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)

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.

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)

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.

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.

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