Thursday, April 30, 2009

Beat the Dull Drums

I don't have much to say yet still. We're weakening now, perhaps reversing down. But multiple heads on CNBC are presently throbbing up and down over the idea we are going to pullback now! Everyone with a blog is pointing at the same. Some calling for a healthy pullback, others calling for doom. Either way it's a crowded space, though action is not yet enticingly terrible.

At this writing the NDX and Russell-2k are notably out-performing more-lagging indices like the Dow and SPX; breadth is still reasonably firm; and several leadership industry groups are higher by 3% and more still on the session. While it is never out of the question, that is not how a blood-bath reversal typically ensues.

Sorry, I'm getting bored again. I'm back to reducing exposure and looking to yank something out of deep water again (instead of trading in the mud). If this turns out to be a great trade short, I'll hope to be involved. At the moment I don't see it. This weekend I'll do extensive screens of rapidly declining industry groups (in terms of relative strength) and begin then a new shopping list of eligible individual shorts. Until then I'm treading water and waiting for better.

CYOU has been a terrific trading stock and (thus far) remains a powerful leader. I'll keep pushing on this beast long (in-and-out and out-and-in) and convey the moves on Twitter.

I was stopped early on STRA short, following earnings. A failure below the 200-day (now 201.46) would make this interesting again and reignite a rather mammoth HS pattern on the weekly chart. This is a recently leading industry group that has fallen-off dramatically in terms of relative strength; a typical green-light for shorting.

TSYS reports after the close today. I may or may not hold into that event (possible I will lose faith before the close, depending on the name and the general market).

If we can get the NDX to reverse lower today, I expect I will step to the sidelines altogether, or possibly re-position short (via another go with SDS or possibly SRS, depending). Until then, the blood in the water is so far faint and at the same time that the clarion calls for pulling back are increasingly loud.

A recipe for z's.

Total Position: all long; only 13% invested

Currently Long (according to size): SNDA (5.2%), CYOU (4.1%), TSYS (4.2%)

Wednesday, April 29, 2009

Short Swoons (and mere flesh wounds)

The pivot set-up from yesterday did indeed follow-through and bears are left biting this market to death; given their legs now have been lanced. This then sets-up short-side entry# 516 for this rally; I'm reading.

Still, I'll skip the latest ribbon cutting ceremony and catch-up with the bears later, on the way down. In the meantime I would have preferred having greater exposure long; but a fool cannot have everything if he is at least lucky - no complaints here.

I am on the move today and now maybe tomorrow as well. This is a lot of why I am lightly exposed, but I won't give that as an excuse (my excuse remains that the action has been nothing more than murky in the larger scheme of things; certainly ahead of today). If I could re-post yesterday's words, I think it will still count for the present situation. The market is a bit higher, the internals a bit stronger and the bear beer a bit flatter.

All bear chidings aside, I doubt we're on the verge of any tremendous upside in the markets just here, but I still see no reason to attack short with any size until something gets going in that direction.

You black knights still have guts, I'll give you that; it's the arms and legs which might be concerning.

STRA remains my one short at moment and reports before the open tomorrow. I may sweat this, given the continued drop in RS for that industry group, but I'll re-consider in the final 15 minutes. Check the Twitter page in the final minutes today if you care.

Total Position: 4.13-to-1; 31% invested

Currently Long (according to size): CYOU (8%), SNDA (5.1%), TSYS (4.4%), WNR (4.2%), ARST (3.2%)

Currently Short (according to size):
STRA (5.9%)

Tuesday, April 28, 2009

CYOU (wouldn't want to be you)

While nothing but nothing says we're in for better than muddy, mirky water still, we did see a bit of upside reversal early today, following the low-volume decline from yesterday. That draws some promise now for a pivot long; let's see how it shapes up.

I let out a little line long coming off the reversal, just in case this runs. If we re-reverse lower today, something I doubt at this writing, then it might just be exciting to get short this market after all. That would be something new - an actual downtrend of more than several hours.

So IF IF IF you guys can gain any momentum downward, I'll be coming late to the party. Right now though I see nothing but Hopeful and Mopeful over there in the corner sipping flat beer from plastic cups, grumbling about market manipulation; how certain swine should be in jail while other swine just may accelerate and take prices where they really want to go; ought to be; etc. etc. etc.

I hate that kind of party, let me know when things heat up. At moment bear balloons need further helium.

CYOU , which I have been trading decently, is live again today; knocking above it's (young) all-time high on strong, rising volume. While this IPO's base is only a couple of weeks young, it has held like a rock during each recent down-draft and now has shot to new all-time highs today in both price and relative strength (RS). CYOU reports Monday before the open. If I could design it, it would rally through to Monday morning and then see profit taking after a further gap-up at Monday's open (somewhere between 33 and 35). Either way I'm looking to reduce by the close of Friday; although I'm happy to reduce on spikes higher now and add then again on pullbacks. Currently I'm holding 8% long CYOU .

TSYS reports Thursday after the close and is set-up for a potential breakout here. Volume was perfect yesterday (strong, rising volume as it rallied to the upper end of a very nice, 10-wk base), but there is not yet a new high in RS (ideal is to see a NH in RS ahead of a breakout) and today is not yet on pace to top yesterday in terms of volume. The pivot for breakout here is 10.19. I'll be looking to increase my position above that level (currently long 3.2%).

I decided against travel today. I remain lightly invested overall and I may still travel tomorrow; which would put me out of commission for most of the day, depending.

Total Position: 3.15-to-1; 25% invested

Currently Long (according to size): CYOU (8%), WNR (4.2%), ARST (3.3%), TSYS (3.2%)

Currently Short (according to size):
STRA (5.9%)

Monday, April 27, 2009

Quicknote on the New Week

The current market direction remains murky and I am smaller still. My style trading is not best served by a choppy market and I'll continue to lay low as long as direction remains mixed.

Ever-bears are excited (yet again) that Friday's resilience was merely the latest-greatest bull-trapping doormat and today's down-open marks the re-re-resumption of the market's larger downtrend. Expect a 40% haircut in short short order - give or take 50%.

That sounds fun to me and far from out of the question. Still, I prefer to club wounded pup seals on an open beach rather than chase foxes in the forest. I'll let the blood flow a bit before getting involved with that thesis.

As well, I may miss most of tomorrow's session as I export my vacationing brainpan further and further out into the Pacific; yet another reason not to get involved. You guys can keep making the money.

Today I reduced my STRA short and traded out of CYOU long, for now; only 10% invested at this writing.

Total Position: 1.4-to-1, 10% invested

Currently Long (according to size): WNR (4.2%)

Currently Short (according to size):
STRA (5.9%; reduced today)

Friday, April 24, 2009

Soft White Underbelly (short of a lifetime)

I'm in transition today and can't add much new. Unfortunately that included the market, where there were many new set-ups long at the open and I pretty much stayed out since I knew I couldn't keep full-tabs the rest of the day.

I'm not complaining, I had committed to resting a bit anyhow. I've got my dacron skivvies on now and I'm heading out for a swim. Spring is in the water - feels good to be alive, if you know what I mean.

With today's action, I expect we have 99 and 44/100% of the trading public now expecting a pullback, instead of the mere 98% or so apparent from yesterday (including Cramer last night, no less). If that short trade starts working, let me know. You'll need someone to take over by that point.

Battling Great Whites under-water can get pretty exhausting, huh? Tigers!

Thursday, April 23, 2009

Snarky Action (sidelined and dangerous)

The action remains murky from what I see and my position has shrunk now to the point I can mail-it-in for the time being.

My longs stopped working and consequently they are nearly entirely gone. At the same time I am not yet seeing any great set-up here to attack short.

There are a lot of smart minds getting short (again!) and I wont chide them since the long-side this week stopped being such a candy-grab - but at the same time I find everything too mixed and trendless at present. If this is the next great bear set-up then text me when the riches start pouring-in - I'll leave my dumpy dental paradise (below) and come late to the better party.

You guys can make all the money for now.

Being sidelined then, I've packed teeth and brush and I'm leaving shortly (fat-ly as well). I'm embarking on the latest, greatest luxury getaway since the extinction of the Sabertooth. This jaunt's the deeply-discounted Destiny of Doom Dreamaway. They're giving me the special AAA-approved dentist-in-training rate due to poor recent demand - ha! For 3-days and 6-nights I'm allowed to spear anything that moves - I intend to get my fool money's worth.

If I can't kill the market I've got to rip at something. You don't drink this much coffee and just go home to roost.

I'll stand by until something better sets-up.

Total Position: 1.39-to-1, 16% invested

Currently Long (according to size): WNR (4%; will not hold <12.12), CYOU (2.7%; will not hold <23.90,>26.40)

Currently Short (according to size):
STRA (9.3%); under the 50-day for STRA looks good (currently 174.34); mammoth HS pattern on wkly-chart.

Wednesday, April 22, 2009

Off the Hook (getting smaller still)

Shorts are scrambling again today, as the pullback picture has all but evaporated for now.

I dodged a bullet with my short side, as the down-open action flashed sad-little power. I decided since I am getting smaller here I'll cover that side of things and just blow-out the longs then if the market didn't recover.

Better lucky than good, right? Stupid-lucky wins again.

I can brag now, since I am quite a bit smaller and frankly I'm not looking to grow aggressive again anytime soon. The bigger picture now is a bit murky. I'm not thrilled with the longs I have left and I'm not ambitious to short this either. I'll babysit this reduced group whilst preparing my next escape to lands well-under. Every trader needs a rest. Mine looks to be on the weigh.

Keep on the Tweatbeat over there >>> for the blow-by-blowfish history of shrinkage.

Beast out

Total Position: 5.1-to-1 net long, 40% invested

Currently Long (according to size): CYOU, PMCS, WNR, CEO, MYGN, MNRO, FORM, OTEX, CHKP

Currently Short (according to size): STRA (6.5%); under the 50-day for STRA looks good; mammoth HS pattern.

Tuesday, April 21, 2009

Trading Lessons (Rhyme over Reason)

Today was the first frustrating day here in some time. My shorts went mostly against me (to be expected given the reversal), but my longs went mostly against me as well. As such, I started reducing exposure and expect to likely continue with that plan early tomorrow. I'll then hang-out while something better takes shape, perhaps focusing on simple index trades if that is working; focus on my next hunt-and-grunt adventure if not.

I'm not crazy with the action in leadership at the moment and there are not yet enough indications the trend has changed for me to focus on shorting aggressively. The reversal in the banking uglies today was impressive, like it or not.

Okay, since I can't make money at the moment, I may as well teach...

Percentage-wise, today was no big deal here. But my trading style more and more is based on rhythm (centrifugal ramping-up as things are going well and shutting down or finding a cave as things worsen). I want to be fully insane when my position is optimal and I want to be conservative when I cannot find the handle.

This is the exact opposite of how I often traded in the past. I was a fighter, taking-on great whites in their own backpool, because I thought I knew something significant and important and I (thought I) hated to lose.

Experienced traders reading this know that it is not uncommon for traders to fight harder (average-down, etc.) when losing and then book profits too easily when winning; thus risking more on losing positions and limiting gains on a winning position. The typical psyche lusts for this pattern, even though it is a loser.

You'll never go broke taking a profit, right? Well, if you're the kind of loser who let's his losses run and at the same time takes small gains when you've (finally) got something right, then you will go broke eventually. For some of you that may be obvious, but it warrants mentioning.

Some years ago I was complaining to an artist-friend (not a trader) about having to rename a (failed) internet venture due to trademark concerns. He listened to my feeble rant and responded: "Make it a positive."

I've thought a lot about that (10 years and counting) and more and more I work on incorporating it into my trading style. I analyze where and how I am losing money and identify common, repeat-mistakes; figuring if I turned those traits into strengths I improve results significantly. If I can identify my greatest weaknesses and commit to making them positives, I optimize results.

I can be wrong most of the time and still make money. And if I happen to be running like god, then I'm killing it (and all of god's children, if it be short-selling).

I was a trader who would fight to the death, on occasion, when I was strong-minded about something. There was a succinct pattern of being early and ultimately being varying degrees of exhausted by the time the market did move my way. In the case of the 2000-top in the Nasdaq, I was more sure of that being a great short than I was of my own existence. However, I fought against the tide for the last remaining weeks of that bull (from January to early March) and when the break finally came I made back my losses for the early year very quickly, but then I moved aside; essentially exhausted. I did the same thing with the housing stocks a few years later, only in this instance I lost more fighting those uglies before the top and had little will left to capitalize when the juiciest momentum was under way. I had a couple of similar situations in the 90's where I got ahead of myself on the long-side; only in the 90's it was easy enough to turn around from a mistake and make another 200% in the following 12 months, again and again.

Earn while you learn was the mantra for the 90's. These days it is more like Burn while you learn. The market is a lot less forgiving.

The recent rally recently reminded me of these traits, but after net-losing money shorting stocks like BZH, HOV and LEN a few years ago I took the idea of "making it a positive" and decided that I should train to be a little late (instead of early) and focus on having my maximum energy on a trade when that trade was working (instead of anticipating it working and burning up confidence and will in the meantime). I don't need to care at all what really happens, nor whether I am right or not - but simply suspect what might develop. Focus on reacting, in real-time as things take shape. No more hero stuff for me.

So while I did attack short again coming off the initial bounce in early March, my own rules forced me to stop. And given there were so many decent growth charts out there at the time, my rules allowed me to increase exposure on that side as things continued to work.

By not averaging-down (no matter what the brainpan is shouting), but instead adding to wining positions only, you're getting big into a position as profitability is increasing and you are only lightly invested in one that is losing. And then instead of exhaustion from battle fatigue, one can trade aggressive when the sharp teeth are to the side of the pond.

Be Late, be Great. Or, Fortunately I am an idiot. I don't know anything ultimately, unless the market tells me it's true.

Being smart is over-rated and total conviction can be deadly.

Being a meathead however, is just fine. As long as you are willing to adjust.

Re-Re-Shift (grinding neutral at moment)

Already half-way in today and I don't have a great deal to say. There was measurable damage to the uptrend yesterday, but internals today are positive enough to suggest we won't see much in the way downside drama; for the moment at least.

I was nicely positioned coming in (having moved to market-neutral late in the day and into the after-mkt session yesterday), but I'm taking a couple of body shots; with NFLX and MYGN longs down in an up-tape.

Today I've added a couple of individual shorts as well as increasing longs. I'm trying to keep more or less market neutral and allow direction to take greater hold before committing again to one side. I'm not crazy about the action of leadership names today. More of this under-performance tomorrow would impress me enough to reduce longs.

Regarding NFLX, MYGN and the new reload of OTEX longs, I will cut any of these if they are to close near the lows of the session so far (or worse). In the meantime I'm willing to let them recover (I'd like to see NFLX close at least near the 10-day of 47.25; MYGN >40.25 or so and preferably closer to the 50-day at 42.23; and OTEX I need to close >50-day of 33.31).

I'm down about 1.5% on the week at the moment. That is perfectly acceptable given I came into the week mostly long (and the give-back is mild compared to recent gains). At the same time though, if accounts keep slipping here I will start getting smaller; regroup then for later.

Like Bernie, I hate to see accounts dropping...We'll see.

[edit: I should mention the STRA short - the comm. school group has been dropping considerably in terms of relative strength and this group is breaking on rising volume again today. And while I'm here, I was stopped on the NTRS and NTG shorts]

Total Position: 1.27-1 net long, 73% invested
(Note: accounts are leaning roughly mkt-neutral, considering leverage of SDS)

Currently Long (according to size): NFLX, PMCS, CYOU CEO, WNR, MYGN, MNRO FORM, OTEX, CHKP,

Currently Short (according to size): SDS-long (SP500 Dbl-short, currently 14.7% position), NTRS, STRA, GE, NTG
(Note: inverse-ETF SDS represents being dbl-short the SP500)

Monday, April 20, 2009

Bear Spring

Too soon to say yet if the bear is back, but not too soon to adjust. I increased my SDS-hedge in the pre-market and added SKF after the regular session failed to find any positive traction 60 minutes in.

Internals are severely negative and while volume on the NYSE is not extreme, the Nasdaq volume rate is running historically high so far.

I'm positioned more short than long for now, but I'm willing to let go longs as it becomes necessary (which presumably increases my exposure short). Anything breaking on rising volume will go. Anything remaining is hedged for now.

If internals remain extreme AND we are not beginning to recover, I will look to short aggressively in the final 75 minutes; for a daytrade. If we do manage to recover later, I'll reduce hedges accordingly. Either way, I'll convey via Twitter.

Total Position: 1.62-1 net long, 72% invested
(Note: accounts are leaning net-short now since leverage of SDS and SKF hedges outweigh long exposure)

Currently Long (according to size): PMCS, NFLX, CEO, MYGN, RJI, WNR, MNRO, BKE, BBY, FORM, CHKP, CYOU

Currently Short (according to size): SDS-long (SP500 Dbl-short, currently 22.1% position), SKF-long (US Financials Dbl-short, currently 5.3%)
(Note: inverse-ETFs SDS and SKF represent being dbl-short the respective indices)

Friday, April 17, 2009

North Snort (bear is good food)

Well, horseshoe up my ass.

GOOG, GE and C earnings are out of the way, the market dropped, as per bear's predictions. But the option-expiration action simmered into frozen dull drums, drifting drifting drifting until leadership names began quietly raging again on the tape. I'm lucky-still and still making money; loaded to the whale gills on aggressive growth.

However, I have begun phasing downward some; increasing the hedge and decreasing the number of longs. I can't stay too ramped-up for too long and I can't taunt you bears forever before getting bit.

That said, I will hang in net-long until the action forces otherwise (I don't have a target). I'll cut back on emotional thrusts; while culling-out dead wood; and I'm hedging according to present action and my own idiot-lucky determination of present risk (since I have too many names to dump at once, I'll increase the hedge dramatically once needed, allowing me then to let go and/or trim the lesser-performing longs soon thereafter).

I let go the Rimm-long today, as that one tagged the 200-day moving average. I would reconsider a new set-up long above that level (currently stands at 68.34, but is trending slightly downward); I entertained the idea of shorting this one up here today and benching w the 200-day on a closing basis, but it has too much momentum. I'll let you guys make the money on that trade.

GS flashed a negative divergence yesterday, so I blew out my remaining half. If it were my only child I'd hold it longer, but I have enough mealy-mouths left to keep me busy.

And as advertised I'm cutting this short. Action is positive now and that is good because I am out on the weekend already and have other distractions.

I'm deep outside, in some upper ascending triangle of resistance, somewhere North of Nanuvut. I'm skipping Disney-Finlayson Islands here, since I was up most of the night smoking wolves out of an abandoned whale-bone shelter. The wolves weren't too happy, but nor was I. Earlier I tried sleeping in the hull of the boat, ice cracking beneath sleeping bag and boat in unison. This place is too cold, even for my taste. The sky now shifts various shades of wanton pallor as the sun squibs higher.

Up here they bathe in salt water, hacksaw whale ribs in order to skewer other whales, then hefty-bag the cubes for easy Spring storage. I love this place.

Oh, BAC reports before the open Monday. No one would be too surprised to see this rally stall on that beast. I'll be back home for the action. Bears can point to that event now - an even better top for the market ;)

Total Position: 4.35-1 net long, 74% invested
(Note: SDS hedge is leveraged, accts are playing roughly 2.17-to-1 net long at moment)

Currently Long (according to size): PMCS, NFLX, ARST, OTEX, DRI, CEO, MYGN, WNR, RJI, MNRO, BKE, FORM, BBY, CYOU, CHKP

Currently Short (according to size): SDS-long (SP500 Dbl-short, currently 13.9% position)
(Note: inverse-ETF SDS represents being dbl-short the SP500)

Thursday, April 16, 2009

17 Longs (all wrong, but lucky still)

With JPM earnings now out of the way, action today was mixed early, but now reasonably positive. Leadership is humming quietly along, with technology notably strong on the tape again.

Due to the quiet rise of this pivot-rally from yesterday's early lows, I am able to hold patiently; adding here and trimming there but, without big changes. I'm a bit hedged, but remain a mutual fund - loaded with aggressive growth.

Further big drivers on the horizon: GOOG reports tonight, then Citigroup (C) and Generally Electric (GE) before the open tomorrow. Monday is Bank O'merica (BAC) earnings. Mattel (MAT) is also set to report before the open tomorrow. I would take a stab short there ahead of that number (stabbing Barbie in this case), but for the fact that so many uglies are blasting higher on bad news.

Note the fact that AMR was down yesterday morning on earnings, and then rallied only 25% in the span of 10 minutes; a rather effective assault on bears.

I know I don't want to short a tape where losers act like that; one of the reasons I am stupid-lucky and holding half the tape long at moment.

I took profits on half the GS trade, sold 123.74 in the pre-market; I'm holding the other half for now. This tranche (now 4.9%) may end up a core position, depending. I will unload when there is a clear failure, distribution, stalling or break (In either GS or in the mkt); which means if there is no reason to run I will be in this one through to higher-highs and potentially beyond; we'll see how lucky it gets, I don't have a target.

I added a new oil name long into the mix, CEO on the pullback. China seems to be the driver these days still, as so many of the groups rising in relative strength turn up Chinese stock symbols as the strongest names within those groups. Westworlder WNR is my only other oil play in the mix; been in that for some weeks now (except perhaps a day or two). IOC is one I should have held onto, but at least I sold it significantly extended (31-ish a couple of weeks ago). IOC is headquartered in Australia; it's a bit thin and it recently moved onto the NYSE; given all of that I'm ok to let someone else make the money on IOC.

I have orders to sell the RIMM-long a little below the 200-day MA. That may be a stretch for this session (200-day is 68.60 currently), but it could be reached by the after-mkt tonight, depending on GOOG. I will be open to sell within 12 cents of the mark in case we spike on the GOOG report; I'll be gone before then should the price spike that high prior.

I did manage to get back my NFLX later yesterday, and within a 15 cents of the 45.55; this too, is a would-be core position, assuming it doesn't fail in the meantime (now 5.1% sized-position). Yesterday I also reloaded OTEX-long (now 6.7%). This one does looked poised to breakout, but it is thin and now below the 1st pivot-point of 36.40 (I may have bitten-off too-much too-soon here); I will reduce if it cannot get back above 36.40 by tomorrow (sooner if it starts downward from here; below 35.70 or so).

I added to PMCS long today. This one looks poised for a fresh breakout (5.5 wk base); rising to the upper end of its range on strong, rising volume, with earnings due next week (Apr 23, after the close).

I am going to be out this afternoon, traveling early for this weekend. I'm running low on whale blubber (why go solar when you can burn blubber for free?) and subsequently I'll be icefloing in a broad, northerly direction. I'll be posting, but expect light sentencing for the next few days. Trades and allocation will continue to convey via Twitter, but I won't be talking so much. I'll be frozen.

If the market spikes still-higher with emotion I will reduce exposure dramatically. If the tide turns I will increase the hedge dramatically and then look to unload the names going poor on the charts. And if the market just continues onward, slowly and surely taking us up to higher-highs without much in the way of drama, then I will just sit fat, cull here and there and perhaps add to existing winners, etc. etc., yup yup

Total Position: 8-to-1 net long, 79% invested
(Note: SDS hedge is leveraged, accts are playing roughly 4-1 net long at moment)

Currently Long (according to size): OTEX, PMCS, NFLX, GS, ARST, RIMM, DRI, CEO, MYGN, WNR, RJI, MNRO, BKE, FORM, BBY, CYOU, CHKP

Currently Short (according to size): SDS-long (SP500 Dbl-short, currently 8.9% position)
(Note: inverse-ETF SDS represents being dbl-short the SP500)

Wednesday, April 15, 2009

Bull Butter

Writing fast, as I am back to being a mutual fund again; too many children to get across the intersection.

I was able to add long in several places. The largest trade is indeed GS long, but it set-up backwards (opening higher in a down market and then trading down to the 200-day).

I recovered.

Anyway I'm bloated with names again, though so far only 65% invested (including the remaining SDS-hedge). I will add further if the action remains constructive (adding to existing winning positions especially). I still want NFLX back, but am trying to hold out for ~45.50.

How the market responds from here will be important (as always), but the key for now is that selling was constructive, the pullback was relatively mild (although we did mange the first distribution day for the averages in > 2 weeks) and leading stocks remain strong on the charts.

AND the larger trend remains up. So whether or not we will bounce here, only to mark an important double top (new bear argument out there today), the point of the present is that there is no top. It seems to me the more present idea was to buy leadership on the pullback, but that's my stupid-lucky talking.

Fortunately, I remain an idiot. You'll get me yet Mr. cuddly.

I have stops, for GS certainly but for others and hedge-increases as well. Forget conveying that here and now, but I have been keeping my action up-to-date live via Twitter, so look there if you care to follow changes/adjustments. As always, don't do what I do. Bears will tell you I am going to blow up any minute - they may be right (certainly by the time you follow the trade I'm more or less doomed anyway).

Beast out

Total Position: >10-to-1 net long, 65% invested
(Note: SDS hedge is leveraged, accts are playing roughly 6-1 net long at moment)

Currently Long (according to size): GS, ARST, RIMM, MYGN, WNR, RJI, DRI, PMCS, MNRO, BKE, FORM, BBY, CYOU, CHKP

Currently Short (according to size): SDS-long (SP500 Dbl-short)
(Note: inverse-ETF SDS represents being dbl-short the SP500)

Tuesday, April 14, 2009

Gold Satan (GS setting up long...or short)

All work and no play makes Jack a dull boy - buy that bear a beer tonight!

Tomorrow may be the difficult day for me and ultimately I may need to adjust (re-accumulating longs so far this week has been painless, with some simple hedging). Early in the session tomorrow however, I am looking to add to longs...then basically scramble if the market is not able to catch a bid. If the futures reverse before the open I will hold off on that idea, but on a gap-lower I'm going to be a buyer early, trusting the market will firm; until it doesn't.

In fact it is GS surviving a test of the 200-day ma that I am most interested in and as long as it doesn't gap below that level (113.40), I will dance with the devil himself; using the 200-day then as my stop-loss benchmark (preferably on a closing basis, however I would take losses sooner if it is below that level after 60 to 90 minutes, making lower-lows and/or volume is heavy without any signs of recovering; I'll convey whichever occurs and my actions via Twitt).

The more I think about this the more I like it. GS is the leading financial stock and the beast of the bellwethers. And while I know there are a lot of fans (not to mention a lot of funds) willing to buy Goldman, everyone I read around here seems to be uber-bearish on this one, even though it has proved itself a very powerful monster.

My risk/reward is very favorable, assuming it sets up properly (again, I would not buy if it gaps below 113.40, unless or until it reversed back above that level and I would add further if it then reversed up above Tuesday's [edit: 115.11] close; employ the 200-day bench then from there).

And here it is again - I don't care if I lose money on this trade.

I don't care because it is a set-up I'll take every time (buying the leader of a group which is rising rapidly in relative strength, at its key moving average early in a session in which the market has gapped-lower). If I trade this set-up 1000 times I know the expectation value is firmly positive (+EV). Give me 10,000 of these - even better. Because if this works I might pull 10-20% in a few days to a couple of weeks, depending; whereas if I get stopped and I have played it correctly, it won't cost me more than 3-5%; not to mention I can then turn around and short a high-volume, clear break of the 200-day; shorting at that point becomes +EV.

Anyway, in your mind I'm walking into a buzz saw perhaps, about to finally have my idiot-head handed to me on a Goldman platter. I've been too stupid-lucky lately but the tide always changes, right?

Fine. In my mind I know I might have a negative session tomorrow. But I believe my potential upside out-weighs what I will be risking. Also, because I'm an idiot, I don't care how wrong or stupid I may be - I'll turn around and get short before any bear panty raids make the next cover of Newsbleak. I don't need to be right.

You point out I'm overconfident - well sure I'm overconfident - how can one succeed at this game without overconfidence? If I'm looking to gamble - even if I have odds to justify the risk - well, I'd better be a little confident. Being meek will not beat the averages. And between you and me, my arbitrage super-computer is still in the shop.

It's the inflexibility and/or inexperience and/or stubborn, scenario-minded thinking that's cost the bears so much of late. I'm over-confident, but also very experienced AND an idiot - that stove might be hot and while I intend to touch it (idiot!) I'll retreat if I get burned (why shouldn't I?). And if it's not burning then I'll touch more and more until I am almost rolling around on the thing.

I'm holding a portfolio (reasonably hedged), but I can change into my bear cheeks inside of a few minutes. Come and get me tough guy - I'm dating Satan's daughter and I deserve to get wrecked. I'll touch her and I'll get burned, but that means I'll cower and run. But if she'll let's me, I'll willing to court this burner for several days or several weeks. The upside justifies properly executed risk.

Total Position: 2.78-to-1 net long, 60% invested
(Note: accts are leaning roughly 1.5-to-1 net long, due to leverage of TWM and SDS hedges)

Currently Long (according to size): ARST, CYOU, MYGN, WNR, RJI, PMCS, MNRO, SNDA, BKE, FORM, BBY, CHKP

Currently Short (according to size): SDS-long (SP500 Dbl-short), TWM-long (Russell-2k Dbl-short)
(Note: inverse-ETFs SDS and TWM represent being dbl-short the respective indices)

Where's the Bear? (cute pullback so far)

They're selling on the (GS) news today and it sure looks...really boring out there.

Never short a dull market, right? Especially if it has been trending higher.

I revised my plan of attack slightly, as the market neither thrust with an emotional burst higher (giving me the chance to get temporarily short), nor did it turn very grim in the gums (giving me fear to flight instead of fight).

We're pulling back some, but like yesterday the action (so far) remains more constructive than anything else. I added back some names long, ahead of plan, and subsequently I made a minor increase to my short-hedge; nothing yet aggressive.

Intel reports tonight and tech is acting decently on the day (on a relative basis; earlier tech was trading higher in the face of an otherwise down-market, not so much at this moment). Perhaps we'll get an emotional rush higher on the heels of INTC. If so, I would likely then increase my hedge dramatically (in order to afford accumulating leadership on a then subsequent pullback; as mentioned in the previous post).

Otherwise I am not looking to hedge aggressively unless and until internals truly turn bearish. If we are going to remain cute and cuddly and pull-back in constructive fashion whereby leading stocks are demonstrating resilience, breadth is far from extreme and bears are squirming due to the meek re-trace profits - then I will more or less hold pat. If I increase my hedge it is only because I am increasing longs at the same time (like this morning). Then when the market looks ready to rise again I let go the hedge (letting go the hedge to move aggressively long is much easier/faster than trying to quickly load-up a dozen stocks I get long the stocks as they set-up and let go the hedge at the moment the overall market looks to turn).

I'm sure I've repeated myself enough by now and if it doesn't make sense yet it never will (not necessarily your fault, I may be totally incompetent for all you know). On top of that, everything here is subject to change depending on the action. So I'll just shut up, update my real moves via Twitt-spit.

I know bears are looking at this and perhaps thinking I am pathetic, ridiculous and indeed incompetent to think that a pullback here will only set-up another leg long. And do you know what the sick thing about that is?

I am all of those things and I don't care if I'm wrong...for a day. You might be totally, utterly right and I am missing on the greatest shorting opportunity since the last greatest shorting opportunity. But I'm the kind of trader who if he vomits in his sleep, he likes to move onto his side. I'm not looking to fight gravity. Bring it on and I'll catch up down the way some.

Note on CYOU - I re-exited again this morning, but am currently looking to re-load again long; somewhere between 26 and 27; we'll see.

2nd Note: I was stopped into a larger TWM position just now, prior to posting. I've adjusted the position here below and I'm closer to market neutral for the moment; still looking to add leadership as names set-up. Pullback now a little less cute, but I'll stick with the basic gist of this post for now.

Total Position: 2.45-to-1 net long, 51% invested
(Note: accts are leaning closer to 1.25-to-1 net long, due to leverage of TWM and SDS hedges)

Currently Long (according to size): ARST, MYGN, RJI, WNR, PMCS, MNRO, BKE, BBY, FORM, CHKP

Currently Short (according to size): TWM-long (Russell-2k Dbl-short), SDS-long (SP500 Dbl-short)
(Note: inverse-ETFs SDS and TWM represent being dbl-short the respective indices)

Quicknote for Tuesday

I'm writing fast with no time to edit, trying to beat the opening bell.

Goldman (GS) profits were essentially double the analyst's estimates, so no real surprise there. GS is 3.5% lower at the moment in the pre-market.

Intel (INTC) reports tonight after the close. That will be worth paying attention to; announcements on cap-ex spending especially will be relevant for Semi-equip, a leadership group in terms of relative strength.

While I'm not sure when, where or exactly how, I am looking for an opportunity to greatly increase my hedge. This will position me net-short at that moment, but the objective is less about getting the market short and more about creating greater ability to accumulate leadership, should the market begin to retrace.

I don't want to call a short-term top to this rally (why start a bad thing now?), so I am looking to implement this in one of two ways. First, if there is an emotional rush higher, I will go ahead and grab the hedge. Otherwise I need to see signs we've peaked near term. More on this during the day as something begins to play out.

Again, the objective of getting short near term is to allow me to re-ramp aggressively long (the strongest leadership stocks on a pullback). This way, instead of buying (and buying more) the dip and finding myself uncomfortably exposed to a further pullback, I am already cushioned and adding long will simply begin to neutralize my short exposure. Then when the market firms I cover the hedge and very quickly I become aggressively long once again.

That's the basic idea, subject to change along the way. Easy enough.

Monday, April 13, 2009

Goldman Slumber

Indeed the market is pulling back some today, but so far it looks like constructive, consolidating action. I'm not getting too excited either way at the moment.

Big banks are strong on a relative basis today and all eyes point now towards Goldman Sachs (GS); where earnings are due tomorrow before the open. Plenty has been said already and while I am not going to argue that Satan himself is not the whipping boy of GS, I will merely point out the stock is 1.) a bellwether and 2.) it has remained very powerful on the tape and 3.) Goldman gets the girls.

I'm probably going to keep things light until tomorrow's action is seen. As long as GS does not break the 200-day ma (now well-below at 113.72) I am not likely to attack any Financials anytime soon. If GS breaks back below the 200-day tomorrow, I will likely be firing at that group.

While I may adjust somewhat, In the meantime I am looking to keep things light.

Total Position: 2.15-to-1 net long, 43% invested
(Note: due to the leverage of SDS, accounts play closer to 1.5-1 net long)

Currently Long (according to size): CYOU, ARST, MYGN, RJI, WNR, MNRO, BKE, CHKP

Currently Short (according to size): SDS-long (SP500 Dbl-short), AAPL
(Note: inverse-ETF SDS represents being dbl-short the respective index)

Sunday, April 12, 2009

Quicknote on the coming week

In winding down from the long weekend and sinking into my research for the new market week, I couldn't find much evidence suggesting the plug is about to be pulled on this rally.

We may pullback some, but significant downside in the near-term looks unreasonable still.

I spent several hours more on my updated list for eligible shorts, scouring about a third of 197 industry groups (studying a few hundred charts of stocks from groups dropping in relative strength as well as all of the bottom 25% RS groups); but outside of Medical and Healthcare groups there appear to be few attractive charts for initiating shorts. I am going to wait (still) further to publish names.

If the market retreats some in the next few days and the Medical/Healthcare sectors are not demonstrating any new resilience, I'll go ahead and post my list of eligible Med-shorts. Otherwise I am going to continue to focus on where and when to ramp-up on leadership longs.

Until something changes, I would rather buy or add to leadership on pullbacks than look to short weakness. I see no problem is selling on strength, especially if I can continue to rotate between the many set-ups long (buy as names set-up and let-go or reduce on strength).

That's it for tonight. The futures are down slightly and I'm looking to catch a 6 hour nap before getting started. After selling most of my position Thursday, I'm light, I'm hedged and I'm going to be sleeping easy.

Friday, April 10, 2009

Night Gallery (squid ink)

Trading markets exhausts the senses and as such I do enjoy these three-day weekends. The additional hours allow me to venture welded without a joint into further hearts of darkness.

This time I've headed South, sunburned and tequila drenched skin - lanterns blazing in the salty night. My venerable Captain, Mr. Kurtz Boltonoff is a retired stump grinder from the Pacific Northwest. He's at times meditative, fit for nothing but placid staring. But intermittently he's bolts-on and bolts-off again, for whatever reason. He's not a fan of the flesh - not sea flesh anyway.

I don't care. I'm barbing anything that moves beneath this silvery varnished sea.

Thursday, April 09, 2009

Carry out the Shorts

While further upside for Monday is far from out of the question, the bang-up session came today. I'm trimming slowly and steadily, the spoils from my ramped-up and unprotected splash aggressive-long.

In other words, stepping over the bodies of dead short people while cutting back an aggressive long stance initiated yesterday.

I'll be traveling later today, to an as of yet undisclosed but thoroughly exotic blood-lust pack-and-Carrie whirlwind spontoon-festoon underwater action adventure thunderland.

As such I'm going to keep this brief. Follow the Twittcast for anything especially relevant from here. I expect to continue trimming; I want to get down to under 3-1 net long, and am looking to short an index near the close; as a partial hedge.

At the moment the action is quieting some, but internals are severe-positive. Hence I am trying to hold out for the close before hedging; via SDS or something similar.

Bone weekend!

Total Position: 3.88-to-1 net long, 66.5% invested

Currently Long (according to size): ARST, CYOU, TSYS, BKE, MYGN, WNR, RJI, MNRO, NFLX, TNDM BBY, CHKP

Currently Short (according to size): GE, AAPL

Wednesday, April 08, 2009

Sans Hedge (running long for the memories)

Fortunately I remain an idiot.

So far so good with this new swing higher. I went into tonight with considerably increased long exposure, only two core-shorts, and nothing in the way of index or other hedges. I'm playing this beast as if it were 1999.

For a day.

I won't speak for next week and I will look to hedge + reduce late in the day tomorrow (sooner if sellers regain control). But tomorrow should be a relatively quiet affair, whereby leadership names (perhaps others, but I'm not really concerned there) drift higher on low volume. It will get thin late in the day and so I need to work orders a bit, but if it plays out like a standard pre-holiday April session it will be rewarding enough.

I wont be surprised to see strength last into Monday as well, but I'll have much of my ass off of the chopping block by then. If we get a bang-up session then Monday, I will step over the bodies of the shorts and look to remove nearly all of these long goodies; or at least scale myself short enough in other places in preparation for the next wave of selling. But as with the strategy previously, if we can keep a more slow and steady rise higher I will hang in until things get more emotional, or until sellers take control (hanging in long as long as profitable in the meantime).

Again, don't do what I do. My current position is like running across the freeway to grab bars of gold - it can be dangerous if poorly timed (and one gets a little heavier with each additional bar).

to my mind it is 2AM and Sunday morning and I can run like god (the tape is piling up bars of gold and traffic is negligible). But to you there may be Mack-trucks ready to take your ass up into your brainpan, for all I know.

It's a little late to ramp-up at this point anyway. The on-ramp was earlier this morning and the exit-ramp is not far off. Such is the spoils of a rally in this rotten, loathsome market ;)


Total Position: 5.8-to-1 net long, 88% invested

Currently Long (according to size): NFLX, RIMM, ARST, BBY, CYOU, MNRO, BKE, TSYS, CHKP, MYGN, DRI, RJI, WNR, TNDM

Currently Short (according to size): GE, AAPL

Swing Long (re-shift for holiday week)

Diving into the cold water today. I've let go hedges and am focused now on being long for the remainder of the short week; assuming that plan doesn't deep-freeze performance.

Assuming this plays out like a reasonable market in a Good Friday week (ha!), things should start quieting down now and prices of leadership stocks should begin drifting upward; on lower volume. Saying 'reasonable market' is a stretch, but I have to acknowledge that many charts look very positive still and once again sellers cannot get much traction after a renewed attempt. I'll try to adjust quickly if this position fails; so far so good.

Retail is quite live today and various retail groups are ranked highest now in terms of relative strength. Retail is where I've focused most of my buying today.

Total Position: 4.6-to-1 net long, 72% invested

Currently Long (according to size): BBY(new), CYOU, TSYS, MNRO, BKE(new), NFLX, CHKP, ARST, RJI, MYGN, DRI, TNDM(new)

Currently Short (according to size): GE, AAPL