Ice Water Veins (and fortunately, shit for brains)

Fortunately, I remain an idiot.

The session was a little wild and I did whip myself some today, I'm still riding long, in push-it-till-it-pops fashion.

So while I did take some caution when a GS-led sell-off threatened to reverse the market today, I am happy to report I was crazy enough to whip right back to full-fool long-mode; once it became clear the reversal was going to fail.

Right back on the bike.

I suspect that bears got very excited when Goldman Sachs (GS) reversed lower and especially as that led to a reasonable counter-wave of selling throughout the market. If I hadn't had so many orders to enter, so many positions to monitor and 3 Faces of Eve to council (sorry Fred), I would have been lurking the boards for value today. Pure, natural value. But two things kept my mind thinking long, even without seeing the bear-board jamboree (and even whilst I was entering GS shorts myself).

First, the market internals were still very strong, down from extremely positive earlier in the session, and it was a broad-based, rising-volume rally. Second, leadership stocks (GS aside) were out-performing the major indices (again!). Third, the time-of-day was a little too early (12:30-1:00 EST) and didn't hold the weight of a late-day reversal attempt (time-of-day has provided an incredible edge many times for me in the past - I have discussed it plenty, though not lately; I'll look to explain the nuance of this again soon).

Fourth, even though I wasn't able to confirm, would I be wrong to suspect bears were pounding tables with extreme excitement? There was great cause for celebration after all - as the indices were up only .75% or so at that point! Practically an up-day if you had been short, right?

And while that is amusing, or not, it doesn't really mean anything going forward tomorrow. In fact it may even be a negative for tomorrow (especially after bears cover positions on the up-open). These were good only for today and on top of that, the now-choppy advance is a little suspect. Why? Well, tops are sometimes choppy in nature. Secondly, we have not yet traded to higher index highs (although leadership names are much closer to highs than the indices). Thirdly, you know about forty-five thirdlies, so let's leave it at that for now.

Anyway, this is a lot about nothing - especially when I won't even tell you how to use time-of-day to your advantage for a fake-out counter-move; Or why buying a high-volume breakout whereby a name is breaking-out on news of buying another company is such a high-percentage play (HRBN today, for example). Frankly, I'm not sure why you continue to read this site. I rarely post, compared to most, and when I do most of the time I'm just blowing steam and using you to organize what I might not think as much as anything otherwise.

See what I mean? Even when I am surmising what might be next it comes from a process of elimination, not anything so brilliant. Breadth was severe-strong today and suggested we would not see an ugly reversal. Trish came on and her opening comments did not even mention the strong rally in stocks, but instead she focused on the strength in gold and the weak Dollar (Trish would have been much more jubilant if we were going to reverse ugly. Trust me, she's that good). And those bearish boards, which I couldn't even visit so I have no right to flame today? They were no doubt salivating what little saliva was left in those giant cotton mouths - that today was progressing much like the key-reversal failure in the market a couple of weeks ago on Sep. 23rd!

Whatever. At least I always have myself to kick around once you guys go away. In the meantime, things could get exciting now. I'm going to froth and push and push again, until ugly again fairly flashes. At that point I am going to take cover as best I can, whatever my lumps may be. This way if we keep on higher (how ridiculous) I am not going to miss it. I can take the body shots of running out of a crowded theater with my ass already on fire. The real risk is a dramatic gap-lower - which means I'm in a building which has already collapsed; not good.

I'll risk the latter, until and unless there are clear signs of warning (which may be close, maybe not - htf do I know?). Or if it's a gift-horse right out of the mouth - like if Trish comes into the theater, takes a seat next to me and shouts sweet nothings into my Six Ears of Eve- I'll be godspeed the hell right out of there in such a case.

In the meantime - the machine still has teeth. Why fight the machine?

-Total Position: >10-to-1 net-long
-58% invested overall
-Pure-longs = 53%

Currently Long (according to size): HMIN (10.4%), HRBN (6.7%), SXCI (6.7%), CFSG (6.4%), DGW (5%), BCSI (5.1%), CLW (4.5%), SWM (4.1%), PTI (4.1%)

Currently Short (according to size): TER (5.1%)

Futures Accounts: no current position

Sitting on Hands (sans hedge here at moment)

Yes you can!

Bears are jumping up and down now, seeing actual red on the tape and a negative reversal in the major averages.

Myself, I had a sloppy cover of my new SDS hedge, coughing it up as the averages surged early, only to watch them revert right back to Earth afterward.

Amateur!

Fine. Normally I would hop right back on, if/when I regret exiting a trade. But this is a hedge and I am committed still to the long-side as long as it is working.

And no offense to bears (ha!) but in many ways I am less nervous today than I have been most of the week.

The reason is that I'm looking to hedge in order to protect - for defense. But of my still-too-many 13 longs today, there are only 3 in the red at the moment (meaning, if this is the pressure I was worried about ensuing, then I may as well just try to ride it out).

CNBC's Fast Money just finished (morning segment) and 4 out of 4 of the trader pros there suggested selling this market; but breadth is not very negative, far from extreme; leadership is obviously holding well, with names like AAPL and GS still up strong on the session; stocks are still breaking out to the upside, charts remain live and I'm up almost a full percent with currently 10 out of 13 longs in the green.

What me worry?

Anyway, my finger is not far from the trigger, but I am going to keep to the strategy of hedging only if I have to (may be before you even read this ;). I don't mind a bit of whipsaw now and then and I don't expect to trade perfectly. But I will not be net-short this market until the long side stops working.

Total Position: Aprox. 7.5-to-1 net-long, considering under-levered UUP hedge; 72% invested (pure-longs amnt to 60%)

Currently Long (according to size): SNDA (7.2%), CFSG (5.6%), NEU (5.6%), CTSH (5.6%), CYOU 5.5%), RKT (5.4%), ULTA (5.3%), CLW (5.1%), JDAS (4.2%), ININ (3.9%), SWI (3.3%), FNSR (2.9%)

Currently Short (according to size):
-Long-UUP here (12.1%); which due to inverse correlation with equity mkts defines this as an equity hedge and I have it in the short-camp as a result.

Futures Accounts:
-20% Dec BR Pound short, from 1.6497
-Covered Dec SP500 short today at 1057.75

My leg - bear mouths...

Churn while you Earn (scaling further short)

The glass is evolving half-empty at the moment with waters inside churning.

While yesterday it was the NDX flashing distributive action, today it is the NDX and pretty much everything else (sans Medicals). Volume is rising and heavy again today, the pace of which is extreme.

Combine this with today's ugly gap-up and reversal (again, the NDX ugliest in that regard), and you have a genuine toppy, churning tape which in my world suggests some kind of top.

Cute churning action.

I say some kind because I don't know (and I don't pretend to know) whether this is simply a mild pullback before resuming upward again, the beginning of an intermediate-term trend lower, or the latest, greatest decline-to-define-all-declines for futureless generations to come.

Leadership growth charts are looking poor at the moment (some breaking down, many others getting choppy), but nothing too dramatic at this point.

Elements so far then command a bit of respect, perhaps nothing more. I'll continue to let out more short as this develops (thus positioning myself as one dirty, short-bastard by the time blood is seriously flowing, or else keep overall-small; nibbling on dumpster-fare should the downside lack lethal dejection.

Sad story - I tried shorting a couple of Solars gapping 8 and 10% higher (they are 8 and 10% down now on the day; nice swing), but could not get shares borrowed. At-the-money option premiums were too high to go that route, so I've got nothing short in Solar.

I intentionally waited to short the Financials. But GS now, unless it recovers to 36.05 by the close, is set to mark a key-reversal (gapping to a higher-high and then closing at a lower-low); volume is rising there as well. I got GS off short, but it is MS that is perhaps more exciting, since that beast couldn't really rally lately and has lower relative strength. I'm working orders to short MS (>27.70 at moment), but may not manage to get it today; if not, I'll take the first reasonable set-up, regardless of price.

That's it. I don't want to jinx the pullback for you guys by blowing sexy conch calls about colliding wave counts, imploding stars and bloody-green clovers. I suspect tired bears will be reluctant-but-happy to exit quickly now that they see losses finally improving. That's the bitch about being so early - nothing left in the lust tank to take advantage of one's previous dreams, once they start to gel.

Did that make any sense? I'll just try to keep 1-small step behind the market action and let you guys make the smart calls - how's that? Stupid-lucky showing up late to all the finer parties.

Snort.

Total Position: 2.42-to-1 net short, 27% invested

Currently Long (according to size): WNR (4%), CYOU (new, 3.8% - benching on 10-day m.a., post-2pm basis

Currently Short (according to size): AAPL (8%), GS (6.1%), STRA (4.9%)

Futures Accounts: Covered NDX June (unfortunately) at 1405.75 for small profit; looking to re-enter; blew-out on the slice lower today as breadth was then 2-1 positive, but internals have worsened sufficiently since.

Cute churning action.

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 long...so 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)

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)