If you have the consolidation blues, longfully awaiting your market to return to the good old swing trading,gunslinging days of old, then this post is for you. It’s difficult to be sidelined and not get into anything, but because of the lack of market direction in the past week, it’s all a game of anticipatory trades and lustful desires for the market to trade with the side you have chosen for your portfolio. My suggestion? Stay cash until this consolidation storm blows over.
If you read my post about the “Housing Bottom” last night, then you’ll enjoy Diana Olick’s stupid article on how the housing bottom is in sight:
http://www.cnbc.com/id/30071303
Quit calling bottoms on specific markets people, especially if the data is updated in the time frame that housing is updated in (monthly). Sorry Diana, it seems as though your thoughts on the housing bottom just don’t fit the scenario of how the Obama Plan will affect this market. How do you know, my fair lady, that his plan won’t drop the market lower in the sense of his ill-will incentives rather than a doer mentality and actually solving the problem at hand? Foreclosures are continuing, whether it be at a slower rate than the worst of times or not. Refinancing is up, but who cares if refinancing is up? If the people that refinance default (or worse yet, re-default) on their home loans and mortgage payments, how in the world can you say the housing market has hit a point of inflection that will eventually cause this particular market to round out? Cut me a break.
In other news, the EIA released the Crude Inventory Reports for this past week, and although the number was under the previous week’s barrel inventory of +2.8 million barrels, the inventory still came in at +1.6 million barrels. A surplus shows lack in demand, and yet the crude oil prices increased by $2.00 when the inventory came out. Check out this chart, and you will understand how asinine this crude oil movement really was:
.gif)
Crude Oil Inventories for the Week of 4-3-09 (Courtesy of Econoday)
In my honest opinion, that is nothing to cheer about. The price action in ERX is a supporter of the information, closing +$0.75 with lighter than normal volume. The ERX historical price action, however, shows a possible pop in the next couple of days:
.jpg)
ERX 30 Day, 60 Minute
Another looker for tomorrow if the day goes well is ENER:
.jpg)
ENER 20 Day, 30 Minute
My strategy for tomorrow? Stay cash throughout the day and watch for SRS and TNA entry points to hold over the long weekend. Risky, yes, but this is a good hedge – Trading with the Small Caps (leaders of the market rally) and shorting Real Estate via SRS. Two industries to watch tomorrow:
I am also considering a long position in ERX if the overall price of oil is down over 4% tomorrow. This drop is a good level to dip buy ERX, as seen from historical Crude Oil prices and bounces in ERX based upon the performance of Crude Oil.
All in all, cash is the safest thing to be in during market consolidations. Don’t forget, the VIX hit 38 support today, which the VIX has been known to bounce off of before. Keep your eyes peeled to new found volatility tomorrow, possibly setting the tone for Earnings Reports next week. Good luck tomorrow!
ZMoose
Anecdotal but…
Live in Florida and I can’t say I’ve ever known anybody who had a house foreclosed until the past few weeks. I now have no less than 6 friends who are “proud” of saying fuck it, I’m walking.
This NEVER used to be something you would talk about but now it’s almost cool to stick it to the banks.
I was in and out of a lot of RE (investment properties) between 1998 and 2005/6.
Into the crash I was essentially flat with the exception of our home. Bought in 2001. Almost tripled in value by 2006. We want to move to a bigger house so we thought WTF – we’ll try to sell.
Over the last 6 mos, we’ve had several offers – ALL were less than half of what it would cost to build the same house new today (not retail cost – BUILDER cost).
Now I know this can’t be sustained forever – at some point it will have to catch up to balance one way or the other.
As long as middle and upper-middle class people are willing to talk freely about their foreclosure, short sale, bankruptcy, etc. it won’t get better.
Foreclosure and bankruptcy are rapidly losing their stigma and that is simply not good for the market.
@lazy man: You have hit the nail on the head with your closing quote:
“As long as middle and upper-middle class people are willing to talk freely about their foreclosure, short sale, bankruptcy, etc. it won’t get better.”
You, me, and mustard seeds are going to Capital Hill together to bitch. Pick a day and a time.
Hmmm.
Let me remind you zeemoose12, you are ermm 19?
So, exactly how much can you know about “gunslinging days of old”?
Another perspective – if this is consolidation – rather than sitting in cash – is to position yourself (small/hedged) for the next move – which will be big.
Again, “In my honest opinion, that is nothing to cheer about” your alleged age (19?) sort of invalidates this point because although you can see and interpret charts, you simply don’t have the longevity to comprehend them in their entirety.
Also, you “dis” people who have greater experience (by far) than you and are able to consider events in a different context. Learn boy, learn!
How can you say “consolidation is boring”? It allows easy up/down trades with less risk than normal – assuming you know what you are doing.
Anyway. TTFN.
@Lady Gingerbeer: I am 18.
The gunslinging days of old I mention in there were December 2008 and January 2009 when swing trades could be initiated with better acuity than today, allowing you to make money somewhat securely with an overnight hold.
This is consolidation if you look at the charts because we’ve been playing within a range of 800 to 850 for the past week and a half.
I did position myself hedged today as I was going to do (if you read my last post) 25% short, 20% long, and 55% cash.
I don’t know what my age has anything to do with my “nothing to cheer about” because those statistics aren’t that great for Crude Oil.
I am dissing Diana Olick because she’s been wrong since December about the housing market, calling a bottom back in the middle of December and then again at the beginning of February. I like other opinions and I am a very open minded person, but I’m not a fan of people who are bottom callers.
Consolidation (or at least this one) is boring because I don’t have the time to get in and out because I am a student in high school who only has the time to swing trade.
I don’t know what TTFN means.
And ma’am: Don’t judge a book by its cover. Even though I began trading OFFICIALLY back in November ’08, I watched the entire Bear Stearns debacle occur right under everyone’s noses in January of that year.
Thank you for your comments though. I will take them to heart.
Don’t let some old hag rag on you Z man. Age doesn’t measure intelligence. Good analysis, keep it up.
Indeud. Well said Z. Age is mostly a random variate in this game of cards, as demonstrated best by the actions of some iBC members. I might also introduce exhibit A; Larry Kudlow.
At the tender age of 18 you clearly understand more than prob 96% of “adults”.
Easy to understand why Chart left you his tab.
When I was 20, I was running retail store (I started with them at 17 and worked my ass off proving myself). It was a large 700+ store chain – got the store @ $23M/year run rate and got it up to $41M/year in about 4 years – consistently ranked #3-#7 in the company in gross profit. We were top 5% in customer service rankings, top 5% in turnover. Staff loved working there and customers loved to shop there.
The whole fucking time none of the other bitter old-ass managers took me seriously even though I was putting their balls in a juicer on a daily basis.
Moral of the story as it applies to you, age is a bullshit reason to doubt someone and you have a bright future ahead of you.
This lady kinda reminds me of when old people look at my 3 year old boy with that “I’d steal your youth if I could” jealous gaze. Fuckin creapy.
@lazy man, manuelstop, and Really?: You guys rock. I’m glad to have support behind me, even if I’m younger than almost all of the bloggers on here. People like you guys are the things that make me want to post more. I’m glad you have enjoyed my technical analysis this past week, and I will be trying out for the tabbed spot that Fly is throwing around.
Enjoy your 3-Day guys, and thanks again!
PS: lazy man, that’s fucking boss about the retail store.