10% Intraday Swing
No one knows the future, but we can play the odds when they are in our favor.
Today was one of those days.
What was looking like a shaky retest now looks like a reverse head & shoulders low (or a triple bottom). For those of you who have been paying attention to both the broader market theories espoused here, as well as the specific trading dynamics, there was money to be made in this environment.
If you made the difficult trade and saw some portfolio net gains, congratulations — go buy yourself something nice.
If you did not participate because your methodology does not involve active trading or market timing, congratulations for sticking to your discipline.
Everyone else should be trying to figure out what today meant. Was this a repeatable set up? Are there clues you may have missed? What lessons there are to be learned from recent action?
>
November 13th, 2008 at 4:13 pm
Put SPY on a 60 min 6 week chart with a 50MA average and you’ll see the second downwave is moving higher than the first. Good chance at recovery moving forward.
November 13th, 2008 at 4:19 pm
A retest, midst very negative attitudes & a legitimate key reversal….will not sneeze at it. Mkts go to the orders…price movement makes the news.
November 13th, 2008 at 4:20 pm
I remain flexible to change course, but as I pointed out recently, we’ll be back at these levels again for retest. Not sure when, but probably much sooner than most people think. All of the bad news isn’t yet priced in. How can it be when we don’t even know all of the bad news that’s likely out there?
November 13th, 2008 at 4:21 pm
I learned to listen to BR. I’m guessing Nouriel Roubini will be having a tough 4-5 months trying to explain why stocks are going up when he is predicting they’ll go down nonstop until the S&P hits 600.
November 13th, 2008 at 4:21 pm
Big lesson to be learned: Listen to Barry, you guys
I was thinking like you but was mostly in already and down because I hadn’t sold out at the recent high. Was looking to buy at the when it hit the low, but was out, but did manage to get some more DDM at 30 to balance the SSO and UWM. Since I’m long, hope this is for real. It may be that we are in a trading range as you suggested a week or so ago. In any case, bailing out of the options if I we get back to near the recent peak and just rely on the ultralongs.
November 13th, 2008 at 4:22 pm
A few of us saw head and shoulders action in the short vehicles, like SKF and DUG. The prospect of short sellers taking profits was one factor that encouraged me to buy late yesterday, and of course I have been waiting for the long end of the Treasury market to start melting down. Of course, I am right 50% of the time.
November 13th, 2008 at 4:23 pm
What a day! I just hope the rally is met with skepticism and not too many bottom callers.
November 13th, 2008 at 4:23 pm
in reality we made a new low on the naz and SP. People can sugarcoat it however they like, but decisive new intraday lows were made today.
~~~
BR: You are correct - I dont know if it matters, but you are correct.
http://stockcharts.com/charts/gallery.html?$COMPQ
http://stockcharts.com/charts/gallery.html?$SPX
November 13th, 2008 at 4:24 pm
“For the faint of heart or weak of mind the market is not” — Yoda.
November 13th, 2008 at 4:25 pm
Sold my QQQ puts a little after the market began the bounce off the day’s bottom. Then bought QQQ calls and sold them at a profit at the close.
Would it be all days were this good.
As to why the market rallied, who knows? Maybe it’’s a bottom?
November 13th, 2008 at 4:26 pm
I made the difficult trade a few days ago in ABV….today I just used horrible stops and got stopped out.
November 13th, 2008 at 4:27 pm
Of course hindsight is 20/20 (or close enough). I’m not a super sophisticated trader, but I thought that it was a good sign that the markets didn’t tank on the greater than 500K unemployment numbers.
And then when we didn’t break the previous lows, I took as a good sign, and got a little longer.
Quick question to the group, do you guys look for individual stocks to trade in this environment (meaning stocks that you always have on your radar screens), or do you just trade the indices?
thanks,
Jeff
November 13th, 2008 at 4:27 pm
Another modest rally tomorrow (about 2%), and I’ll probably short it.
November 13th, 2008 at 4:31 pm
I wonder if Steve Barry sold QID?
November 13th, 2008 at 4:34 pm
I am reasonably optimistic but I don’t see myself taking many individual stocks home for the weekend. All eyes have to be on the bond market. How much longer will people sit in the 3-month T-bill and the 2-year?
November 13th, 2008 at 4:36 pm
leftback:
hope you were out of your SRS
134.70 -37.83 (-21.93%)
I have a standing buy order for some at 82, but I guess it’ll never get back there.
November 13th, 2008 at 4:37 pm
Got filled to all my limit trades to close out SDS yesterday and today 105, 106 ,107 then got filled on SSO at 24. Been pretty lucky all of a sudden. I think I’ll treat myself to a couple of days WITHOUT Xanax.
The SDS trade was for no gain as I bought them two two weeks ago at the previous low. I literally paniced but kept kept the trade in place looking for another low. Got it this week. Amazing.
Barry … you da man!
November 13th, 2008 at 4:43 pm
jrhyno. Indices- but am a futures trader of 49 years exp. Too much work at my age for individual stocks. When I see folks in the visual media, who were outrageous bulls 4000 pts higher…now stand on one foot & then the other and advise caution & the lights did not go out when we took out the lows….you have to take a shot and hope the sellers show up en masse tomorrow…be then a second stage buy in my opinion.
November 13th, 2008 at 4:47 pm
I’m not interested in shorting this rally yet. I’m guessing it has some legs. We filled some key gaps below today, so the market should be focusing on gaps above for a while. Today was a textbook key reversal.
November 13th, 2008 at 4:52 pm
@ jrhyno:
Personally, I-Man plays the individual stocks… but that’s more from me getting my start trading options… a crazy way to start trading, I know.
But at times, I’ve often wondered why I even dick around with indy stocks anymore because there are so many good ETF’s now… If I had it to do over again, (which I still can), strictly trading the index and sector ETF’s are plenty enough to make a good trading plan.
SPY, DIA, QQQQ great way to start. Then break it down further to the sectors. A big plus is that with these you save yourself the pain of waking up one day with one holding down 20% due to a shitty earnings report or piece of bad news, etc.
But you gotta find what YOU are comfortable with.
November 13th, 2008 at 4:56 pm
Nothing has changed; we’ve seen this pattern over and over this year: new lows, big bounce, repeat.
New lows were made today in the S&P and the Nasdaq, that’s much more significant to me than the Dow bouncing off its low — I expect the blue chips to outperform the broader averages in this environment.
High bear market volatility continues. Bear market rallies are sharp and short, and we just saw more evidence to support that maxim today.
Nothing has changed long-term; it’s too early for that, IMO. However, the possibility of a longer rally – two to three months — does exist, but it would be just that: another bear market rally.
Remember, much more money was lost in 1930 to 1932 than was lost in the crash of ’29.
November 13th, 2008 at 5:00 pm
JM,
Why would I sell QID after holding for 18 months, because of a foolish 2 hour rally? QQQQ short interest is about 3 hours worth of avg. volume. No squeeze is possible and anyone who thinks one is possible should go back to their research. Put/calls are nowhere near oversold and the economy is literally crashing. Unless I post otherwise, assume I will sell QID at 120.
November 13th, 2008 at 5:01 pm
For sure 9000 in the short term. I think that much of the rally was programed. If level X is reached, then hold, buy. Untill we see some event that drives us below the 7900 mark, say to 7500 then we are stuck at this trading range. For sure at some point we are going lower. We are still too near the hurricane that is ingulfing the consumer economey. This is not the bottom. Not even close. Just a range.
Things I am watching, Unemployment number after the boeing workers return to work. What happens in Dec when the numbers hit 7%?
What is happen with the emerging markets, is the collapase of a large economy cause enough to spook the makert? Is china going to 6% GDP? (Now at 8.2%).
Is the collapes of GM to BK that scary? It was not when united went down.
Is the collapse of another large bank like geneworth?
However I did short DOG when the lows did not hold. Waiting for 9000 to go back long.
http://doomisnigh.blogspot.com/
November 13th, 2008 at 5:01 pm
Like I’ve said… This was way too predictable. There will be multiple tests of these lows until, of course there isn’t and we go much lower.
November 13th, 2008 at 5:05 pm
bought some GE @14.95 and OLA. and closed QLD puts. all around or before 2PM. niiiiccceee.
long way to go though.
November 13th, 2008 at 5:06 pm
Steve I think you need to consider the possibility that 120 will not get hit. You are still up around 100% now. The volatility will kill the QID fund. As foolish as the people were who bought into the bubbles and held you don’t want to turn into yourself doing the same thing on the bearish side?
November 13th, 2008 at 5:09 pm
To me, the only concern is that today’s low was the most over-determined market ever:
— All the major cycle lows come today and tomorrow
— Last night was a full moon
— we made a perfect, measured move Elliot Wave 5 of 3
— you are entering end-of-year buying period
All that nonsense aside, almost a month ago I wrote on this blog that I expected a low in the NDX at 1000 but that I would cover shorts and go long DIG, MOO, QLD and UYG at 1020. Well, I stuck to the discipline, though the NDX low turned out to be 1009.
Having recently retired, I have only had the time to “trade the market” this year. What an experience. It has been one hell of a ride but I think I am too old for much more of this.
I expect the market to be “ragged up”- sideways into late January more or less. The next drop should continue into, say, May. The low on the SP should be around 650.
November 13th, 2008 at 5:09 pm
Well, today I opened 2 shorts in EUR/JPY and closed 3. One was a win, one a loss, and one a push. I have more money than when I opened the first one (Tuesday morning) so I’m going to call it not too bad for having clearly been on the wrong side today. Did I learn anything? Yes! Sticking to my plans is the only thing that keeps me alive to trade the next (probably bad) idea.
November 13th, 2008 at 5:12 pm
We had all the classic signs of the bottom:
1. False breakdown
2. Heavy buying after the fake and heavy volume (the highest within 2 weeks)
3. Closing near the high of the day
Spice it up with seasonality and historic proportions pessimism and panic, successful re-testing of October lows and hitting 2002-03 market lows territory, signs of a major buying thrust, historic low intraday TICK of 2000 and a quick flip in breadth… Voila! It is the bottom.
What is next?
According to history, we should get a 20-25% S&P 500 rally over the next 2-3 months (remember, the best ever short-term market gains were made during the bear rallies of 1930s)
November 13th, 2008 at 5:14 pm
yeah, totally about comfort, and options can be pretty uncomfortable.
i’m of the taleb persuasion, lots of cash, and long only out of the money calls and puts, as trading vehicles -i’m not betting they go in the money, just that the improbable event becomes a bit more probable.
lots of small losses, then a big win, at least that’s the idea. . .
today, i got smoked as i did not sell back my DIA Puts, but instead got long OOM Calls on AAPL & SPWR near the bottom which cushioned me a bit, but then added more DIA DEC 70 Puts +200 & +400 which proceeded to go right down the toilet.
but. . . i’ve been hammering this trade (long index/ bank puts into rallies) going on 14 months, and i’ve lost money i think maybe, twice.
again, it’s comfort, play small, expect to lose a bit, stick with it, and yes, if i was a stock investor, i’d rather own AAPL here than the S&P.
cheers. good luck (it’s mostly luck).
November 13th, 2008 at 5:27 pm
Dear Trading Diary:
Yesterday and today got nice fills on my limit orders (105, 106, 107) for some bad positions in SDS. I acually had a panic attack two weeks ago at the previous low and opened the SDS position. Those fills just about broke even for me. Then my limit order got filled at 24 on SSO today.
Lesson learned: don’t panic…be patient.
Barry….you da man.
November 13th, 2008 at 5:42 pm
As much as I would like to believe a new bull market is at hand, there is simply nothing that I see other than blind faith in “America’s greatness” to support these ideas. It is known that bull markets climb a wall of worry, meaning there are is lots of whudda, cudda, shudda going on - but nothing concrete. Today, we are not climbing a whudda, cudda, shudda wall of worry but are being inundated with a flood of f&#king facts. Things worldwide pretty much suck.
Maybe the bad news is all priced in. But having these negatives priced in is not the same as saying they are discounted - discounted means the problems have been managed and will not stem growth.
We could go sideways for 10 years or slowly grind lower if the news gets worse.
But hey, I’m playing the bounce on the long side, too. Cause no matter what I think, I realize that I could be wrong. And when the facts change, I change my mind.
What do you do, sir?
November 13th, 2008 at 5:44 pm
jrhyno: I mainly use indices for trades, usually something like QQQ options because the spread is tiny.
Would like to go long some cleantech stocks, but the time doesn’t appear quite right yet. Am watching ORA, ENER, the more speculative CPN, and GRH looks interesting, sort of a mini-cleantech conglomerate.
Also own some beat up oil tanker stocks that were yielding 8-10% when I bought them. Will hold them as oil will come back and then so will they.
November 13th, 2008 at 5:49 pm
Wild action today… As I said an an earlier market related post I was flat today. However, I did try selling in front of 890 on the Dec Futures. I was quickly stopped out above 900. Here’s what I’m stuck with technically speaking…The larger degree fourth wave that began on October 10th is not yet complete.
One of the most difficult challenges for shorts is to stay short during a fourth wave congestion. The role of the fourth wave is to CONFUSE shorts into covering shorts. Here’s the count I have after today’s bear BBQ…
Starting on 10/10…
839 to 1044 = A wave
1044 to 845 = small A wave in B
845 to 1007 = small B wave in B
1007 to 818 = small C wave in B wave for an a=c in %
818 begins a very sharp C wave similar to the 839-1044 move.
Targets are 945 for .618 A = C or 1022 for a full A = C
There’s a more bearish case that requires the SP500 to peak and reverse hard before 925, but that’s not my main case at this point.
There is no such thing as a triple bottom. If this turns out to be a triple bottom, then I’ll eat a lot of crow right here….
I think this was a “Sell the rumor” of hedge fund redemptions in front Nov. 15th deadline and now we’re “Buying the fact”…..
I remain flat and on the sidelines looking for more short covering higher.
- AT.
November 13th, 2008 at 5:52 pm
@KC:
appears he’s sticking his tongue out at you!
http://www.rgemonitor.com/blog/roubini/254403/explaining_todays_bounce
November 13th, 2008 at 5:53 pm
I’m long on selected three stocks (2 adr oil/utility 1 tech). A little underwater but within the strategy and will hold for 2 weeks more, then reevaluate.
November 13th, 2008 at 5:59 pm
Looking at the comments, it looks to me a lot of the bears are not paying any attention to the charts whatsoever, or even to price levels for that matter. They will short the SPX to zero as long as certain events they deem “key” do not come to pass (housing stabilization, TED spread, whatever floats your boat).
Volume was strong today. The TICK reached a record low, a sign of capitulation. Look at the TICK chart!
http://4.bp.blogspot.com/_m3CQF7whYY4/SRykrolH29I/AAAAAAAABFA/laa12p79hEY/s1600-h/tick.JPG
Right now this is looking like an accelerated version of the 2002-2003 NASDAQ bottom - and if that’s the case, this is the 3rd test that actually starts something meaningful.
November 13th, 2008 at 6:16 pm
I have to agree with WM,
I live and work main street and I am not a professional trader like many of you. I happen to think that is a strength sometimes. Looking at history especially the great depression is fine as long as you have the ability to realize today is MUCH different. Concerns that I have are that we have a Government that is currently meddling where it has no business, no pun intended. We have a unelected official day by day deciding where taxpayer money shall go…?? No one can answer what will replace easy money? Anyone? It’s over folks and I have to agree with Winston that it is going to be a slow grind. Fine if you are young and can go long but if you make your living trading day to day,…bummer! Or old ready to retire, Fricking “A” I’d be pissed!
My simple minded take is that you could look at values prior to the easy money boom and price where a company currently is barring that it doesn’t need credit to operate???? Take the example of housing. Simply price a house at ~1998-1999 levels and add the expected rate or appreciation historically of 3% until today. Should give a range. Should apply across the spectrum. The problem is that we still have absolutely no transparency, none. And…a government that thinks it’s smarter than the the market, the masses, and joe six pack for that matter. That is simply ridiculous.
Appreciate all your comments and the BR blog.
November 13th, 2008 at 6:20 pm
Well, the market will eventually follow the economy.
Yeah, I know 6 months forward looking….
My thought is in 6 months, world economy is worse than it is now…
..just my opinion. Unlike Barry, I have no supernumery toes….
November 13th, 2008 at 6:31 pm
An interesting post on the MarketSci Blog showing Dow daily percentage returns with standard deviation going back 1 year. Chart is 1928 - 2008. The current percentage upswings (over 10%) have only been seen in one prior period (1928-1933). Our down swings have not reached those of 1987 or 1928-1933 (percentage changes over 10%) but are beyond the down swings of any other time since 1928.
http://marketsci.wordpress.com/2008/11/13/when-does-this-ride-end/
Today reminds me of wind sprints. Run to the touch line, just touch, return to the starting touch line back again. I don’t see how a bottom can be so precise. I need some sideways action.
November 13th, 2008 at 6:32 pm
The market is NOT forward looking. That’s a popular misconception IMHO. The market can’t fortel the future better than anything else around.
November 13th, 2008 at 6:42 pm
i absolutely and of the opinion the market is anything but forward looking. what wa sthe market looking at in oct 2007 when equities were making new highs while credit collpased. markets forecast ZERO ahead of deteriorating fundamentals. The s+p was trading with blinders on at 1200 most recently before it woke up to the credit freeze up. as far as forecasting recoveries, LOL. for some reason stocks remain the investment vehicle of choice and have not been hated in decades maybe the 1970’s. the fed has been manipulating asset prices for 25 years with interest rates and bailouts so sooner or later a rally sticks. it is simply a self fulfilling prophecy. it is common sense and logic to discredit ANYTHING WALL STREET HAS TO SAY.
November 13th, 2008 at 6:43 pm
Off topic but you simply cannot make up this stuff….
“Michael Alix was head of risk management for Bear Stearns for two years until the institution imploded this spring, a victim of its (risky) subprime-mortgage related investments.
Last Friday, the Federal Reserve Bank of New York quietly announced it had hired Alix to advise it on bank supervision.”
http://abcnews.go.com/Blotter/WallStreet/story?id=6180235&page=1
Mr.Titanic, we’d like to put you in charge of boat safety…..
November 13th, 2008 at 6:58 pm
beware the black swan!
all statistics are valid until they are not.
November 13th, 2008 at 7:03 pm
Bruce in Tn said, “Well, the market will eventually follow the economy.”
If that’s the case, I hope it doesn’t wear its good shoes.
Don’t know about you, but I see this bounce lasting until just after lunch tomorrow - kind of like waking up the day after an incredible party, you hear the shower running and see the steam rolling into the bedroom, and then he/she walks out of the bathroom and you actually see for the first time who or what it was you brought home with you last night.
All of a sudden you are disgustingly sober and not in the mood to party any more.
November 13th, 2008 at 7:04 pm
Barry, I’m confused by your remarks because you make it sound like you saw this coming. However, didn’t you get stopped out at the previous intraday lows and therefore lost money? That’s where your stops were according to your posts. Also, you said that if we break through the previous intraday lows(839) that the market would plunge(I forget your exact words) and that obviously didn’t happen.
The “difficult trade” was not to trade at all. Our impulse is to trade…to be active…to be involved. Sitting on cash is much more difficult.
~~~
BR: Did you assume i was buying the SPX with a 3 point stop loss? Really? Go reread both of this morning’s posts.
I thought it was clear I was referring to the Dow lows 1,000 point collapse and recovery.
For future reference, you can assume I am not buying the SPX with a 3 point stop loss, 0.4% stop loss in place.
November 13th, 2008 at 7:06 pm
Head & Shoulders, that one will rinse out.
Come on, with the two std dev. Bollinger bands being breached so violently the odds were 98% for an upheaval. To me this looks akin to Sept. 19; like a Popsicle. Will thaw before credit markets do. For any value buyer: go long in Russia; forward P/E <4. Gentlemen, if companies cannot pay an absolute 6% interest then default looms which invalidates any terminal value assumptions.
November 19&20 will be peculiar for sure- last trading day for Nov. index options. Ensure to be liquid when 4th quarter results come in. Those will be devastating as the foregoing unaudited 10qs will need to be squeezed into an audited 10k by means of making the last 10q fit.
I betted on a falling VIX as I did not dare to invest in an 815 SPX Know-out. For as long as CL is trending upwards I will be riding the wave.
Well done of Andy to call to attention the notification date for withdrawals.
November 13th, 2008 at 7:34 pm
Sweet
This bought today:
Symbol Last
Trade Change
$ %
Day’s
Gain Qty Price Paid Total Gain
$
SSO Buy / Sell 28.10 3.26 13.12% $1,630.00 400 $24.00 $1,630.00 16.96%
November 13th, 2008 at 7:55 pm
http://www.portfolio.com/views/blogs/market-movers/2008/11/13/citis-desperate-straits
If you have not read this you should right away.
November 13th, 2008 at 8:04 pm
Regardless of whether or not one believes that this is “The” bottom, a “trade-able” bottom, or a “blip”, the Powers That Be have every reason to throw everything they have at making this work, if only to try and convince the sheeple at large that the worst is behind us, that we have “turned the corner”, and please, people, GET OUT THERE NEXT FRIDAY AND BUY STUFF!!!
That is the only way to truly attack deflation. You have to change the public mindset. Just as with inflation, people have to be broken from their inflationary expectations, to break the back of deflation, they must be filled with hope and willing to take chances and extend themselves.
So my guess is that a large number of influential parties (not the least of which would be all those who have recently received ginormous “gifts” from Uncle Sam, as well as those who hope to receive some in the future, will be doing everything they can to foster a warm happy glow over the population for the next ten days or so. This will likely take the part of aggressive buying support by those flush with bailout money, aggressive Black Friday sales by those with “stuff” to sell, and excessive happy-talk media coverage by those who are in a position to do so.
A person would be a fool to stand in the way of such efforts. On the plus side, the worst they can do is to delay the inevitable reckoning with immovable mountains of debt (prolly even make them a teeny bit more immovable), but delay is a Good Thing, as the thing we need most to keep this bear at bay is TIME.
Even if it’s only a couple of weeks, I’ll take it. And it might even take us deep into December, or in the best case, have the Bear’s teeth dig deep in the January earnings reporting season, when Reality bites once more.
It would be heavenly to have a month without the Incredible Shrinking Portfolio.
November 13th, 2008 at 8:05 pm
Oh! Of course, to have the Amazing Growing Portfolio, one would have to own something that is growing — growing faster than money market funds.
November 13th, 2008 at 8:08 pm
OK, I’m nowhere as sophisticated as many of you, but for the last few months I’ve been flipping between SPY and SH. Buy SH at 80, sell at 93, buy SPY under 80, sell at 98. Simple, effective and low maintenance. Worked pretty much perfectly yesterday.
It seems to me that since no one really understands what is going on, it’s better just to play against sentiment, at least for now. My bias is for things to generally trend worse over the rest of this year at least, so my long positions are only half as big as my short positions, and overall I’m only using about 25% of my assets for these plays, leaving the rest spread between short govt etf’s, intermediate gov etf’s and a GNMA fund.
Comments?
November 13th, 2008 at 8:10 pm
It seems to me that a lot of folks had trades set to buy if the Dow went below 8000. Those kicked in - big time. I predict the next day or 3 those same folks digest the data coming out and down we go.
‘Course, I’m happily sitting on the sidelines. Too much guesswork for me.
November 13th, 2008 at 8:35 pm
It appears to me that every swinging Richard on Wall Street wants to be the next great Buffett, correctly calling the bottom and putting their money where their predictions are. This means 1/2 of the “investors” will pile in every time the tea leaves predict a new bottom. (The other half will wait for the “true” bottom, whatever that is.) It remains to be seen if 99% of the investors buying today are geniuses or simply spending their money. Ask me in April of 2009. Hopefully by then we will have run out of various wave theories and pattern matching and pricing models and people will be using bones and dice to divine the true bottom.
November 13th, 2008 at 8:35 pm
BR,
>>The October 10th intraday lows remain our line in the sand as far as trading stops go.<>BR: If the old lows fail, then you should expect a very nasty downward break.
VERY nasty. . .<<
I didn’t realize you were using the DOW instead of the S+P. Everyone I know always talks in terms of the S+P and it clearly broke through the intraday lows, but didn’t experience a “nasty break.” Also, I have no way of knowing how much room you give your stop losses if you don’t tell us.
November 13th, 2008 at 8:50 pm
I have stated previously that I view today’s market as a replay of 1974 and as such I would happily buy the maket under the 2002 lows—mid 700’s. After today’s action that is now canceled. With all the work that has gone on since Oct 10th I would view a break of today’s lows as indicative that the doomsters may be right with substantially lower prices to follow.
That said I think a major low has been established. A big up day with volume would be pretty good confirmation. In short any break of todays low would put me in the bleachers.
November 13th, 2008 at 9:12 pm
right back to the Tuesday open!! Woohoo! Good call so far though. It will need to hold because we made significant new lows today….I’d be a seller. Especially those dangerous 2x funds. Talk about removing alpha from a portfolio….good luck Barry!
November 13th, 2008 at 9:16 pm
Were US$ spent to prevent the sudden free fall that was unfolding? The USDX dropped rapidly at nearly the same time that gold and stocks vaulted back up. I haven’t seen anyone mention the Plunge Protection Team yet…
November 13th, 2008 at 9:32 pm
Another market I look at is the 10 yr bond. Studying it tonight…. I tell you what, from the highs today I can see a very ominous looking move down. It looks very much like a text book five waver off the highs, which is going to be a really bad sign for interest rates. i.e. rates are going to go much higher on the longer bonds.
We’ve seen a lot of inverse correlation between the stocks and the bonds. I wonder what would happen to the stock market if we see a dramatic collapse in the longer bond markets and screaming high interest rates on the 10 and 30 yr US bonds?
Just wondering….
- AT
November 13th, 2008 at 9:44 pm
Today may have been the bottom but I’m not sure enough people will care. Unless you trade it, there is no point being in it, and a lot of investors are beginning to understand that.
November 13th, 2008 at 10:05 pm
H-hour was at 1300 today. The ten-year rate spiked higher and the equity rally started at the same time. I don’t know what the futures did, but it sure smells of a coordinated effort to save the market from new lows – and it worked, for the time being that is.
Then again maybe it was just a normal technical bounce off the previous lows. I’m not a conspiracy theorist, and I don’t believe the PPT is nearly as active as many do. Besides, I figure they would have given up the game at this point. Why try to prop up a market that has already fallen 40% from the highs? It’s a little too late now, don’t you think?
November 13th, 2008 at 10:19 pm
Just because it’s fun to share strategies and failures (with some successes), I thought I’d outline where I am YTD (and the decision I face through year-end). For reference, I’m in my late 30s and I’m trading in an IRA while my 401(k) runs on autopilot (90% equities with quarterly rebalancing).
Summary Stats through November 13th (using SPY as benchmark, which is down -37% YTD)
IRA: -13% YTD
401(k): -35% YTD
The IRA is 60% long and 40% cash. I have 22 long positions (ETFs and individual stocks) that I’ve built since October 7th (and, for reference, I’ve sold and bought several times with a trading cost of $8.00/trade). Using the November 4 closing prices as targets for each position, I could (theoretically) achieve another 12% return from today (if each position attains its November 4 price). Or, altenatively I could sell all the individual positions, and either (a) reinvest proceeds in SPY with a target of 100.17 for 10% return from today, or (b) reinvest proceeds in SSO with a target of 34.25 for a 22% return from today. (I’m using November 4th as the
I’m leaning toward selling all the positions and reinvesting in SPY or QQQQ because a stock like GOOG (which I have at a cost basis of 310 likely won’t return to 366, which is the November 4 price). And, while I like the idea, I don’t know if I have the stomach for SSO.
Thanks to all for sharing.
November 13th, 2008 at 10:20 pm
Comments that today’s stock rally originated from the results in the bond pits are credible IMO. Poor 10 and 30 year auctions.
November 13th, 2008 at 10:36 pm
Getting pretty sick of the market. The swings are wearing on me. I’m 10-20 years from retirement and may never truly retire as I love what I do. I’m torn between going all in and walking away, or going all cash and walking away, leaning towards the former. Is this capitulation?
November 13th, 2008 at 10:42 pm
Has anyone else been keeping an eye on FCB purchases? Seems for about 8 weeks now - or more - they have been steadily dumping their holdings of Fannie and Freddie paper and scooping up Treasuries instead.
Does the current trade deficit figure partly explain the lousy 10 and 30 year auctions today? Certainly the OPEC nations and Russia have a lot fewer dollars to recycle.
November 13th, 2008 at 10:45 pm
@DP: I thought about going all cash and dividing it 1/24, investing 1/24 every two weeks for the next year.
November 13th, 2008 at 10:53 pm
I guess what I’m wondering about in re: US bonds and rates is the following….
Remember a long, long time ago (a few months) when everyone was saying:
“We just need the dollar to rally so that Commodities will come down…then we’ll be ‘OK’ ”
That same crowd…and I mean the VERY SAME crowd is now saying:
“We need to get investors out of these US bonds and get them into riskier assets…when Interest Rates start going up, then that will be a good sign and then we’ll be ‘OK’”
There’s been loads and loads of bond guys that have come on CNBC the last several months talking about the US bond bubble out there….until now I sort of wanted to always fade them because it meant they were really short “the irrational long bonds”….but I’m starting to think that the long bonds are very vulnerable to a sharp decline.
And, while the madding crowds may at first cheer the fall in the long bonds, just like they did with the stronger dollar, a long bond that really falls out of bed will not be a good thing…..
Will the U.S. longer term bonds be the last asset domino to fall? Will the ever steepening yield curve go completely parabolic?
It’s what I’m now thinking about late this night…
- AT
November 13th, 2008 at 11:04 pm
Calling a bottom here? Nuts.
What on earth makes you think technicals apply in this market? There is simply too much meddlingfor any of it to work. What technicals factor in the scary FED charts? How about NONE!
The horribly expensive long bond auction today is what caused this rally. You guys need to look at ALL the data before you make ridiculous proclamations. Jeeze, I’m not even an active trader and I can clearly see what caused this rally.
November 13th, 2008 at 11:14 pm
RE: Michael
The stock rally started as we bounced from technical levels around 1PM. The sell off in bonds did not occur until well into the stock rally close to 2PM.
This was almost an entirely psychological rally, compounded by short covering and piggybacking. The bond sell-off may have helped, but it was NOT the cause.
November 13th, 2008 at 11:37 pm
Andy Tabbo @ 10:53
“Will the U.S. longer term bonds be the last asset domino to fall? Will the ever- steepening yield curve go completely parabolic?”
I’m inclined to think so, but it’s a question of timing. We probably won’t see a big rise in T-bond yields over the next 12 months. But at some point thereafter, I do think that could become an issue. The bear case for T-bonds rests in part on the mortgage-based assets and other collateral that the government will be holding. The Fed is holding mortgage-based assets on which they have (thus far) lent two trillion dollars. The new plan is for the Treasury to accept assets based on credit card debt and car loans (in addition to what the Fed is holding). After all is said and done, the government (Treasury plus the Fed) could be sitting on many trillions of dollars worth of “stuff”. Given that, the Fed may be under pressure to inflate the nominal value of that collateral, or at least to keep that collateral from declining in value. Hence the Fed is likely to be restrained in any tightening of monetary policy that would otherwise occur in 2010. So that creates potential inflationary pressure, which could push up T-bond rates.
Then of course, the higher the debt-to-GDP ratio, the greater the pressure to monetize the debt. And of course the deficit will be rising, although the government will no doubt play all sorts of games with the numbers.
(The only thing that gives me pause in this analysis is the low rates on government bonds in Japan).
November 14th, 2008 at 12:06 am
DL:
All true…especially the part about Japan. The counter argument to longer rates rallying is the fact that U.S. will be in slow growth/recessionary mode for many years to come. See Japan.
To be honest, I’m not a scholar on Japanese financial history, so I don’t know how much debt raising they were doing to inflate themselves. I know their rates have been very low forever, but did they swap massive amount of govt bonds in exchange for crap. And was China sitting on Trillions of debt looking to cash in to support theirs own economy? Was Japan simply doomed from the start because of the makeup of their population?
The deal is that everyone knows all this…if “we” know this, then the Trillion dollar U.S. bond market knows all of this….so I’ve been waiting on some technical evidence to conclude it’s OVER for the long bonds….and I’m starting to get some of that evidence. I could be wrong….and I’ve got stops on the trade….If the 10 yr Dec futures start trading above 117′oo, then I’ll be proven wrong technically shorter term.
- AT.
November 14th, 2008 at 1:29 am
After 30 years of using fundamental analysis I’ve finally given it up. For me being 100% cash and waiting for the trends and counter trends to develop is the only way to go. Today was classic. I notice a lot of posters here believe the market is going lower. Perhaps they are right. But I don’t know where the market is going. I think that when you start to believe in a price direction you become “anchored” in that belief. It begins to color your thinking. You start holding onto positions you should sell because you are anchored to your thinking. We are our own worst enemy.
I heard Barry a few week ago on Financial Sense. I found him to be a breath of fresh air. He was being interviewed by a super bull on gold and silver. The interviewer’s fundamental analysis of gold and silver was flawless. Unfortunately he’s losing money every day because the markets don’t give a hoot about fundamental analysis. Barry told him he could be right in his analysis, but all he knew was the price was going down. When I heard this I thought to myself now here’s someone who makes sense.
There are some good posters here and I thank you for your insights.
November 14th, 2008 at 7:02 am
I’m on the sidelines. My hobby is playing the horses. You folks remind me so very much of racetrack touts. You’re so involved with your charts and theories. My God, take a step back and look at the macroeconomic picture. It’s brutal and literally getting worse every day.
Is the bottom in? Get real.
November 14th, 2008 at 7:17 am
Got to go mine some salt, but I agree with whosonfirst, and will give you my thoughts this afternoon. I have seen news this morning, that when considering what is going to happen, makes me very quiet….
November 14th, 2008 at 10:40 am
@ whosonfirst
Get Real in the fourth at Belmont?