A Market in Need of Prozac

I’ve been trading since 98, which is not nearly as long as some of the senior citizens that participate on this great space of financial content. This trading experience of mine has allowed me to participate in an entire catalogue of market conditions. I can recall with great detail, the positive environments of the late 90’s, the great run from 03-07, and of course, the ugly times too. However, the one thing that has stood out to me, as a generation of market participants have gotten starched over the last 15 years, is that sentiment towards the financial markets has never been worse…from my experience.

You people are all miserable, and rightfully so. You exploded onto the scene in 99, only to lose your shirt and your savings. When you built it back up, you returned from a motivational seminar with a new wad of cash fresh off a second mortgage, only to watch it burn along with your job in 2008. Most of your friends, family and co-workers have fled the scene long ago, realizing the playing field is not level. They no longer believe in the system, and long term optimism has completely diminished over the last 5 years.

Now that everyone has turned towards the idea that the long term outcome of the financial system is doomed, it’s a rigged game, house of cards, etc… The new class of “short and hold” strategists can only pick fights out of frustration. They’ve been saying for years how screwed we all are. They hate stocks and love Gold, especially at their basis of $1700 per ounce. But the rest of us just follow the paper money, until she runs dry.

The last multi-year run like this we had was fun. The mood was positive, people were supportive, and eager to learn. This time around, everyone is a disgruntled burnout – angry when they lose money, and even angrier when they make it. It feels like the higher we go, the more tension it creates.

I can say all this from experience, not just from observation. In my own personal life, my attitude is shit, people generally annoy me now, and personal relationships are suffering as a result of the negativity I have to immerse myself in everyday. Funny that this is the case even though I have made a ton of money over the years. At the end of the day, it feels like less of an accomplishment now that nobody cares.

My venture here is to provide actionable trading ideas and commentary. In doing so, I am going to work hard to keep it as positive of an environment as I can. My track record suggests I swing better when I am having fun and am in a better mood. You should do the same.

OA

I was recently asked how I felt about the miners in terms of market sentiment. I hate the idea of the metals and miners here, because there are still so many people watching and asking about buying opportunities.

I have a monthly chart of Gold here. Many of you that followed me back in my blogging days know that we were publicly pounding the table on buying Gold back in early 06. At that time, NOBODY was talking Gold, which is exactly one of the reasons it was such an incredible buying opportunity. From that point on, you can see an obvious stage of returning confidence, and an enthusiastic high set by Mr. T and his spokesman role at Gold Promise.

In contrast, take a look at the sentiment chart below…

It is my humble opinion that Gold is still in disbelief mode. There are a lot of folks trapped at some horrendous prices above. I don’t think panic really sets in until the metal passes $1000, until I stop seeing Gold Rush re-runs on the Discovery channel,  or until your local pawn shop no longer wants to buy your gold.

While I scoffed in the face of the market on Monday, watching a red tape and swinging a book of exploding longs, I am now perplexed to have started to draw down a little, with a handful of option plays blowing up on me.

I put together a few ideas on video this afternoon that I will upload for viewing later today. The analysis discussed will provide a decent road map heading out til September.

In the meantime, I am watching the Russell very closely, as this chart structure has very unique implications when compared against the Dow, S&P, or Nasdaq.

I have been lucky enough to have been caught holding $LITB, $PLUG, $UNXL today and still have a few decent winners over the last few weeks to navigate out of. I’d prefer to milk them for more, to be honest, but I want to lock in many of them this month so I can point my efforts in a new and fresh perspective coming out of the summer.

I have a few positions on that will require strength post earnings to meet price targets: GRPN, GLUU, FSLR and MCP. These are stocks where I feel the risk is to the upside as opposed to the downside. In other words, greater than 5-to-1 Risk/Reward plays, based on structure, short interest, and trading activity this year. It is important to note, I am not betting the world here. Trading size is the same as always to avoid massive drawdowns.

The remainder of my trades, stocks like VMW, BKS, DDD, and RKUS are just waiting for an alignment of conditions to produce profits. The name of the game is to patiently wait for patterns to unfold, and manage risk against a flawed plan.

In the meantime, I bought more AAPL today and am strongly considering a long in $P.

OA

Last month, the most common ticker symbol to show up in the blog comments here was UNXL. I couldn’t understand why there was such a strong desire amongst the natives that they had to own shares of this stock that had just been murdered the month before. However, rather than care about what others wanted to buy, I watched the stock, thinking only that it would do something remarkable to explain why everyone loved it so much. I watched it at $17, $16, $15…etc. In the end, I was sad to see the stock did nothing but satisfy your desire to own it by slowly bleeding to death daily on down to $12 per share.

My timing, interest, and analysis on this trade centered around one isolated instrument: You.

The moment I was no longer asked about the stock was reason enough to buy it. So now that the stock has increased 25% since the entry, I want to thank you for such an awesome recommendation.

I would ask your opinion on whether or not to sell, only so I can do the opposite.

Let’s do this again soon.

OA

Thus far on the day, I booked gains in CLF and LITB, while booking losses in SHLD and CHCI.

No other moves yet, but will post them in the chat here today.

Stay frosty.

OA