Doug's log

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Re: Doug's log

Postby Doug Coulter » Mon May 23, 2011 12:32 pm

Back to mostly out, cutting losses as I had to to get here again. My sell call seems to have been right, and soon will probably be the call to get short (which I might already be late on).
Looking at this reminds me of last summer and a few other "corrections" that head-faked me horribly, only this time with no magic September rally in store I think.

We are seeing buying on the dips still, which is why we're not just going straight down -- but those guys (and I fell for a little) are going to be so burned that they'll stay out for awhile. Seems the market is finally pricing in the end of QE for real. And one pundit, who I'd love to give credit to if I remembered which one had an interesting take on this.

QE ends. Market tanks -- no surprise. Bonds go up (yield down). Investors flock to those "safe" bonds that are going up. Ben quits buying them at end of QE, but now we have external demand for them, so he gets off the hook, which he wants, obviously. So as long as the markets don't tank "too bad" and bonds don't go down "too much" -- the fed "pulled it off", kinda-sorta, and gets buyers for our ever increasing debt -- congress lacks the balls to really cut squat, so long term -- we are toast. When the entitlement programs are figured into our debt, we're worse off than Greece by far, please note.

All currencies are in a race to the bottom, more or less, but the buck may take second now and then (now) as the reality of the bailout failures for everyone but large financial institutions takes hold more publicly, and they're not doing so well -- they'd mostly be insolvent with one FASB rule change that required mark to market again for their bad holdings.

I'm not necessarily calling the dreaded "double dip" right now -- but it's a definite possibility. Real estate has farther to go down before it becomes real again. Many of the jobs lost are just plain lost as companies have figured out it's better to only keep the better workers on board, and not re-hire the ones they've laid off -- seems they chose well, as their productivity without them is still at record levels and going up without the losers - and yes, I know that's utterly politically incorrect. Just correct, which I'll settle for anytime. I see what shows up when I look for workers here....ugh. And when I try to hire good people -- well, they're just busy now. Tells the story, right at ground level, no faking that one. Losers are readily available, good talent not so easy to find.

That 100% recovery on the markets since Mar 9 at the big bottom? Against Gold -- 4.5% or so, I heard quoted today. I'd have to check that (sounds worse than I think it is), but....look at things priced in say gold or oil, and see for yourself. Asset inflation is sure good for the tax collector, even if it doesn't actually increase your purchasing power.

So, my call right now is look for good shorts....but look, don't buy into what isn't really established just yet. For the more obvious ones, SNE, LNKD and such, I'd wait a little longer since the middle of those possible moves is still before us and they might give a better entry first. There's little point in my mind shorting the indexes, even though they might go down some more, because of the nominal dollar-problem there -- you still have to pick "best of breed" or in this case "worst loser" to do better than simply betting against the buck and breaking even in purchasing power. And by betting against the buck, I don't mean against some other fiat currency - I mean in real things instead, as every printing press on earth is running overtime it seems.

Retail sucks now -- because all the bucks are going into gas tanks. China looks like cooling, bad sign since they were all the fresh demand at the margin driving commodities higher. Rough seas ahead, matey. It's beginning to look fairly nasty out there -- the squall lines are on the horizon. Sure, it could just blow over (again) for awhile but the storm producing patterns have not changed one whit.
Posting as just me, not as the forum owner. Everything I say is "in my opinion" and YMMV -- which should go for everyone without saying.
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Re: Doug's log

Postby Doug Coulter » Fri Jun 03, 2011 9:54 am

It's almost time to change my call from "sell" to "go short". AT least at the timescales I can report. I've already been dipping toes into the short waters with success on a faster, shorter timescale, and come out OK. The big drop on wednesday was so controlled and even I managed to catch the middle of it, closed my shorts, opened some new ones on a bounce yesterday, and just closed them near the open today also with nice green numbers. At a somewhat longer timescale one might think about just going short especially if you can find something that's weak but others haven't jumped on it yet -- don't get into crowded trades if it can be avoided.

While I won't even attempt to call the rest of today (S&P seemed to find support at the psychological 1300 point and might retest that, but after lunch action will tell), I note that a bump in the middle of a decline is the norm (dead cat bounce), and can be a good place to open short trades if you call the overall trend right. The bump occurs mostly due to bargain hunters jumping in to buy "cheap" before they've waited long enough. The data recently on just about everything has been miserable - jobs, orders, consumer confidence -- all bad. The one thing propping things up just now is great earnings at many companies, who've cut costs (and jobs) and are hoarding a lot of cash in case things do get worse, which seems likely.

Over history, though things might be changing a bit, record earnings have always mean reverted when regular capitalism has been allowed to operate, as those record earnings bring in hungrier competition. Over the last few decades, the big guys have managed to get laws done to limit this effect, so it may be lessened compared to older history, but in general only lessened, not reversed...So I expect to see worse numbers next quarter. If that's the last thing propping things up, we'll see some real tanking around then. Whenever everyone else begins to figure it out.

BUT! Meanwhile, the euro mess is building up again, and they'll either kick the can down the road a little more (and then, look out below, they are at the end of what they can do with that almost already). But what does that mean to us? As usual, it depends, but a stronger dollar means weaker commodity prices, in dollars, and the way the dollar is measured is against other currencies -- like the Euro. If the dollar shoots up (Against the falling euro -- both are falling against "real stuff") it's going to create a buying opportunity on dollar-denominated things, like oil, gold etc - and along with it, the dangers of catching a falling knife. Maybe. This is going to be a short term wiggle you'll want to be nimble to play with. If instead the Euro guys come up with a good enough spin, euro up, dollar down -- for awhile until the reality hits again. Right now, all the sick correlations due to Forex variations are showing up again, and quite a lot of the volatility depends on this kind of thing right now. Since monetary things are all by political hot air -- it's hard to predict well, doubly so as it's the ratio of political BS between this and that currency that's going to affect who is beating who in the race to the bottom we've been seeing -- so call either side of a swap wrong and you're wrong.

Seize the day and be nimble! Long term (in my eyes, a couple years) looks pretty crappy, actually, but you never know what emotional rabbit will pop out of which hat, so there'll be plenty tradeable moves.
Posting as just me, not as the forum owner. Everything I say is "in my opinion" and YMMV -- which should go for everyone without saying.
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Re: Doug's log

Postby Doug Coulter » Fri Jun 03, 2011 3:03 pm

Plenty tradeable moves indeed, but not for me, not today. Closed my shorts a bit early I suppose, but hey, too greedy and you might lose it all, and as it is, they're back in the bank, risk free (or limited anyway).

I could have doubled down on my SPY short at noonish, but "who knew", and then closed right now. I thought about reopening it over the weekend, but nope, my guess is we have a little bounce back and that will be a better time.

I see all sorts of possible long and shorts on my timing services, but you know -- the long ones look at the end of runs, and so do the short ones. Which to me indicates a reversal of some kind is coming Monday. Likely, but not likely enough to bet enough money on it to make any if I'm right...and I'd rather not lose it if I'm wrong.

But this twitchy market type is the sort in which you can do some real bizzare plays and make out anyway. I'm not doing this now understand, just pointing out the trick.
You can do the same thing with equites or etfs that you can with options - bet both ways. Buy a long and a short on the same (or better yet, carefully chosen different ) thing, and then just close each in turn when each goes green -- both are fairly sure to happen unless "this is it", which of course, it probably isn't. But it does tie up money, so I'm not going to do it.

S&P held 1300 today, more or less, which seems like support for it just now. It kind of has to either break out down or up from here. When you don't know -- just wait and catch the middle again, it's better than either nothing, or being wrong.
Posting as just me, not as the forum owner. Everything I say is "in my opinion" and YMMV -- which should go for everyone without saying.
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Re: Doug's log

Postby Doug Coulter » Mon Jun 06, 2011 12:45 pm

I expect to be in here a little more aggressively soon, to pay for that nice new ride, that's kind of how I work, I'm not pedal to the metal all the time (too stressful) but when I need money to meet my own benchmarks, then I get aggressive.

I expect some real big swings -- day trader heaven if you're of that mind -- in the next 30 days or so. QE2 is going to end, it's politically unpalatable at the moment, and now that the side channel QE where the banks were borrowing at .2% and buying treasuries making over 3% has been made public (by me and others), well, that has to stop too, at least for public consumption.

The thing is, most of the market is in utter denial about QE ending -- they seem sure that QE3 will be announced within a week or two after QE2 is over. I sort of doubt it, I think that if they do anything like that (public-ally anyway) that they will wait until some things happen, one of:

Treasury yields go up too much, which would mean we really can't pay them off without massive additional printing (and inflation). The definition of "too much" is not one I'm privy to.
Market goes down too much...again, I don't know the definition there, but I'd expect they wouldn't sweat another 500 points on the dow on the downside.
The banks really get too tight to keep up the pretense -- right now, they are absolved from reporting all their bad paper (no mark to market), and are the walking dead, but as long as they can have enough liquidity to make things look ok -- your checks are cashable, etc -- they can keep the illusion.

What it looks like the plan is, is Ben stops the presses for a bit. Market tanks and all the speculative bubbles go pop. Since the government was buying 40% of it's own debt up front, and maybe another that much via the lend the banks money as long as they mostly buy treasuries with it (unspoken deal, but a deal I'm sure -- makes too much sense not to be), the demand for treasuries would seem to really go down quick when that ends.....to a first-order analysis.

However, if the markets tank, all the money will flow out, and back into "safe" treasuries, keeping the prices high and the yields low -- just what Ben and co want. At which point the backslapping in DC will be so loud I'll here it down here -- and they really pulled something off. It's a very dicey bet, however -- if the markets tank "too much" and don't bounce, if the T yields go up "too much so that debt service gets too expensive" they'll have to regroup. I expect all this bouncing and sloshing back and forth to take place mostly between now and the end of July.

Nimble people can trade off this one, people who only check on things daily or less -- your best move is a savings account for now. Expect some wild swings, and if this were normal, I'd be saying buy the dips and sell the rips (it's what I plan on doing). But! This is going to be some quick, violent, nasty moves real soon now, and if you don't call them right, you're going to get murdered, so for all the beginners out there -- savings account or money market.

See, for one thing, the end of QE will cause a big uptick on the dollar -- gold, oil, copper are going to go down inversely, and the fear adder on gold will evaporate. It might in fact be an ideal time to buy it -- not now, but then. But then reality will kick back in (these little self panicking traders are sooo predictable) and the dollar will then go down again -- making gold and oil and such go up. Sounds too easy -- and it is. We have other uncertainties -- Greece, all that euro stuff. Which will make the euro go down, and the dollar up (by comparison) for awhile. All those nice juicy corporate profits will be mean-reverting in the next quarter, almost a sure thing, employment will stay bad and so on. The net take-away from this is that we can't reliably predict what the trend will be after we get over this "chop" -- so no long term stuff is a good idea right now -- we don't know what side of the trade to be on at this point, too many moving parts even for me.

I'll be there, getting up early, fading gaps, going long and short in the AM and closing trades at lunch or at end of trading, and I'll make some money....but it's like this. Calm is a not very good time to surf - no waves. As it gets stormy, the surfing gets better and better, bigger waves to play with. But by golly, when there's waterspouts and tennis ball sized hail, only a few would be out on the water. Such a storm is coming....real soon now.
Posting as just me, not as the forum owner. Everything I say is "in my opinion" and YMMV -- which should go for everyone without saying.
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Re: Doug's log

Postby Doug Coulter » Wed Jun 08, 2011 8:39 am

Well, I've been dipping my toes in short water, and the water is fine. Opened a short (SPXU) two days ago, closed it yesterday AM on the pop, then opened it again in another account in the afternoon (a slick trick that avoids day-trading flags). Also went short BAC, and picked up some FAZ (a short financial ETF). In the IRA, you can't short, but you can go long something that itself is short - handy, but of course, a workaround of the rules. They are all up in premarket this AM but trending back down, so I may have to close these trades on open, or most of them, but they are nicely green -- and a couple percent a day is real good stuff for me. Would I could do that every day and with all my money - there are over 200 trading days a year, so even 1% a day is pretty doggone spiffy.

I fully expect a market bounce -- even in a disaster it's never monotonic down. At some point money on the sidelines (or the fed's plunge protection team) comes in believing the selloff is overdone (and is right often enough to promote that as a strategy). This is usually opportunistic "fast" money though, so if it can't move the market to turn around for real, out it goes again and accelerates the next leg of downtrend. We've already had more down days in a row than is normal for the last year or so, so where are those guys? They might show up today.

One thing about these derivative ETFs, some of which are double or triple long or short - their carrying and rebalancing charges are big, and cause them to decay even if the underlying instrument is stable.

Therefore, I'm saying "short" now rather than "out" but I'd wait for a pop to do it -- and there will almost always be one. We seem to have mini trends of up or down for 3-4 days at a go, so if we get a one or a few days "up" that will be time to really jump on it.

BAC is easy to short, as I hate them anyway...other candidates might be BIDU if that party isn't over yet, or TAO (chinese real estate), or CSCO, and I'm sure a few more. Most of the things that have been going down look like bottoming, however. Shorting takes more speed as things fall faster than they rise, and then bounce quick. You have to use the usual judgement. A lot of these postions are just for a short "Rent", not a long term hold, but if you find something going down because, well, they stink at their business you might hold them short a lot longer. Particularly if they are far from any visible support level (BAC and CSCO might qualify there). You might even add to a position if they pop up a little....

The only time I use those option based short etfs is for the IRA, for more general shorting, it's better to short a long one, as then the carrying costs go your way better.
Posting as just me, not as the forum owner. Everything I say is "in my opinion" and YMMV -- which should go for everyone without saying.
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Re: Doug's log

Postby Sergei Barna » Wed Jun 08, 2011 1:00 pm

Doug, why not just open a margin account? You don't have to use any margin, but you won't have to worry about the day trading flags, and some brokers even pay you interest on your cash balance.
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Re: Doug's log

Postby Doug Coulter » Wed Jun 08, 2011 1:11 pm

I have a margin account (the non-IRA -- IRA's can't have margin or go short). You still get flags for day trading, and it reduces the amount of available margin there and adds limits. At least at TD Ameritrade it does. Since I'm otherwise completely happy with them -- love that software and the data access I get trade by trade for all the exchanges, and rarely get a flag there -- it's not really a a problem. Sometimes I do a little dancing to avoid a flag, but usually it's no concern at all. I mostly swing trade things except "in emergencies" or just plain bad calls, where I simply get right back out if I called something wrong, as we all do sometimes.

I do get interest on my cash, but it's money-market -- not a lot.

The shorts are all doing well -- I "shoulda" had more guts and gone in much deeper with them. But we'll see, I still think there might be a bargain hunting pop in the next few, which will be a nice time to add to them if I still feel like things are generally going into the crapper. Heck, I KNOW they are longer term -- but "the markets can stay irrational longer than you can stay solvent", so I'm sticking to short term things for now, just following the tape around and not holding though any big losses. First rule of money management, after all. If anything, my stops are closer now than usual.
Posting as just me, not as the forum owner. Everything I say is "in my opinion" and YMMV -- which should go for everyone without saying.
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Re: Doug's log

Postby Doug Coulter » Thu Jun 09, 2011 8:33 am

If the futures are right, looks like I'll be closing some of the shorts real early today. We've had such a long monotonic downturn that a bounce is pretty likely. I think we're still on a downtrend, but it could make sense to close at least some of those trades and reopen them after said bounce, or that's plan A for the day. I don't think things are oversold re fundamentals (not hardly) but markets only care about that when forced. More often, a consensus appears that after X amount of loss, it must be a bargain now -- it was last time it reached these numbers after all, and so forth, pure rationalization on the part of the players. Even in the crash, things didn't follow a straight line down. You did OK going short near the top and just waiting, though some of the bounces would have required motion sickness medication. IN this case, I'm trying to make money fast (that new car) and I will be trying to extract more than usual off the wiggles on the way.

One I'll probably just hold on to, and even increase on a pop, is BAC. That one looks pretty good long term unless the banking lobbyists manage to gut Dodd-Frank even further, which they just failed to manage on the debit swipe fee amendment, so things aren't looking so rosy for that, though it does look like they are going to be able to neuter the new consumer protection agency, which is long term good for them (lets them have enough rope to create another crash while they get the bonuses) and of course, bad for us.

I used to not believe in crony capitalism, thinking it the exception. But gosh, it's becoming so blatant now it's hard to ignore. And as new people gain money and power so they can join the club, or fight it, they're all joining instead.
Posting as just me, not as the forum owner. Everything I say is "in my opinion" and YMMV -- which should go for everyone without saying.
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Re: Doug's log - blatant manipulation

Postby Doug Coulter » Fri Jun 10, 2011 2:01 pm

Sigh, I thought this was a thing of the past, but someone beyond the law evidently is involved here.
The chart says it all -- about 600 million of on balance volume in under a half hour on one stock, and zero news -- at least none that we googlers and DJI, and WSJ and Bloomberg subscribers get.
Screenshot-6.png
Lookee -- someone with unlimited money is cheating bigtime.


Maybe we find out over the weekend. This was *only* the financial stocks affected (which do get into the averages). I just turned from several thousand green on my shorts to several thousand red before I could get my wife to shut up so I could trade out of them. $%^#$%@$#%@$.
Posting as just me, not as the forum owner. Everything I say is "in my opinion" and YMMV -- which should go for everyone without saying.
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Re: Doug's log

Postby Doug Coulter » Tue Jun 14, 2011 10:36 am

It's been a busy time dodging bullets lately. That bank stock manipulation can only be from one source - the fed, and it affected at least all of BAC, C, and GS simultaneously, and amounted to a few billion at least of buying at the "ask" even though the asks went up fast. I held on to those shorts, but have sold GLD (it's correcting, I'll buy it back later) and closed a very profitable short hedge on BTE, which allowed me to stay long it in another account without losing money there -- worked out sweet.

This is turnaround Tuesday, the bargain hunters are out again -- usually this doesn't work out for them, they are probably catching a falling knife, but in the world where QE is ending, despite some people in denial, to be replaced by ??? (and no word about the plunge protection team, or Bernanke put), it seems wise not to jump the gun too much, even I can't react to everything going on within a few seconds -- when things are moving that quick, even I have to sit it out -- it still takes me about 200ms to complete a trade (two clicks more or less).

The markets are broken again -- by this I mean the transactional systems are reporting weird junk. See pic -- all those trades way off either bids and asks -- what's going on here?
Screenshot-7.png
Whaaat?


I was watching BAC's on balance volume jump around yesterday while also watching depth charts of bids and asks. Funny how in one second the OBV can change by millions in one second when the total bids and asks are only for 50k or so shares -- again, what's going on? I doubt it's my trading platform, which was after all showing both of these. If it was back-channel, off the exchanges, then why did it nevertheless report some of it on my platform anyway?

I guess the fed is going out with a bang. I'd guess my longer term predictions are still on track, but I really hate holding through double digit percent oddities to see if I'm right.

I do think today (and maybe a couple more) will be up, barring weird news events. That's the pattern in general -- even in a down trend the bargain hunters come in thinking it's so oversold they can't go wrong. But they run out of money and faith if they can't really turn the trend, and it resumes. This also happens when the major trend is up -- you usually at most see a few days in a row of one direction or the other, then a reversal, then resumption of the trend. Look at a 6 month or so chart of say, SPY and see this...it's the normal human "time constant".
Posting as just me, not as the forum owner. Everything I say is "in my opinion" and YMMV -- which should go for everyone without saying.
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