Today I didn't have to use my AK... I gotta say it was a good day.

Apologies to Ice Cube.

The Shuttle launch was definitely the highlight of the day. I forgot my camera, but there will be enough professional-quality photos circulating around that I won't miss much. I got to watch from the parking lot of the Vehicle Assembly Building (VAB), exact location below:



Anyone can access the NASA website to view any shuttle related info, including photos and video of the most recent launch that will include footage from the Solid Rocket Boosters (SRB's). Those are the little guys that detach from the Shuttle after 2 minutes, and then parachute back into the Atlantic Ocean for retrieval. The thundering roar was pretty cool, but the brightness of the flame up close was what amazed me. I had to squint or look away.

Meanwhile, I was away from the Markets but my positions held. Notice how all four of my holdings are showing various stages of an Ascending Triangle pattern (bullish), and I ended up for the day.






I'm still about 50% cash, but not for any particular reason, except that I haven't chosen to commit to any more trades at this time. After I almost gave it all away to FAZ in March, I've sub-consciously been committing no more than 12%-15% total equity to any, one trade.

Before leaving work, I had updated all my TPS reports that the boss had been asking for; even remembered to use the cover sheets! After that, I went home and cooked up some homemade fried chicken tenders, steak, and corn on the cob for dinner. Then, we all spent a relatively relaxing evening at home while a thunderstorm rolled in to water our parched Plumeria and Pineapples. Yep, it was a pretty good day...now to just convince the missus to make it a 'perfect' day with a grande finale...

Shuttle Launch Today, 2:01 PM EST

Click for live coverage on NASA TV at NASA.com.
STS-125, Atlantis to service Hubble Space Telescope.

Got Gas?

I've noticed the price of gas has been going up in leaps and bounds again. So, I thought I'd check on the June contracts for Light, Sweet Crude. Here's the chart:



Looks like we're hitting a line of resistance. We might see a correction..most likely forming into a wedge or flag for a few weeks. What it means is that the price of gas might stay the same for the next month. Guess I won't try to wait before filling up.

TMV update

While researching my last post, I came across this article quoting Bill Gross of PIMCO. He predicts that the FED will step up Treasury buying in an attempt to keep agency mortgage rates at 4%. What the #$%@ is an "agency mortgage rate?" Beats me, I'm guessing it's a 30-yr mortgage on a house.

"...the Fed will likely have to step up its daily purchases of Treasuries and focus more on the longer end of the curve..."

And by "the curve", I assume he means the Yield Curve, where the longer end is probably the right side, the 30-yr Bonds. But the part I DO understand is that Treasury buyback by the Fed might pickup, which means a stabilizing of the 30-yr Bond interest rates, and my precious TMV might see some white water ahead. Should've known it wasn't going to be that easy to just buy and hold.

PIMCO and the Friday Night Link Orgy

Ok, I've never really been too good at comparing two people who reminded me of each other. But I saw this recent image of PIMCO's Co-CIO, Bill Gross:



And I couldn't stop thinking about this guy:


If you can guess who this is and where the picture is from, you can have the next two days off. Maybe if his hair was combed over a little...

Noob Trading for Today

Got stopped-out of TMV on a sharp dip, right before it channelled back up. I'll hold of for now, and see what happens Monday. Took a chance on FAZ during what I thought was a dip, but quickly gave all that money away and got stopped-out right away.

Bought some GNK at 19.71 and ILMN at 38.90. ILMN just hit the bottom of an ascending triangle, if it breaks down I'm out. GNK recently broke resistance around 19.50 and shot up to 23.75 before pulling back. I'm betting that line is now support, and will drop GNK if it falls through it.

FEED and GMO were flat all day, except GMO had a small runup at the end of the day. Chart patterns are still good, both on ascending triangles which are getting closer to Judgement Day.

Just Damn!

First of all, I have a disdain for conspiracy theorists. Second, I think bloggers who just parrot other blogs or news articles to comment on them are mostly worthless. But since I have a strong desire to get this latest tidbit of news out, I'm just going to put it out there and leave it at that. Here's a link to The Big Picture blog on the latest update on the GS conspiracy (make what you want of it):

Clickez-vous ici

In other news, I sold GSI yesterday and bought TMV and GMO. TMV is a 30-yr Treasury 3x Bear ETF, and it spiked up nicely today for a 9% gain. I've moved the stops up and still holding.

Also got back into some FEED at 3.99, thinking I saw a rising wedge. It failed later, but didn't drop so far to stop me out. I'll keep it overnight to see what it decides to do tomorrow. There's a lot of junk out there, and I might have to toss out my watch basket and find a new one, soon.



On a tip from Trader Stewie, I'll be looking at buying the dips on STM and GNK. That guy's got his sh!t together.

S&P to 950

This market is unrelenting, conspiracy theories or not. It's been a bit choppy lately, but I think I can finally see a nice pattern forming:


Looks like another Judgement Day in about two weeks or less. Is this an Ascending Triangle, or a Rising Wedge? Perhaps a rising wedge embedded within an ascending triangle? Ok, ok, I made that last one up.

Talk of the day has been about the S&P hitting it's 200 day MA. But I like to look at the EMA's, and the 50 week EMA has a few more points, currently at 986.


The markets have been a bit more choppy, so there are less entries. Those who are long are staying long, those in cash are staying in cash. We are currently overbought, but that has meant little during this rally so far. I've been busy with work, so I haven't had a chance to watch the tape and find a time to jump in. My only holding is GSI right now, as I got stopped-out of FEED for a small gain this morning.

I'm still itchin' to go short, but I'll go long with the trend. The problem is that the trend needs to blow off some steam.

As for conspiracy theories, I read this today, which really go the fear juices flowing. The strangest thing that came to me after reading this story was this thought: If the institutional investors have stepped-back to the retail investors trading these days, how can GoldmanSachs program trade and control the markets? Perhaps their volume is still great enough, it's just that the other big dogs know enough to stay out for now?

I'll be watching my usual, small basket of stocks for entries. Updates to come.

This is Good News

And by "Good" I mean "not good." Click on the picture for full article.

Nation Ready To Be Lied To About Economy Again

"For the first time in my life I know who the secretary of the treasury is," Harrington continued. "And I don't like it."

Sherpa Who Led Neil Armstrong To Moon Dead At 71

"...Phurba was as much a member of that team as anyone. Probably more than [Michael] Collins was."

Herding

Listening to Barry Ritholtz on Bloomberg Surveillance. He says that retail discount broker (Etrade, Ameritrade, etc...) trading volume is up while institutional (GS, JPM, etc...) volume is down. This means that us mom & pop, individual, little guys are trying to cash in on this rally while the big dogs are standing off. It also means that this is only a bear market rally, and not the big turnaround.

The little guys are usually the suckers in a trend, by the way.



I wonder how you get access to those volume numbers, get a Bloomberg? I'll have to ask him.

Some notes:

"...this is not the broad institutional endorsement that you see at the end of bear markets and at the beginning of bull markets."

"Mike Santoli (from Barrons): This is an unwiding of the panic selloff that we saw January, February, March. And it's now put us at a place where the heavy lifting is going to begin."

He supports a Chrysler bankruptcy as the price of free market capitalism, and the same should be applied to the banks.

The stress tests are ineffective, not 'stressful' enough:
"...it's going to take more cash to get them to the proper amount of leverage, and more sale of assets that are way under water."

"When people are talking about green shoots.. it's not that things are getting better, it's that things are getting worse at a slower rate."

Monday Review

First thing in the morning, I'm stopped-out of TMV for a small gain. GSI is rocking to new highs, along with FAS, STM, SCHN, and the rest of the Market.

I was watching to get on FAS. But it gapped-up and kept going, so I didn't move in. I prefer to buy on pullbacks or early starts to what I percieve as long moves up. FAS was riding just under the line of support and I was waiting for a pullback. It didn't pull back, but shot back up with a grand finale finish across the line of resistance. That's one of the problems of being a part-time trader, you can't watch the tape all day, or always be there when you want to jump in. But, I still have a day job, so I'm not complaining today. I did get to jump in on some FEED during an early pullback, and it's moving nicely so far. So, now my only two holdings are in Chinese companies. Hmmmm.

This morning I heard on the radio that China has quarantined up to 70 Mexican visitors, 25 Canadian students (& their teacher), and 4 Americans, out of fears for Swine Flu. One of the visitors was quoted as saying they felt like they had been kidnapped. It's all a reminder of the uncertainty in investing in China, the government is a much greater variable over there.

In other news, the radio is also talking about "the end of the Recession" and how we could be getting out of it. That's a bearish flag to me, but I'm not shorting until I see the patterns set up.

Update on the GS Conspiracy Theory

I checked out the GoldmanSachs666 site and happened to find an article from today talking about the same thing; find it here. Either the conspiracy theorists hang out (wouldn't be surprised), or the Small Smart Money is figuring it out at the same time.

In fact, in the comments section for another post on GS666, I found this gem mentioning the Zero Hedge article:

smalltownlawyer on April 27, 2009 9:21 PM

I am a little disappointed at how easy it is to debunk the Zero Hedge-born conspiracy theory regarding Goldman and their program trading activty. Look at Rule 107B - Supplemental Liquidity Providers - of the NYSE Rules on Dealings and Settlements, adopted October 29, 2008. The program's description reads a lot like the trading activity described on the Zero Hedge blog these past few weeks: a group of securities assigned to Goldman, the provider (Goldman) to use program trading and the providers own accounts rather than client accounts, etc. And, the purpose is to generate liquidity. Isn't this exactly what Zero Hedge has been describing? But, if so, it is not a conspiracy - it is an announced program being run on a 6-month pilot basis.

Perhaps, but the 6 months are up now, so let's see what happens. Besides, the Zero Hedge blog didn't really get into too many details of what the purpose of the conspiracy was (citing lack of information). Rather, it stated there seems to be an excellent option for monopoly, the benefits of which are still not clear.

GS Conspiracy Theory Explained

I have mentioned that I've heard rumors of how Goldman Sachs could be controlling the markets these days. No, I didn't get it from GoldmanSachs666.com, never actually been to the site...yet. I've heard mention of this from several different sources, but a recent article by Zero Hedge explains a lot. So much that I had to read it 2 or 3 times to digest all the big, hard words like "Pricipal Trader," which means trading not on behalf of its clients but for its own benefit. Here's some highlights from the posting:

"...Goldman has seen its share of Principal trading go from 60% all the way into 90%: a vast majority of all its trades are merely for its own benefit (and potentially as an SLP funnel)."
NOTE: read the article for a definition of SLP, it's the point of the whole post.

"...while the total amount of total Principal trading as a portion of NYSE PT has stayed relatively flat, at about half of total PT volumes, Goldman's share has exploded over the past six months: while GS was responsible for around 27% of Principal NYSE stock trading in Q3 and most of Q4, that number has risen to the low 50% range over the past 3 months."


"...traditional market neutral, high-frequency quants, aka independent liquidity providers have not only suffered significant P&L losses in April, but have deleveraged to a point where their presence in the market is negligible, resulting in dramatic volatility spikes on low volume. Could it be that Goldman is singlehandedly benefitting from being the liquidity provider of last resort, even more so as there are virtually no other participants in the SLP program? And, as is expected, with a liquidity "monopoly", come unprecedented opportunities to take advantage of this, depending on one's view of the market."

Thanks to Tyler Durden for excellent work. This has helped expand my knowlege about the rumors and scoffs of GS. However, this raises new fears and questions: is GS responsible for the Return of the Financials? (maybe it's really only the Bailout Money) Maybe this only means that GS is enjoying a certain monopoly on high-volume trading. But, whatever it is, those guys in the know...the full-timers, aren't too happy. So, I'll be keeping an eye out for more updates on these events. There is definitely a concerted effort to make GS seem like the new Evil That Must Be Stopped, or at least shorted someday.

--------------------------------------------------------------
As for trading, I found STM through iBankCoin.com.

At first, I saw the rising wedge, but I also see a sideways channel or flag potentially forming.


The daily chart shows RSI (pink) weakness getting stronger, and breaking down away from the momentum (green). It made a similar break to the upside in early March, so I'm guessing this stock is about to go down. Oh yeah, and it's Swine Flu-related. I would short the Swine Flu if it had an ETF right now.

FAS update, 3:29 pm

FAS


FAS didn't really find an opportunity to jump in today. The chart started looking more like a breakdown, and I'm not going to hold it over the weekend. Wait til Monday.

Speculate This!

Thanks to Evil Speculator for explaining the rules for bear markets and bear market rallies:

Bear market rallies continue on bad news and reverse on good news.

Chrysler is filing for bankruptcy. Normally, that is bad news... but my GM stock went up in sympathy. Uhhhhhhhh, Y-e-e-e-e-a-a-a-a-h-h-h...

I also discovered another conspiracy theory: that the bank stocks have been going up so that the bankers can have some equity to back up their lending and other witchcraft. I think it's rather that the $750B Christmas Bonus given to them by Congress is being realized in the stock price, and not the other way around. The banks have all this money for lending, but they're using it instead to keep the employees (at the top) happy and to save for a rainy day. However, it's been raining for over a year, and the housing, mortgage, and forclosure notice numbers all seem to suggest that the storm is only getting worse. I'm sure this bank fiasco will all make sense 3 years from now when we look back and the truth is slowly leaked out in the back pages of the 2 or 3 newspapers still printing on real paper.

Other talk is that the Market Makers are whipsawing the prices and destroying the average/noob trader's equity accounts like a whipsaw through a noob trader's account, and that there's not much volume otherwise. I've been hearing for almost 2 years now that the "money is on the sidelines", people are waiting for the chance to jump in. Supposedly, only the institutions are trading, and so the volume is low. I don't know about that. I'm not sure what institutional volume is supposed to look like, but the volume levels on my charts look nominal. It's all noise, the real trading needs to be based on the charts and nothing else.

As for charts, thanks to Trader Stewie for pointing out this winner. He's got a new stock alert service with a free trial. I'm trading with my IRA, so I can't touch any money for another 30 years, and the rest of my paycheck goes to one of those big banks that got billions in bailout money... I guess that means my paycheck AND my tax money go there..hmmmm. Anyway, I'd like to sign up for his service as soon as I can make trading a more serious hobby...or job. I'd definitely recommend it!

XLF is showing an ascending triangle pattern. As much as I am still pessimistic about the banks, this chart is telling me that XLF is about to pop up again...long live the banks/financials. I'll be looking for a pullback in FAS to get in.

Update on previous holdings: I got into TNA today and was almost instantly stopped out as it kept falling. I got into my bear short, TMV, and it's looking good so far. This is despite the Fed announcing that it will buy back another $300B in treasuries by autumn. I had expected a correction, but it was short-lived as I have seen the wildest interday spikes in 30-yr treasury rates ever in the 4+ years I've been watching them.

Still holding GM and GSI in the green.

The name's Bond, Junk Bond...

The smartest thing I've done this week is dump my 30-yr treasuries that I've held for 4 years. The dumbest thing I'm probably going to do is go nuts against those bonds further by putting some of that newly-freed cash into a 3x ETF going against those same bonds: TMV. If the banks won't give me what I want, then perhaps TMV will...

Still holding FAZ overnight for small gain as of now, but that ETF is so volatile right now that I'm not getting excited yet. Dropped LVLT today, it was rockin' yesterday but stopped me out today. If this keeps up, I'll get out of SIRI too. GSI and GM disappointed today, but still within tolerance.

Many indices are completing wedge patterns, indicating a substantial move in either direction soon. The fundamentals still point to doom, but there is just no telling at this point. Chances are, when the wedge is broken, a lot of traders while pile in. Gotta be quick!

Wednesday, I'll be watching TMV, TNA, and TZA for entries.

Krispey, yet Kremey

I learned a new term today: 'stop sweep'. KKD opened up and then spiked-down big time this morning. It dropped just enough to kiss my stop, and then shot back up. More market f*ckery by the Market Makers, I assume. They've learned a new trick: sell sell sell to kick out all the preset stops placed out there, then flip the price back up and get the suckers to jump back in.

KKD is almost back down to where it stopped me out, and I haven't been eager get back in. Too much Krispey Kreme gives me heartburn, anyway.

Speaking of heartburn, the Fed should look into acquiring Waste Management while it assumes all this garbage it's taking from the banks. There is a massive transfer of wealth...correction: there WAS a massive transfer of wealth. The banks/lenders gave all the money to the developers/speculators/insurers/etc..., and now we taxpayers are transferring it back to the banks through the FED. It's going to get worse before it gets worse.

Daytrading, the next fad?

I'm finding that more and more daytraders, who have been blogging and vlogging for several years now, are going "pro", they have decided to start charging for their services. They have rightfully earned their status, with a regular population of followers, so they can get away with adding the extra income. More power to you guys.

But it's an interesting sign of the times: more daytrading followers indicates that more people are looking to trade for themselves. I'm just worried that sudden growth like this could turn into fad-status, but I'm not sure what to make of it yet. Right now, we could use some more meat for the grinder, the volume has been so low these past few weeks that the big money movers (a.k.a. Market Makers) have nearly full control over what the markets are doing that day.

The only thing I can think of for now is that 401k firms and mutual funds might start having to get creative to retain investors, while this new wave of private (and unlicensed) advisors fill the holes. Interesting times, indeed.

More Headfake

Some of the buzz I caught today is more confusion on which way the markets are going. The Bears expected a big move down today based on technicals. But volume was relatively low today, and at key points...nothing happened. So, the door was left wide open for the market movers to decide the day. And since most of THOSE guys work at the banks/financials, guess which way it went at the end of the day?

Ok, I'm starting to sound like a conspiracy theorist, it's beginning to bother me. I don't want to turn into some wacko full of crazy ideas, because such people instantly lose credibility with me. But I'm still trying to figure all this out from a newbie, retail, point of view... who's trying to stay away from the herd.

Anyway, look at the chart above. Despite the sudden move up at the end of the day, XLF (and the S&P for that matter) is still within it's nominal channel and behaving normal. There's still a ceiling around 11.50, but I've already bought some FAZ in anticipation.

If I didn't say already, here's my other holdings (all long): GM, SIRI, GSI, KKD, LVLT, and some 30-yr US bonds I got when they were around 5%. I tried dumping the bonds on Wednesday, but the buy offer expired before I accepted. I still hold them, but I'm watching the rates for a few days, looks like the prices might rise a tad again.

Treasury Recall

Treasury Department Issues Emergency Recall Of All US Dollars


I see short-term down days ahead, but I am long a select few favorites that have been scraping bottom: KKD, SIRI, GSI, GM, and LVLT. I'm keeping an eye on all these with tight stops, along with yet another FAZ entry.

Lots of chop right now, and I'm guessing the government's Stress Test announcements are being timed to try and keep things afloat. Let's see if that and the false bank profits can keep this Market F*ckery going!

Still reading Jim Rogers A Bull in China, and building a list of Chinese stocks to research.

Here it comes

Options expired today, and earnings are about through. All the banking information released is total bunk, yet I still don't get tired of getting burned by FAZ. Direxion triple ETF's have now earned the term, "Devil's ETFs". Now is not the time to make a deal with the Devil, but soon....soon.

S&P 500 is reaching a critical point of decision: a rising wedge starting to touch a fairly decent line of resistance. This is very Bearish, indeed, and I'm itching to short the S&P and get it out of my system.




GS has settled around the 120 mark that I suggested in my last post, and is closing the gap to the 2-yr old resistance line. The top is around 126 here, but since that line goes so far back, I'd have to keep it exact number a little fuzzy until it gets defined. It may end up being a thick line with a hi-low range, so I'm not going to worry about it. GS likes to move in the direction of the Indices, so if the Dow goes down, GS might follow. There's still some room on this ceiling, though, and I won't be surprised if it finally gets touched before any real moves down.



I'm currently reading Jim Rodger's A Bull in China. And I just so happen to keep hearing recommendations by the pros for FEED (Chinese owned). I jumped in today and got stopped out before the close. I will look to get back in around 3.00, this might be a good long-term play.

Gold, Man!

Goldman Sachs reported earnings early today. I didn't know that because I was reading the news, I found out because the professional traders posting on the decent blogs that I frequent were posting in disbelief. I hear ("read") terms such as, "WTF?!?!", "..how brazen,", and "huh?" Apparently, is was premature for GS to announce today. Maybe they had to one-up Wells Fargo with their premature annouce-ulation Friday? WFC still hasn't actually announced earnings, they just wanted to let us all know that it's gonna be great!

Whew, what a relief! This rally is up almost 29% in A MONTH, but we needed that warm, maternal, reassurance of STELLAR earnings by these financial groups right away. Heaven forbid that this rally loses thrust while still trying to break orbit! I must applaud PresBO, the Fed, the Treasury, and all these Wall Street clubbers for the machine-like execution of their joint effort in keeping things afloat. It is working very well right now, and yet I can't seem to stay away from listening to Jim Rogers or this guy:



That being said, here's the technicals on GS:


Price action is attempting to penetrate a 1.5 year old resistance line that sits around 128-132 today. Breaking through that channel is quite bullish, and I'd expect to see it go up for at least a couple of days before any red candles form.


But the Bear in me loves the dark, dismal side! MACD is looking tired, just like it did back in December (see arrows), and there may be a trend to follow the wedge. Since I don't have the fancy charts that light up the price on the right, I had to mouse over the point of convergence for the three lines, I got April 23 at $125.71. If GS just doesn't take off the next few days, we could see a pennant before the rally continues. Makes a good case to get in GS around $120. Even StockTA.com has nothing but support for GS!

There will be blood!

Thanks to Evil Speculator for this cry of doom & gloom, here at the peak of this Bear Market Rally.



Things have been going well, and the charts look like we're piercing through resistance lines left and right. But I still can't stop feeling that this whole rally is artificial, and it just won't be enough to float us until the fundamentals catch up. Creeping inflation is still hitting us while the FED denies it through "Core CPI", we've printed more money than EVER to bail ourselves out, and we now have a bunch of financial institutions who are technically government owned.

Over Easter, I spoke with my sister-in-law, who is a manager at a big bank. She says that the TARP funds were originally going to have to be held by the banks for a minimum of 3 years while they paid interest to the gov't, but now it's down to 1 year minimum. They still have to pay that interest, and were forced to take the loans by the government. Bailout or not, I don't care what they say or how much we're mad at the banks, but the Feds scammed the banks for some guaranteed interest payments while telling the rest of us that it was for our own good. Why can't politicians just come right out and say what they're really doing? Is it so bad to dance around these feel-good explanations instead of just telling us what's going on? Are we, the people, that ignorant? Probably so, so I'll just stop that rant right there.

But this particular bank can't wait to pay back it's TARP money (which every single bank in the country had to take, big or small), and thinks it will be rockin' in a year, especially when it's acquisition comes through of another major financial firm with big-hitter money management accounts. In a related note, Goldman Sachs wants to dump $5.5B of itself into a fresh stock offering so that it can pay off its TARP money NOW!

So, the banks are optimistic. The bulls are optimistic. The charts are even looking optimistic. Look how a the S&P continues to channel up through repeted declining RSI and MACD curves:



But with all these gaps up and down overnight, retailers like me are taking a step back after getting burned a few times. This bull looks like it could keep going, but it's also looking pretty tired. Earnings come out this week, Wells Fargo put the market into a Second Stage booster lift through premature annouce-ulation. Did they really need to do that, or was the market losing steam too early?

In snort, I am so cynical about this market and rally. It's still way too choppy, and I suspect we may see more blood & chop up to about S&P 880 (max) before a serious, more prolonged "correction."

Where do we go now?

This is what I'm looking at tonight:



Yes, yes, very busy, so, let me explain.
I divided the chart into four segments, based on where the MACD lines crossed (Orange circles, boxes, and vertical lines). I placed a mess of trendlines to see if there were any correlations between the various indicators and price action.

The easy thing to spot is where the market bottomed in early March. Leading indicators were the positive divergence in the RSI, MACD trend & histogram, and Force Index. All those went flat while the market still dropped, until the market shot up.

I was actually hoping to find some good revelations on MA/EMA relationships, like if the MA(10) crosses the EMA(12) then I get a good buy/sell signal. I've stared at it for about 1/2 an hour now, and I don't see any indicators here. I got the idea of mixing MA with EMA from dshort.com (excellent site).

But the point of all this is in the subject of this post: Where do we go now? Well, what I see is a flat RSI and MACD curve, downtrending MACD histogram and Force Index while the price has been channeling up. Since RSI is within normal levels, I don't give it much heed. But I do have a little more confidence in the MACD flattop. That negative divergence could be a telltale sign that this rally may be coming to a close, and Trader Stewie believes we might be setting up for an upslope Head & Shoulders pattern. I'm just a little skeptical about going bearish again already, especially since the VIX is testing support levels.

I still believe that we are going to challenge the March low of 666. We might not go that far, or we could even drop to 600 (or 480!). But this rally is so unnatural (I might go into my conspiracy theories another time) that it's best to stay light-footed and be able to get in and out quickly.

Looking Down into the Geyser

Ever since the bottom, I have been bearish. This is why I'm my own, best contrarian indicator. I am so sick of this rally because I see no logical reason behind it. This rally feels like a bottom because of the relentless recovery, and yet I am very cynical about the efforts being made by the decision makers (both public and private) to turn the economy around.

The technicals point to this rally continuing into next week, but the fundamentals suggest that this is a purely emotional rally. Actually, I'm afraid it may be artificial: where is all that money that was given to the banks? Congress can't seem to get an answer, and yet the banks get a pass while GM is getting raked over the coals. I guess there is a slight difference, I have a GM product sitting in my driveway, but a bank collects monthly for the mortgage on that driveway. I work on my own car and avoid dealers like a TB ward, so GM got my money back in 2001 and won't see any more for a while.

Still, what ARE the banks doing with all that money? Paying their own loans, sitting in cash? Banks make money by investing, and many have large trading floors that move a LOT of money daily. I'm not one for conspiracy theories, but who's to say that the banks aren't quietly buying back their own stock, as financials have led this rally? Again, I don't like crackpot theories, but $760 B into financials for 3 strait weeks WOULD explain a lot, like why Congress is giving them a pass (because THEY KNOW). I'm just saying...

So, I still have much difficulty believing in this rally, which has made me "too smart" to read the Trend. Therefore, I have been staring down into the flow of this geyser as it has blasted me in the face. This week, I've listened to a parade of economists on Bloomberg Surveillance predicting lower lows in 3rd QTR 2009...oops, just heard one say 2nd QTR, before we go back up.

This rally is tired. Remember that the trend is your friend, and don't try to outsmart the technicals. Last week's technicals are showing bullish ascending wedges and pennants, XLF looks like a flag. This is all bullish, but I get more skeptical every day.

Long Term Analysis

Haven't even looked at the market since Wednesday. I've had problems with my dog, and then with my grandmother out of town. I've missed all this churn for the past week, thankfully.

We can see a bullish, rising wedge forming for over a week now. It appears that XLF may be falling through support, but it's still within tolerance, and the aftermarket moved back up to 9.19. This pattern should break Monday or Tuesday. I've reached boredom with looking for a reversal, so I'll be looking at FAS. However, since I'm a pretty good contrarian indicator, I'll just keep an eye on XLF and get ready to go either way, FAS/FAZ. Recent narrowing of the channel has reduced volatility of the financials, and I've seen traders (the smart ones) moving into pure equities (not the ETF's) to get bigger profits. After enough people get bored with XLF, there may be good opportunity for a big move when this bullish wedge breaks.


As for where this market is going to go, this rally has really felt like "the bottom." But I still have serious doubts. Recent news about Tobin's Q-Ratio has apparently gone out to the CFA's of the country, as I've heard several of them talk about it recently. One of them is Steve Pomeranz, to whom I listen every week. Here's another CFA who explains Q-Ratio and where it is today. Mr. Pomeranz, by the way, states that the Q-Ratio during 1932 was around 0.30 (& 1921, 1949, & 1952), today it's at 0.76. He also quotes an analyst who believes we'll be in a rally for 2 years supported by the Stimulus until it wears off, and then we'll see things drop to 0.30 by 2014. Congress has been known to extend laws dealing with money, so I'm not too sure about this analysis. But a decent, 2-3 year rally could compare with the the roller coaster ride of 1965-1977. Listen to his radio show from March 23, 2009. He explains all this in the first 7 minutes.

Long term, this looks like a Bear Market Rally that will remain relatively flat for a few months, churning around to look like a wide, dome shape. This rally is being floated by all the stimulus getting pumped into the system by the Fed and Congress with borrowed money. I don't think this jump-start is enough, the fire needs to be put out at the source, and there's not enough fire trucks. This thing is world-wide, and repercussions are still rippling around across the oceans. There is still a lot of room to fall, and I don't see that the fundamentals have really changed enough to turn things around...yet.

Also, here is a monthly chart of the S&P 500 since 1928, log scale. Look at the very right side, 1999-present. I'm concerned about the negative divergence between the double tops and the MACD & RSI peaks down below. Not a good sign...

And Now for Something Completely Different...

Hey guys! I just found this cool, new thing! It's called, Moving Averages!!! It's SOOOOOO cool!

Ok, seriously. I've been placing EMA's in my charts for years, now, but never really used them. I just put them there because some big-shot money-makin trader told me to a while back. Now, thanks to dshort.com, I've realized a little better how to use them to time entries and exits. Also, checkout iBankCoin.com for true, expert knowledge.

I've put up a 10-MA and 12-EMA on my charts and started browsing around. Visual back-testing has helped me come up with a few clues on how to use them, so I'll be trying it out in the near future.

With that in mind, I think I am ready to call a local top to this rally. XLF is breaking down, and I'll be looking to get back into FAZ tomorrow after the morning pop (Stewie, are you reading?).



20 Day XLF. I see a Megaphone Pattern expanding for a week now, combined with declining trends in MACD and RSI. Blue EMA curve is also leading a bearish sign, and I'll be looking for confirmation after tomorrow's opening.



5 Day XLF. I'll be watching for price to not penetrate the Blue EMA line, and for that line to lead a decline. There's a good chance that XLF will break through the channel support around 8.75.

Well class, what did we learn?

Never, EVER, stand in the way of a trend for so long. I broke all the rules, bet too much, pulled the stops, and denied losses in an emotional fury.

So, where do we go from here? Markets finally pulled back from this week-long, insane rally today, but there is SO much conflicting information to try to figure out a trend right now.

1) Financials have led the rally, possibly because they reported better earnings this week. But, has the situation really improved?
2) Ben Bernanke, and the FOMC have both made announcements this week that appear crafted to jump-start the market. And while the Fed announcement to buy back 30-yr treasuries sounds like a good thing, they're going to have to print money to do it. This will cause inflation, the Fed's bane.
3) President Obama is going to be on TV tonight. I expect he will change from his "doom & gloom" speech to "roses and butterflies are coming soon".
4) There are a lot of bloggers talking about going short during the week, only to have become quickly squeezed out.
5) There's new offerings sponsored by the government help resolve housing problems, get/keep people in houses, slow/stop foreclosures, and find new ways to deal with all the bad loans out there.
6) Half the traders out there are saying that we still have months of more downside to go, or would that be just sideways chop? And I'm hearing more doom & gloom into this rally. One stated, "if this really was the bottom, then we wouldn't be asking ourselves right now if this was the bottom." THE BOTTOM is typically characterized by so much despair that people have given up on looking for a recovery.

It all just seems too easy at this point. Some want to compare this to The Great Depression, but the markets haven't really behaved the same. To match the Depression, the Dow would need to fall another 4952 points from today's close of 7400, to bottom at DOW 1846. I think we're due for a pullback, but I expect a short one for now before the rally continues to, at least, 825-850 SPX.

Then again, perhaps all this news is really just noise. Look at the charts and turn off CNBC! I just can't stop the feeling that we'll have a higher low during this consolidation, followed by more rally. Then, we might see another HUGE drop in a month or two.



****UPDATE:
I just noticed that how today's volume compared in the Bullish ETFs to the Bearish ETFs. FAS had almost 6x the volume of FAZ, and dropped 20% while a theoretical inverse drop in FAZ (if you reverse the open and close numbers) would have only been a 13% drop. I think it means the bulls are pulling out, but the bears aren't jumping in. I wonder if tomorrow will continue consolidation?

Short Squeeze?

Today moved as predicted, although a little more pronounced than expected. I've heard a little buzz here and there that this week's price performance may be influenced by the fact that this Friday is Expiration Day for March options. I don't really understand HOW that affects stocks right now, so I hope to get more info as the week unfolds.
The rally today seemed fairly strong, especially since many traders (who blog) expected a shorting day today. After looking at the low volume, I'm thinking today was a short-squeeze play: churning out the timid bears before really going down. Of course, my opinion is biased right now. But, I DID read a comment on a blog today that theorized that since 'no one believes the rally, then there really is a rally.'

True Dat.

Hangin' in There

Still riding the FAZ for the first up-day since I got in. Volume was good for a turnaround, we'll see tomorrow. I also got a Regulation-T notice from my broker. It basically means I can't day-trade with a cash account, which is what I'm working with, unless I trade small enough to have cash on hand to settle the trades 3 days later. So, I couldn't pop out of those FAZ trades as soon as I had wanted to, anyway. Live and learn.

Stewie is nervous, he is back in FAZ at a lower entry, but has noticed ALL other bloggers are also currently short. His comments are that many of these bloggers are rookies, like myself, and that might be a bad sign.

Another trader on Trader Interviews has stated that he'll look for good ol' setups, and then trade against them, betting that the rookies will take the setup but the big fish will go the other way. There's been a lot of that these days, a lot of chop has washed out traders for a while now.





The thing that bothers me about this assumption is that MACD and EMA's are all in a different orientation. I'm not sure if that is more important, or if just the long-term to short-term line relationships are more relevant. The after-hours trades are already pointing at a head-fake, so I'm expecting higher Indices and lower FAZ tomorrow still. I predict FAZ will form a red candle with a long, lower shadow, but may not drop below today's lows.

Stupid Is As Stupid Does

Had another shot at dumping FAZ at a decent price (high 59.50) in the opening minutes. But again held on to see if it would go higher. Today wasn't that day, and the words, "wealth destruction" keep entering my head. Still confident that the rally will end soon, and will be watching price action closely again tomorrow.

What did we learn today? When that voice in your head tells you to shoot, SHOOT! No more second guessing the guy, at least take SOME profits off the table.

Looking around at long-term sentiment, I'm finding rumors that oil is moving up to a more stable price (which usually moves the markets opposite these days). That's also spurring talk of inflation again, more bear-talk.

As for pics, WTF is going on with Scottrade? According to their chart, FAZ shot up like nuts at the close, but the numbers at the top say it closed at 41.60. Even Yahoo! says it has dropped off even further since the close. I'll have to see what Scottrade's chart looks like after the open tomorrow.

Ride the FAZ

During a break at work this morning, I check out Stewie's blog to see what's new. He had just put in a post that states that FAZ and SKF are in good, short-term positions for the upside. I check it out and figure I could tell what he was talking about.

Looking at the 5-day, I see FAZ is bouncing off a lower channel and the overall rally is expected to be short. Price action was showing a swift turnaround from the opening activity, and it looked promising.

I jumped in at 54.69 and watched it rocket up to about 60. I needed it to get to above 64 to make back my losses from Monday, but I was still willing to take what I could off the table. However, I instead hung on to see if it would go higher and had to get back to work. When I got the chance to look back at it, the price had plummeted back down to 55. I watched to price go back up and down two more times, each time considering that I should jump off near 60. But I kept waiting, hoping, actually, for it to cross 60 and shoot up even further.

I watched the prices at the end of the day to see which way they would go. They're moving in the right direction, so I decided to hold overnight. Very, VERY risky with a 3x short ETF! But looking at the long-term charts, and figuring that the bear rally may be over after tomorrow, I figure that the risk is reduced. Aftermarket action climbed up, too. I may be in the money right now, but it could always gap down tomorrow and fall away. Keep the finger on the trigger.

To the experienced day-trader, these are all probably horrific, newbie mistakes. Let me just say that the worse part is not my inexperience, but that I have to limit my trading severely because of my job. With patience and better stops, I expect to find a balance and routine into a part-time trading schedule.

That's also why I have this blog. I don't care if nobody ever reads it, because it will be here for me to look back and study my own mistakes.

Snap Out of It!

After getting my rear handed to me in some short-term trades, I've remembered to better log my trades. I've mostly stayed away from the markets through all this downturn, and have read about daytraders getting washed out of the Game over the past few months. I'll be watching the S&P as a primary indicator of what's going on in the markets in general. The financials are also volatile, which could be a good place for short-term trades...as soon as I get around to examining them.

The charts seem to tell me that we still have farther to fall, but right now is a time to consolidate.

Unnecessary..

...like France.

Good beat, I like the guy with the 'fro.

I'm my own Contrarian Indicator

A trader who goes by 'Stewie' is one of the best traders I've met online. I frequent his blog often and recently commented on what I'm doing with my retirement money. It took another guy to help me realize that I might be a contrarian indicator for the full-timers out there. How's that for confidence?



In other news, here's something I put together today to relate to my real job.



I used to read Dilbert in college and wonder if my life would actually end up like that.

We're B-a-a-a-a-a-a-c-k!

Hey, I found my old blog! It will be nice to record my thoughts and musings again, now that I've sold the restaurant and returned to my old ways again. So much has changed since my last entry, but I'm just going to pick up where I left off for now.

The markets are in the middle of a "death spiral", and I'm starting to see signs of blood in the streets. We're certainly not there yet, but I believe the rebound will be just as fierce as the fall. More to come.

Pizza Party

It's official, I have bought my first business. Not just a piece of stock, but the whole thing. Got a great deal on an Italian restaurant in South Daytona, about the price of the equipment. This is what has been distracting me from all the stock research I was doing only months ago, but I'm hoping to find a new routine soon.

I never saw the sudden drop in stocks that I was waiting for in October. However, it seems that things are starting to stall as we approach the election next week. I'm sure there's a pattern usually seen after off-Presidential elections, but I'm not going to play that game this time. I'm starting to like news-less research all over again!

Besides, the blogs are where it's at! Mainstream media is best for the herds (but there is BIG money in it)!

Taking it in the Shorts

Whew! Over a month since my last post, and nobody noticed. Oh well, there's been so much going on in my life that I haven't had much time to look at investing, let alone write about it.

Meanwhile, my virtual stock game at VSE is showing my getting ripped a new one from betting agains Google. All I can say for myself is, "ow." I'm keeping the short for now because I'm getting some change back that I lost.

Now I know why some money managers NEVER attempt to short. Not a good idea when the Dow is breaking new highs and the other indices are tagging along!

Cheers! And here's to more posts to come soon!

A Lot of Loud Silence

As I peruse throught the various stocks and indices out there, I notice that volume has been gradually decreasing for months and more. It's like more people are either sitting on their bets, pulling out of the markets, or just aren't sure where to go (uncertainty). Sure, a few stocks here and there are moving around, but I sure am noticing a lot of volume trailing away. I suppose whenever the market decides to get moving, it's really gonna move!

Perhaps when the reality of housing hits, ARMs convert, foreclosures go up, cats & dogs start living together, we'll see renewed interest in stocks? Or more running for cover?

Speaking of housing, there's this great comment I read off of my favorite (other) blog, The Big Picture:

"...To complete the global picture, consider this - in one of the condo buildings I surveyed in Pune (near Bombay), the builder told me that 50% of the condos were sold to US investors who used, wait for it, HELOCs in their US properties to buy property in India."

And I thought the lottery was the only tax on stupidity!

Bond-O

My last post addressed how the news and gossip that I read sound very upbeat and positive about the markets. This is a good sign that the smart money might be ready to take some profits. Correct me if I'm wrong, but this rally/correction to the bear-correction may soon be ready for its own correction.

Some say that the bond market contains the 'adults' of the markets, and bond prices are rising. Isn't that a sign that we might be in for some more bad days in stocks? There are all the reasons, FED Watch, Oil prices, housing, etc.. but the fact remains that bonds are rising.

Even this morning, the local Orlando news had a story of realtors admitting that the soft landing is going to be harder than previously thought. They expect the slump in sales to bottom next summer. But they were wrong about the landing (or just didn't want to admit it), so I take their word with a pinch of salt.

Been Off Track

It's been a while since my last post. My excuse is that I haven't had much to say the past few days. I've been busy with work and family, and really haven't been able to keep up on the markets.

This has cost me in my trading as well as my blogging. I've been hammered the past few days, losing gains while not keeping on top of them. Tonight I begin to scan the indices, news, and other blogs that I watch for updates and find out what I've missed. Gold has fallen, oil is down, and the markets have been rallying in concert.

It's been 3 days now for the Nasdaq to rally, and it's showing signs of weekness. Since I've been hurt shorting so many times, I hesitate to short now. I was hoping to become more bullish, probably because of this uptrend that we've been in for a few weeks now. Meanwhile, the prophecies of another major correction in October still linger, with a few mentioning it. Now WOULD be a good time for another correction, because no one expects it.

There are several reasons that things are up this week, Options expiring Friday, oil down, consumer confidence rising, VIX down, optimistic FED expectations, and the smart money is pounding the Bears. I expect to see some profit-taking on Friday as the rest of us newbies decide to go long.

As for myself, I'm going take a good, long look at the big picture before I jump back in.

Long Weekend

Well, the 'adults' are back in the markets, as CNBC put it yesterday. And trading is supposedly back to serious trading, as everything closed way up on Monday.

It's good to see an up-day, but I feel that the recent end-of-summer rally is a bit overbought. In particular, I noticed Ford's chart was showing a weeker slope with possible signs of a turnaround. I shorted yesterday, right before Bill's announcement of his new CEO. The stock is up on the overnight news, but I'm not ready to give up yet. The stop is set, and I expect the price to recover down to the low of a channel, maybe to 7.80, before recovery.

Basically, the good news had already been 'baked in' to Ford's stock. I wanted to go long when I first heard Ford had hired a well-known turnaround manager, but the stock had already rallied. But I watched it rise another 2 bucks while waiting for the rocket fuel to burn out. I don't expect to be short more than a week, as I have good faith in the new CEO. However, it will be a long and slow recovery.

Here's a random question:
Why is it that the really cool/funny commercials these days are by the credit card companies? Namely, the Capital One commercials, and the Citi Identity Theft victims are my favorites today. Until about 5 years ago, the beer commercials were the best. What happened? Did those talented marketers move to companies that serve the credit card companies? Or is this a sign of the times, that money is no longer in beer, but in the financial industry?