit on SCO at 177.50. Bot add’l TZA hedge. Will see how SCO reacts to 178.00
BTW that makes me long oil again …
Bot back SCO again…..
…. twice as much as I sold at 178.50. Mindful of when I have to sell higher or lower. The move so far in oil today is over 6% from the intraday high.
I am sensing we touch under 30 today if OVX stays bid this high or higher
We have hit the same percentage move as we did on 9/2 when ovx hit 74. Thus I am keeping a short leash on SCO.
All the ingredients are present for a bounce – panic, despair and most importantly capitulation. Rally on!
Sold 1/2 of what I had bot SCO 177.02. Took very small loss on that one.
I am slightly long now.
Long oil that is …..