Thursday, June 29, 2006

Market perspective

I am thinking that if this rally can survive to Monday's close, we may be in for a breather. In the lull between earnings seasons, the focus shifted to the Fed, which any trader can tell you has not been good for the market. Now that earnings season is getting ready to begin again, perhaps eyes will be elsewhere. Of course if earnings and guidance dissapoint, we could be looking at just another catalyst for more bear days.

Trading Diary

was turned off today. This was too crucial a trading day to have any interruptions, although I did leave from 1 to 2pm to get some fresh air (and make sure I didn't do anything stupid). Went 40% long yesterday and held positions overnight. I am now 100% long after some frenetic buys from 2:15 to 2:45. My long holdings include BHI, CELG, IIIN, and PWEI.

I am now trying to decide whether to sell flat or continue into tomorrow. My gut tells me that the fund jocks will hold the line at all costs to preserve their quarter tomorrow. On the flip side, my wife just called to tell me "guess what the stock market is up today, honey", which usually is an indicator I should sell (ok I am paraphrasing her a little for comedic license).

As long as Ben doesn't have a dinner date with Maria Bartiromo tonight I think the market will hold until tomorrow's open at least.

Friday, June 23, 2006

Checking back

to the Level II and I see the sellers are overwhelming the buyers in BBBY so I took half off the table at $34.51. (.09c ps loss pluss commish). The stop remains on the the other half but I may cut bait on that one at any moment.

BBBY didn't gap up on the open today

I tried to exit on the open but couldn't get execution at a favorable price. I let the opening range set in on BBBY and I am seeing lots of buying support at the 34.50 level, but it can't seem to make it past that level. If it breaks past support or resistance, this could move substantially, just don't want to get caught on the wrong side. My stop is set very close to that 34.50 level.

My NCC short is continuing to work nicely. In retrospect I should have added to the position on the uptick Wednesday, but there are a lot of things I can say I should have done in retrospect.

I priced puts as a way to add to the position, but the volatility premium is a bit too high for my tastes right here. Of course I don't like to buy puts in a downticking market, since that premium gets exaggerated so I will keep my eye on it.

Also considering some puts/short positions on selected metals stocks.

Thursday, June 22, 2006

5 round trips

today netted me more in terms of worry than it did in dollars. I would have been better off going to the golf course. I bought the overnight gap down setup in BBBY. I noticed a lot of buying interest in the last 3 minutes of trading. Let's hope I was right.

NCC Short

is still motoring along. I will need to close it in advance of any fedwatch data because that seems like the only catalyst that will bounce it against me at this point.

Frenetic day of trading

with 5 round trips today. Closed my short of FCX and JOYG. I went long JOYG and just went flat for a slight profit (we're talking lunch money). FCX I re-shorted and am waiting to close out the position, hoping for a slide into the toilet close.

I am looking at a gap down trade to buy at the close right now.

Expanded short

position by shorting JOYG. Now portfolio is roughly 43% short.

Went short

FCX again a few moments ago. The trade is in the black right now, but I'll have to watch this one closely, since it is volatile.

Wednesday, June 21, 2006

Just returned

to the trading terminal from a business meeting all day today. And of course these things happen at the absolute most inconvenient moments, causing me to miss a +140 tick on the dow.

My post last night should have been a contrarian indicator that should have made me buy the open, but I knew I wasn't going to be able to monitor positions today, so I didn't dive in.

My focus is what to do now? My initial thought is to fade this rally by going short, but I don't want to jump the gun yet.

Tuesday, June 20, 2006

Perfect Storm / AKA fat tail city

"The markets sold off this afteroon because of inflation concerns"

"The market appears to be concerned that the Fed may need to raise rates at the next policy meeting"

"Traders are jittery due to concerns about economic growth"

Heard any of these excuses for the market we are in?

It's almost comical how the talking heads on CNBC and Bloomberg will spout these things as their explanation for why the markets are down.

So here's mine:

We hit the confluence of several very unfortunate situations at the same time:
  • Demise of the yen - carry trade has sucked money out of the markets worldwide
  • The fed unfortunately decided to prop the economy with low interest rates, creating a mess called a housing bubble, which they now have to slowly pop (and don't believe the hype about inflation - that has nothing to do with it)
  • Knuckle head momentum chasing hedge fund traders pushed materials stocks too far too fast
  • Ben Bernanke's "Transparency" policy has left traders to their own neuroses and worst case scenarios at precisely the wrong time

So now that all these things have happened, we have a selloff that is building on itself thanks to the daily blow up of small and large traders. Traders are much "smarter" and more hedged right now, which only seems to mean the death is slower, more gradual and from more directions than in previous years.

But don't worry:

"Equities are at some of their lowest valuations in years"

"We consider ___ to be very attractive right here"

"The markets are poised for a bounce"

No agenda here, I'll trade in whatever direction the market is going. But I needed to get that off my chest.

Covered FCX

a moment ago for +1.6%. I thought briefly about taking half the position home with me, but things are too unpredictable in this market, so I will go home flat. BTW also got stopped out of the remainder of my BHI/RIG trade earlier this afternoon.


FCX just before lunch, and I just got back to see the trade is in the black. (No, I don't take one of those 2 hour "trader lunches") I purposely left the terminal for a while - it was difficult to pull the trigger on that one and it is probably best I am typing now instead of looking at the quote screen. I won't hold this trade overnight. This market is too cruel and difficult to take chances with your capital.

Yesterday's action

had a pretty horriffic end, with the -100 Dow for a while. My BHI/RIG trade was scaled down as I sold around 2:15 down to about 50% of my original position size in both. At the gap up open in both of these I scaled down to 10% of my original position size. At this position size it's probably silly to even bother keeping the trade open, but I still think we get a pop in that sector today, so I guess this is the result of my internal battle for risk control versus trading instincts.

NCC is moving against my short position this mroning, but you really expect a stocks to roll over in the afternoon, so how it trades around 1 or 2 pm will be the tell whether to cut bait on it or hold the line.

Probably no action in the portfolio from this point to lunchtime unless a stop gets hit or the market shows signs of a reversal (which seems unlikely).

Monday, June 19, 2006

I think we go lower in RIG and BHI in

the next few minutes. I will probably buy my other piece in BHI to balance out individual stock risk. Really should probably just buy OIH as a trade vehicle, but I find I get better execution on individual stocks, of course what's a few seconds?

As I was typing

the last post - RIG retraced in a manner consistent with the locals running some stops. I still will wait to expand my position until 12pm...


My entry looks a little premature... Either the specialists are running the stops right now (seems like the most likely scenario) or this is poised for a down day. I'll know whether I am punting on this trade in the next 10 minutes or so.

Buing some of RIG to open an intrady trade

I added 12% of equity in RIG - will buy another piece around 12 if everything looks good.

A fakeout open

that probably successfully tempted some traders to buy. I wouldn't have, but we will never really know since a technical issue with my equipment kept me from doing anything. I have a battery powered backup system, but I saw enough of the action this morning to know not to bother killing myself. I am up and running just fine now, and pondering where to go.

My NCC short is perplexing in the way it refuses to move - read an analyst piece in Barrons that reduced the price target to $32 on it, but we are still hovering around $36. Do I trust it or was it one of those "downgrades" that helps a firm get out from under a NCC short position just before the upward trend resumes? I think the fundamentals are in my favor, but I'd rather be wrong on the fundamentals and right on the trade than the reverse.

Not seeing much in the long department; I may revisit an intraday long setup during trader lunch hour if anything presents itself.

Friday, June 16, 2006

Getting shorter

Added to my short position in NCC and sold more long stocks. I am down to 25% long, and now I'm 10% short. It's a tough market right now to trade, and I am having a tough time thinking that anything but cash is best, since although I think the path of least resistance is down, another big rally is not at all unthinkable.

Sold out

of some long positions - down to 35% long right now. Initiated short position in NCC at 8% of equity. May add to this as the day goes on...

We gapped

down and equities are moving to fill that gap right now. So far the tentative plan is watch to see if yesterday's close becomes a point of resistance for AAPL, and trail stop the positions from yesterday to allow this market the chance to continue to rally (although I am not expecting it).

I am eyeing a short in NCC, but would like to see the opening range set in first before jumping the gun.

When the Fed Speaks

keep a close hand on your wallet. This morning seems to be further proof of that, since the market may open down and not coincidentally some hawkish remarks about the nation's inflation indicators were made yesterday. Seems nothing more than noise to me, since any economist with a pulse knows our inflation indicators understate true inflation, but I guess they need to headline something on CNBC.

I am still thinking the overall bias for the morning will be up for reasons stated yesterday, but who knows? I can't have a moment's hesitation in riding right back to cash.

Thursday, June 15, 2006

All this excitement

and I honestly forgot about that potential NCC short. Should the market roll over tomorrow, this rally provides an excellent set-up for that trade.

What a wild

trading day today was - I opened the day in cash, made a brief attempt at fading the open in FCX, closed that position, then did a complete 180 to finish the day about 60% long, and up substantially.

I am taking all my long positions home tonight. With all the short killing that went on today, I think momentum continues at least into the open tomorrow, although where it goes from there is anyone's guess.

My thought is that we se a continued rally in the am and a weak close tomorrow. First off, some traders were undoubtedly caught heavily short and off guard by the force of this rally. More importantly however, is that options expiration is tomorrow, and the put sellers will drag this market up kicking and screaming to reduce the price tag of settlement tomorrow. Earlier this week, the value of unexercised SPY puts was in monster territory.

Of course all this guessing means nothing; my main focus will be on price action tomorrow, and I can foresee returning to cash again either tomorrow or Monday; I wouldn't be surprised in the least if the market pops a vicious whipsaw in our direction soon.

AAPL immediately in the black

and CELG vacilatting - up momentarily, then the bid book gets swept by a larger sell order, bringing bid down momentarily.

Bought CELG

just a moment ago. And AAPL - combined long of 26% now. Hopefully my timing is not off. Generally I would wait until 12:00 pm to go long intraday. Depending on conditions I may go 50% long later today.


my FCX position - either today is not the day or my timing is off... A very small loss -.8% on 8% of portfolio.

The rally du jour

may break through or it may falter like many of the past few weeks. I opened a small short position in FCX this morning (8% of equity). If it breaks above the opening range I will cover and go long (in other sectors). If it slides below I will add to my position.

Wednesday, June 14, 2006

Ready to roll over?

One of the few

charts I've seen that still appears to have a relatively bullish trend intact despite all the selling going on.


today - the gap up after the CPI numbers just wasn't to my liking for a buy. I thought seriously yesterday afternoon about buying in force, but the risk/reward just didn't seem good. We had mild numbers, which resulted in a "modest" retracement, but I was thinking of the other side; had we had a really high CPI figure we could easily have slipped into oblivion again. The more I watch the tape, the more it seems that being long stocks is fighting against the current of the market.

Energy seemed to be the big winner with 2-3% gains on the day. I thought about shorting this uptick, but with options expiration and a possible short term retracement rally in the works, going short from a risk standpoint right now only seems to be doable on intraday trades.

Tuesday, June 13, 2006


Glad I didn't buy that sucker setup in oil today.

Thought briefly

about getting long here in the oil sector. But it is margin call time, so I think after yesterday's horror show I will wait until 2 pm before making any decisions.

Failed open?

Looks like another failed rally open for the markets today. I don't really feel the setup is there to go short, however - in retrospect that ship sailed yesterday. Today the duration of the position would only be intraday due to the need to go flat prior to tomorrow's closely watched CPI numbers.

On the flip side I definitely think we are doomed for another late day slide again as traders remain overly cautious going into tomorrow's big number.

Monday, June 12, 2006


trading action today. The open traded sideways until about 1 pm at which point everything decided to go into the collective toilet. The timing of the major breakdowns in all the markets (just after 1pm) smacks of margin call induced forced selling. I for one cut my stake down to about 7% long in the ill-timed IFO trade about 3:20. In a normal market environment, I would expect to see it gap up tomorrow, but this isn't a normal trading environment, so I decided to cut my bet size.

S & P

Holding the opening range for now (although if there is a downside breakout it would most likely occur in the next 40 minutes). Nasdaq 100 seems to have broken to the downside (although only slightly). In March I might have considered buying QQQQ's here for a long trade as a failed downside breakout with a stop in the 38.70 area, but I just don't think this market has enough legs to sustain much upside today.

I did buy IFO, which caught my eye due to the drubbing it has taken at the open today. I noticed some institutional sized bids coming in for it in the 17.85 level, so my portfolio is long 12% currently. I may buy another chunk around 12 depending on how the chart acts.

Friday, June 09, 2006


but not yet falling off the edge yet. Seems like closing out flat this weekend involves a bunch of short covering, which if I had to guess is the reason the market continues to levitate around par for the day. Once all the traders are flat and on the way to the beach, I wouldn't be surprised to see a last 30 minute slide into a -50 Dow close, but anything can happen with the way the market has been going lately.

Failed Rally,

or Wall Street on the way to the Hamptons? I'm not sure which. I was just going over my options. It seems downright dangerous to get longer now. I have thinned my long positions already earlier. I have a core of long positions on protected by stops, but am only roughly 20% long at this moment (80% cash). I am bearish on the market for the remainder of the day, but with everything wallowing inside the opening range, it seems too risky to initiate a short position here. So I instead will do something productive and go out and enjoy the beautiful weather. I will check the markets with my mobile device - I plan to go into the 2:00 hour less than 10% long. If the market really tanks I may consider a buy at close sell at open trade, but that too isn't seeming real optimal given the weekend headline risk.


So far no legs to this "reversal". My guess is we finish down - this seems to be a trader dominated market right now. If I'm reluctant to hold overnight positions, everyone else probably is too.

Thursday, June 08, 2006

Mining stocks yields?

Current dividend yield for PCU = 13%. Current dividend yield of FCX=6%. This caught my eye today. Of course, with the decline in underlying commodity prices, I'm sure the market would discount the possibility that profits and hence dividends drop in the future, but this is looking really interesting to me right now. Of course these stocks could well continue to get hammered for weeks - just because something makes sense doesn't make it happen...

Failed breakdown?

Here is one of the stocks I was long earlier today, with as much as 17% of equity in this position today. Still clearly a bearish chart, but in the short term, AAPL failed to break out below support, which means it may test the other side prior to breaking down again. Near the close, I closed part of the position, leaving my portfolio 8% long AAPL. I think it opens up tomorrow, but where it goes from there is anyone's guess in this market.


I am still confounded by this market, and have been for quite a while. The main step I have implemented is to reduce my position sizing considerably. Yesterday I lost money betting for a retracement that reversed in an ugly way. Today, I played the market much better, selling it during the opening and buying around 11:30 to catch what either is a serious bounce or just another fake out move. I did press my bet with as much as 55% long as of around 1pm, but reduced prior to the close to around 30% long at the close. I think that closing on the highs will at least signify an up open tomorrow, but I wouldn't be surprised in the least to see a close on the lows as traders go into the weekend flat.