Barry Ritholtz:
“As we have seen time and again on the Street of Dreams, Wall Street pundits take months, if not years, to accept what is before their very eyes. Whatever you want to call it -- cheerleading or Cognitive dissonance -- it is a fact of life that the obvious takes much longer to be accepted than is logical. Hence, this simple numerical inflation fact, reflected in global food prices, record energy and both industrial and precious metal inflation, will be ignored for as long as possible.”
Sunday, February 24, 2008
Thursday, February 21, 2008
Great day in the wedge.
The markets are very confusing by nature. With all this day-to-day volatility my take is only the traders are making all the money.
You should probably wait until this "wedge" reveals itself on the dow.
The price oscillation is clearly tightening, and we closed a little bit below the wedge, but the problem with "wedges" is they don't give you any direction up or down, all we know is there will be a big move once it breaks out.
I didn't like the stochastic divergence as MOS rose, but it's a great hype play and you should never trade against the hype, just be careful in this market. Today might have been a good day to lighten your load, but not load up quite yet. I'd like to see this come down some and then trade sideways before I'd want to enter. But if you're gonna short anything energy look at DVN, all that upward momentum and zero news, not the best of breed company. This could have some big gap downs, but of course the overall market breath and oil need to retreat some.
JASO should retrace back to the 61.8% fib, at 15.15. Before possibly forming a bottom, if it breaks below that 15.15 level, short as many shares as you can get your hands on, but look out for a reversal. On the upside the next shorting point - crucial fib level - is 19.13. If it can't break that the ride is almost definitely over for JASO. STO looks poised to sell off this recent bounce. And turned down right
on the intermediate trend line. But cover it breaks the trend line on the upside.
Keep your eyes on the VIX, it should send us signals before the overall market will.
Nice close on AUY today, but once it breaks 17.50 (knock on wood, if it does) I'll probably be looking to sell it. I only have 10 contracts.
We will probably gap down tomorrow. Then they might fill the gap in the indexes and move us back into the wedge. So tomorrow morning might be an OK point to get rid of the q puts, especially if the VIX spikes upwards.
According to my fibs the low of the day on the S&P won't be below 1330. If we do break that then look for 1317.
Disclaimer: One shouldn't focus all their attention on these fib levels, they're more of a guideline to the market forces.
You should probably wait until this "wedge" reveals itself on the dow.
The price oscillation is clearly tightening, and we closed a little bit below the wedge, but the problem with "wedges" is they don't give you any direction up or down, all we know is there will be a big move once it breaks out.
I didn't like the stochastic divergence as MOS rose, but it's a great hype play and you should never trade against the hype, just be careful in this market. Today might have been a good day to lighten your load, but not load up quite yet. I'd like to see this come down some and then trade sideways before I'd want to enter. But if you're gonna short anything energy look at DVN, all that upward momentum and zero news, not the best of breed company. This could have some big gap downs, but of course the overall market breath and oil need to retreat some.
JASO should retrace back to the 61.8% fib, at 15.15. Before possibly forming a bottom, if it breaks below that 15.15 level, short as many shares as you can get your hands on, but look out for a reversal. On the upside the next shorting point - crucial fib level - is 19.13. If it can't break that the ride is almost definitely over for JASO. STO looks poised to sell off this recent bounce. And turned down right
on the intermediate trend line. But cover it breaks the trend line on the upside.
Keep your eyes on the VIX, it should send us signals before the overall market will.
Nice close on AUY today, but once it breaks 17.50 (knock on wood, if it does) I'll probably be looking to sell it. I only have 10 contracts.
We will probably gap down tomorrow. Then they might fill the gap in the indexes and move us back into the wedge. So tomorrow morning might be an OK point to get rid of the q puts, especially if the VIX spikes upwards.
According to my fibs the low of the day on the S&P won't be below 1330. If we do break that then look for 1317.
Disclaimer: One shouldn't focus all their attention on these fib levels, they're more of a guideline to the market forces.
Tuesday, February 5, 2008
Before the Light of Dawn Comes Pitch Black
This is exactly why I didn't feel confident going long in the market. We never had our day of capitulation, aka, no bottom. This might have been on the back of most traders minds.
The market makers lifted the curtain today. That manufactured "rally" we saw last week, came to a fast and furious halt. I went into this week completely short. We're about to retest the January lows. This will be the deciding factor, whether or not you want to be long. I would not go long any stocks until after option expiration. The swings are vicious in this market.
Let me recap my current stance.
Puts in MOS. Fundamentally flawed companies, such as Mosaic, will be eaten alive by the 800 pound gorilla (DOW/S&P/NASDAQ). Growth stories can not support such elevated levels of valuation.
ILMN. Was up huge. I suppose there was some validity in the open interest in the march 80 calls going into earnings. I held my calls overnight, this is set up for $80. We'll see it's a gamble.
FSLR. Bull Trap might have been in play? They can't keep it supported with such horrible market breadth.
The market makers lifted the curtain today. That manufactured "rally" we saw last week, came to a fast and furious halt. I went into this week completely short. We're about to retest the January lows. This will be the deciding factor, whether or not you want to be long. I would not go long any stocks until after option expiration. The swings are vicious in this market.
Let me recap my current stance.
Puts in MOS. Fundamentally flawed companies, such as Mosaic, will be eaten alive by the 800 pound gorilla (DOW/S&P/NASDAQ). Growth stories can not support such elevated levels of valuation.
ILMN. Was up huge. I suppose there was some validity in the open interest in the march 80 calls going into earnings. I held my calls overnight, this is set up for $80. We'll see it's a gamble.
FSLR. Bull Trap might have been in play? They can't keep it supported with such horrible market breadth.
Monday, February 4, 2008
FSLR, RYL, ILMN, MOS, IHP
FSLR broke through that "triangle" and onto the upside so the momentum traders should start piling on. It might be a bull trap (but I doubt it...they want to keep it in the 185-230 range, based on the open int. in the march call contracts). So I figure it will have a pre-earnings run. Might be a good long to play in equity heading into earnings Feb 14th, while hedging in some puts along the way (later in the year OTM). I can't see this making new highs above 280. A 30%+ correction in Jan, showed me this was fundamentally flawed. When the earnings come out--they will have to BEAT guidance, and either announce a contract or have some AMAZING forward looking guidance. IMO all hopes and dreams.
RYL buy.
MOS keep on watch list, might make a dynamite short.
ILMN speculation of GE buyout, huge open interest on the march 80 calls. Good growth story, earnings come out. COO, founder of company quit, and current CEO specialized in M&A, do the math. GAMBLED on some calls.
Bought puts in IHP. dangerous b/c of larger spreads. Most of the damage might have been done. There isn't really a chart pattern like this in any of the "books" but looks very bearish to me. Keep your eyes on it.
RYL buy.
MOS keep on watch list, might make a dynamite short.
ILMN speculation of GE buyout, huge open interest on the march 80 calls. Good growth story, earnings come out. COO, founder of company quit, and current CEO specialized in M&A, do the math. GAMBLED on some calls.
Bought puts in IHP. dangerous b/c of larger spreads. Most of the damage might have been done. There isn't really a chart pattern like this in any of the "books" but looks very bearish to me. Keep your eyes on it.
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