Tuesday, October 04, 2011


As the world melts down, the only advice I can give is to hold tight on your shorts, trail this down, and just see where it leads. There is no way of knowing when you get a washout like this how far it will go. If we do close this week at this level or below in the Dow, the sell the VIX trade will be triggered. I have not yet decided exactly how I am going to do this trade in the Vix. I will most likely leg into it beginning on Friday's close if we stay down here. If we bounce I will wait. We have to close the week with a reading under 15, not trade under it within the week.

It is unfortunate for me that all of the things that happened to me with my animals took place when they did. I suppose it is an excuse, but I had no choice but to get out of my positions Friday. I was so upset there was absolutely no way I had any business being in front of the computer juggling hundreds of thousands of dollars. I was not completely sure about a few of the things that I was looking at, and I was entirely too emotional to resolve those differences. Although I did make some money, I missed a huge profit that I would have had. It is what it is, and of course I always state honestly what I do, good bad or otherwise in here. That is what I hope sets me apart.

I recently got an invite to return to a newsletter I once subscribed to quite some time ago. Writing those is tough believe me, I have done it. People can hang you on one word you write that is wrong. However you have to man up and live with what you have done. The old service is now saying they know I wish I had them back. It is amazing to me that when someone makes one correct call on something they run onto the field drawing attention to themselves, "hey look at me" etc.. I guess all the bad ones never count? The main reason I left that old letter, was that I judged the writers did not actually trade the markets. I always wanted someone with skin in the game, someone who actually wins and loses based on their market calls. I don't want an "analyst" telling me what to do. I did learn some things from it that were helpful, but in the end deemed it was not really providing any additional value to me.

I heard one of the best lines I will ever hear in my life at Trader Joe's yesterday afternoon. I was behind a guy who was probably 92 or so, a George Burns look. He was probably 6' 2" in his prime, now about 5" 6", very hunched over. The checker told him to "have a nice day," and  his response was "don't tell me what to do!" Then he walked away and about 10 feet later turned back and winked at her. I just could not stop laughing. I told the checker I was going to steal that line and so I have. However, it illustrates my point. I don't want an analyst telling me what to do.

Their idea of being right and wrong afterwards is not based on money made in a trade. It is based on a theory. That is not worth anything to me. I don't want someone telling me see we dropped X percent, I told you so, when they had been predicting that incorrectly for months and missed a 50% gain in the process. I do not understand why everyone has to always BS everyone else. I admitted to being wrong about GOLD over and over, is that really that hard to do? Nobody is right all the time. I think people need to get over themselves and be more real. The BS is what got us into this predicament.

The top chart is that of Silver. I know so many people have said there is no way a 50% correction could happen in the metals. Well, 47% already has in Silver, and just look at the amount per contract that represents, a mind boggling almost 120K. Overall we are going to go down much more than this before this is all over. However, it does appear to me at the moment we are in bounce mode especially in GOLD. The point of all of this talk about the metals is just this. Do not buy into these it is different this time arguments, in the end the movie always ends the same way: huge retracements/reversions.

In the midst of the Chaos, the above chart of Sugar is starting to look interesting to me as a possible buy. If we get a few more days of consolidation down here this could be a go. It is supported by the weekly chart, which is showing it as a buy right here. Now we just have to get the daily organized and lined up.

One of the things I have noticed in the indexes, and it stands out in this one more than the others, is the strong accumulation that is going on down here. Look at how strong POIV is down here in the DAX. This is a monster divergence in the bullish direction. Ironically, this has also shifted from the weakest to the strongest just recently. I would suggest longs if they are done, be done here at the moment. I still am of the overall view that we are going lower for another week or two. However, we are in the price area once the lows go of a couple of months ago, that a low could be in the making. We have nothing at all that is a buy signal yet other than the VIX potentially being there by the end of the week.

If by some chance you are someone who is a longer term holder of things, this is a good spot to start legging into good dividend paying stocks. These are the types of selling conditions that you need to establish good positions at good values. Do not let the media influence you otherwise. There is always a doom and gloom picture someone will paint for you that seems credible. At times like this whether you are a short term or long term trader, know who you are and stick to what you know. You should not care about picking the low if you are buying value.

This last chart just shows more of that divergence in the POIV that I just mentioned above. This does not tell us to jump in and buy. What it does tell us is that the underlying conditions might be improving more than what price is showing us.

John, I think your comments in the other thread about the metals are pretty much lined up with my view. The Mel Gibson beyond Thunderdome scenario is a tough one for me to sign off on. Things do not look good economically and appear to be deteriorating. However, you have to set that aside when it comes to trading. The stock market is not a daily barometer of the economy. A good buy is coming very soon, so be ready.

Needless to say my sells were not elected in Notes yesterday, and the DX sell is also off the table both due to the stock market weakness. They were setups that were not filled, so I do not consider them to be wrong. They were not losing trades. I did not say sell at the market. One buffer I will always believe in is entering trades with the short term momentum. Sell orders are below current prices and buys are above. This is where that comes in handy.

Good Trading

1 comment:

Anonymous said...

Bernanke saves the day again!! All hail dictator Ben!!

Looks like 7 months of dip buying..