Tuesday, September 30, 2008

Trading in the Bear Market

If I was in a position to give an advise to an individual investor (commonly known in the modern investment world as a "BagHolder") - the only one advise would be: "DO NOT TRADE"

That being said, let me explain "Why"

In a true bear market commonly used approaches, no matter "fundamental" or "technical" mostly lose reliability, not even speaking of "duration".

Any fundamental analysis are based on "historical data and expectation of continued performance" and bear market changes everything - what hope investors had based on "past performance" guaranteed even less in the bear market than in bull cycle.

So, this post is addressed to "Traders", to the people who have total respect for risk control, who are flexible, nimble, and totally lack desire to be right as oppose to "make money or at least preserve capital".

Let's make a list of "dos and don'ts"

  • Decrease your trading account size. Some first recommend to cut down trade/position size, which is the right advise as well, but by cutting your account size and putting money in "not so easy to access safer place" we will fight natural human tendency to "look for a bargain and use money we decided to keep in cash".
  • Decrease your trade size. Moves in true Bear Market are sudden and violent - don't think of "bigger profits", be afraid of "bigger losses"
  • Decrease the number of simultaneous positions. If in "easier" market you would normally have 20 positions (and this is the total of ALL positions in ALL accounts, not even "total of different securities") - cut that number in half - pressure WILL mess you up sooner or later and your stops will fire more often resulting in more frequent losses and shakeouts.
  • Take your losses and profits faster. In the true bear market there is no trend, not even down, there are "moves". At least scale out of winning trades - today's trades might turn into tomorrow's losers in the blink of an eye.
  • Don't rush back in, pick your "spots" - retail trader has very few advantages over institutional traders and the main one is "We DON'T HAVE to trade" (If you HAVE to trade - that means you started trading inadequately capitalized and you WILL lose your money)
  • Employ OPTION - use options to hedge, use options to bet smaller amount of money for controlled risk and greater reward. Do NOT sell naked options!
  • Trade reversals. Forget about common saying "It is very expensive to try to pick tops and bottoms". You really have better chances ( if you understand what to look for) to make profits faster on reversals. You can buy/cover cheaper and sell/short higher. But you have to have "balls of steel" for that type of trading and be ready to cut bad trade short as soon as your original "point of view" proves to be wrong.
  • Do not pile up your trades - if you losing on 2 positions you will lose 20 times more money on 10.
  • Absolutely DO NOT read blogs of people who can not demonstrate that they capable of trading in bear market. Try not to read at all, really, in bear market most of those who were profitable in bull market ( and thought of themselves as "good traders") are losing money. Beside, even if they right - you might be late to the table and you are not capable of seeing the trade from their perspective. Beside, the moment you start looking for "outside opinion" it signals that you losing and have to stop trading.
  • Do not watch CNBC - if you do - listen to intonations of Larry Kudlow and Dennis Kneale. When Larry getting  more hysterical and rude or Dennis getting more "contrarianly optimistic" - run for the cover - BEAR is off the leash. Remember - they are paid to make you BUY.
  • Sell/cover the "News" - you will not get the second chance.
  • Forget IBD ( Investors Business Daily) approach, even if you'll try to use it "in reverse" for shorting - you will have better luck not using it at all.
  • Pay more attention to the quality of services provided by your broker, don't look for "cheap", look for reliable - "cheap" will cost you more in losses and profits not made. 

The Sting - Financial Style


This is a great irony -Paul Newman was not dead for even 1 week and "The Sting" was remade by people who were obligated to fight such things on the first place. FAS157 ( "Fair" Accounting Practices) will be re-interpreted and Level3 worthless assets and Level1 MarkToMarket assets will be permitted to be priced as Level2 assets ( Mark To Model) - as they holders please?

That is just another concept of "Funny Money" and if you or me would do such a trick we WOULD go to jail.


Monday, September 29, 2008

"Surpise" FED Funds rate cut to 0% - anyone?

Yes, I guess "they" are THAT desperate now...

No matter how you slice and dice

Everything that is going on and was going on for quite a while can be described by one word and one word only.
Having said that: XLF is holding "line in the sand" and I am buying lots of UYG at $16

Thursday, September 25, 2008

Today's session posts/emails from Regular Contributors Site / List ( "RCL")

Below are today's session posts/emails from Regular Contributors Site / List ( "RCL")

All of the ideas have played out by now

  ( so it is too late to follow any of those). [Charts are not posted here]
If you are interested in invite only Regular Contributors website/mailing list, please
read FAQ

Thursday, September 25, 2008

Closing all long positions

Have a great day

Posted by DavidDT at 9/25/2008 01:46:00 PM 0 comments Links to this post

WFMI good for "dumb luck long trade"?

Chart of WFMI

Buy range 20.15-20.22 Stop 2.07 

Trailing my VMW and TSO positions, trimming some XLF calls

Posted by DavidDT at 9/25/2008 12:48:00 PM 0 comments Links to this post

Easing on GLD Oct87 puts - close to some support

Posted by DavidDT at 9/25/2008 10:24:00 AM 0 comments Links to this post

Did "they" balance UltraShort ETFs?

SKF looks to be tracking XLF changes quite accurately today - will start paying attention to TWM, SDS as well.

Is something changing and "they" will drop pathetic "short sale rule or market makers finally can hedge against underlying?

moved VMW stop to 29.04

Posted by DavidDT at 9/25/2008 10:21:00 AM 0 comments Links to this post

TSO out of the base?

Looks like with oil prices staying where they are refiners might finally attempt to move higher.

R/R is good for TSO as long as it manages to stay above $19

Chart of TSO

Posted by DavidDT at 9/25/2008 10:01:00 AM 0 comments Links to this post

VMW intraday

VMW looks interesting for day trade at 28.40 ( stop 28.07)

Chart of VMW

[corrected WMV to VMW, luckily there is no such ticker as "WMV" and there is a "watermark" on the chart]

Posted by DavidDT at 9/25/2008 09:41:00 AM 0 comments Links to this post

Bush Effect, Goldman Goose and market take

El Presidente addressing the nation produced just the usual "Bush Effect" - Futures were slightly up before and immediately went down right after. As much as I don't see anyone capable to replace the guy that much I don't want to see the guy...only in America...
Lets talk Goldman Sacks for a change
Forget what media is telling you - GS begged to be saved and got what beggars get - right to live.
Buffet bought shares of GS at current price for $5 BIL - so far so good.
Buffet got $5BIL warrants too? @115? Getting interesting.
Wait - Buffet got 10% interest on $5BIL??? $500 MIL year after year on the company with expected revenue of roughly $1BIL?
Poor trapped GS - time to short after Bailout Bill approved.
Market tomorrow - just a hunch - Thursday/Friday - flat to up, if so - I'll be easing up on some long positions...except semis related...will see.

Posted by DavidDT at 9/25/2008 01:26:00 AM 0 comments Links to this post

Wednesday, September 24, 2008

trading Ideas I am looking at for Thursday Sep25

HD ( long) - sitting on reasonable support, I would watch for W%R moving up


NTAP (long) volume dried up, W%R attempting to move from oversold


ATHR ( long) - sitting on reasonable support, I would watch for W%R moving up



I am holding GLD Oct87puts - in addition to that I have become VERY BEARISH on Gold Miners/GDX


Posted by DavidDT at 9/24/2008 11:19:00 PM 0 comments Links to this post

Tuesday, September 23, 2008

Bounce is coming?

Trading volume lately did not demonstrate any traders' conviction in righteousness of FED doing, now that political show off started - "new great unknown bailout plan" might take a little longer than some anticipated, but it will be there. As Todd Harrison says: "Selling cancer...".
So surprise, surprise - a lot of stocks flashing buy signals. As we are in the process of establishing nervous bottom - we don't ant to miss huge runups.
I am posting the list of fine long candidates on Regular Contributors Site

Older posts from Contrubutors Site

Below are older posts from Regular Contributors Site / List ( "RCL")
Most of the ideas played out by now or will play tomorrow ( so it is too late to follow any of those). [Charts are not posted here]
If you are interested in invite only Regular Contributors website/mailing list, please read FAQ


Tuesday, September 23, 2008

Bought UWM @48.80

Posted by DavidDT at 9/23/2008 02:11:00 PM 0 comments Links to this post

Looking at CIEN long trade

Posted by DavidDT at 9/23/2008 10:39:00 AM 0 comments Links to this post

out of XHB long

out of XHB with +1.6% profit overnight,it is going higher most likely

Posted by DavidDT at 9/23/2008 10:34:00 AM 0 comments Links to this post

The process of establishing the "bottom"

This is the PROCESS, not a one day event, especially after disaster of this magnitude - I-Banks are gone, model broken, entire system (not just financial) is in distress.

Expect extremely volatile trading (like it was not volatile yet)

As long as major indexes will not undercut September 18th closing values markets ARE IN THE PROCESS of attempting to establish higher lows. Expect sudden selloffs - FED/Government are quite out of options and it does not look like that they have time to carefully evaluate impact of their desperate measures on the market ( I refrain from saying "they have no idea" - why state the obvious)

I will be doing very short lived trades (and the moment I will place the trade on equity I WILL place HARD stops 2-3% away from paid price) or if things get messy again ( and they might get even messier any moment) - I will just stop trading all along, keeping 80% in cash equivalent.

Expect losses on many trades in this trading environment or stay away to preserve capital.

Posted by DavidDT at 9/23/2008 08:40:00 AM 0 comments Links to this post

Monday, September 22, 2008

Expecting (XLF) bounce in the morning

XLF finished the day on selling note, long players abandoned "no rules" game, short sellers outcasted, volume mediocre, FED will have to come to the senses to avoid further bloodshed and instead of "short selling ban" I think they might switch back to uptick rule.

XLF sits on reasonable "line on the sand" now ( 1 day charts) and still managed to close above downtrending channel on 2 days chart. I am trading small ( except for "life savior day trades" in order to keep cash balances in my IRA accounts out of "money Markets" - 3 days till settle date it cannot be swept into money markets)

Posted by DavidDT at 9/22/2008 11:34:00 PM 0 comments Links to this post

Bought 1/2 of intended XHB position @20.05

Posted by DavidDT at 9/22/2008 03:40:00 PM 0 comments Links to this post

Buying few UNG Oct37 calls

Posted by DavidDT at 9/22/2008 02:36:00 PM 0 comments Links to this post

Buying STLD Oct25 calls

Posted by DavidDT at 9/22/2008 02:17:00 PM 0 comments Links to this post

Buying few GLD Oct87 puts

Posted by DavidDT at 9/22/2008 01:54:00 PM 0 comments Links to this post

Trading short till Oct2nd

I would stay away from any short positions in UltraShort financial ETFs and not touch puts on any financials - they are incorrectly priced due to current "ban"

Posted by DavidDT at 9/22/2008 12:50:00 PM 0 comments Links to this post

Thursday, September 18, 2008

"CRL" Bought few GRMN Sep40 calls @0.10

pure lotto just to keep myself busy

Posted by DavidDT at 9/18/2008 10:11:00 AM 0 comments Links to this post

Wednesday, September 17, 2008

The reason for XLF long trade

I opened XLF Oct22 long calls position @.47 today based on $VIX hitting level not seeing for years. Why would you ask?

Back in Aug2007 VIX spiked higher, same in Jan 2008, but this is just it - "Spiked" - it did not close that high, nor was rising above 30 for 3 consecutive days.

The second reason is that XLF in spite of extreme panic mode did not undercut July's lows, as a matter of fact today's and yesterday's lows were slightly above July 14th and July16th lows and volume was real high.

Of course I did overpaid for calls - implied volatility was insane today, even if XLF will go up tomorrow my calls' premiums are going to go down, but I am willing to accept it if XLF will hold the double bottom and if it will - move up might be fast and furious.

SMH long calls trade has less reasons and more of a "gut fell".

Posted by DavidDT at 9/17/2008 09:39:00 PM 0 comments Links to this post

Legal Disclaimer:

Disclaimer: This website may include stock and market analysis. Any opinions, ideas, views and statements expressed here are opinion only, subject to change without notice and for informational purposes only. Trading stocks carries a high degree of risk. It is possible that an investor may lose part or all of their investment. Accuracy and timeliness of any information is not guaranteed and should only be used as a starting point for doing independent additional research allowing the investors to come to his or her own opinion. Nothing on this blog is to be considered a buy, hold or sell, recommendation. Any investments, trades and/or speculations made in light of the opinions, ideas, and/or forecasts expressed or implied herein are committed solely at your own risk, financial or otherwise. Results are dependent on market conditions, timing and trading style.

Translation: You are responsible for your own investment decisions. Not anyone else. YOU.

Position disclaimer: Author might OR might not have position/interest in stocks posted on this site!

Their lips are moving..nothing coming out

What a great system that is!
Testimony in front of Senate Banking Committee is in progress, everybody explaining what the problem is now, they are so damn smart, I am sitting here watching "them" and I know they don't have any answers just like they had no clue a while back of what was about to happen to financial system due to uncontrolled greed and total lack of leadership in Government, Congress and all around of corporate world.

This is a very sad pathetic scene, I makes me really scared of what tomorrow will bring.
One of my "Idols" - James Rogers moved a while back to Singapore ( I believe so), now I think that was not such a bad idea - I am dialing my real estate agent's number as I type.

"Give me your poor..." - I don't know why Statue Of Liberty is still standing over Hudson ( not really Hudson, just making a point) - it had to be moved with manufacturing, intellectual property, now financial industry and soon the last man crawling - service industry to China, India, Russia, how about Nigeria?

Are you still optimistic that "you can become the President of what used to be a great country" or you finally starting to realize that these "lower landing standards" were a part of attempt to keep you from knowing the TRUTH? To make you buy junk you don't need, to cultivate a new bread of mindless compulsive buyers with one and only purpose of supporting rotten model?
Are you still enjoying watching your 401Ks, IRAs, savings accounts - or you finally facing the painful fact that it is nothing now and it will be less than nothing when (and IF) you finally decide to take a break?
Are you paying attention to Social Security Statements' fine print? "Here is nothing you going to get after busting your chaps for 60 years and by the time you hope you will get nothing - it will be less than nothing if it still will be there?
I can hear future "fearless leaders" saying (after complete collapse of Social InSecurity) "this is why it DID happen, now we shall not talk why it happened, who caused it, now we need to tax those who still alive and make them work yet another 10 years pass expected retirement date.
"as long as it happens when we are out of the office" - should not we all live by example?

Is my plane ticket here yet? Are yours?

P.S. Are you still paying for the college for your kids in hope that they will find a job?

Monday, September 22, 2008

Morons catering to morons?

Just wondering what reason will be brought up today after "Short Ban" was implemented and XLF is down 7%. Beside, "someone" might be even covering today providing additional support!
There might be only one reason for stocks to go down - SELLING/NO BUYING.
Selling or Short selling does not make much difference, there always going to be "buying/covering" sooner or later.

How much longer "they" will think that "we" can be fooled and lied to?

Saturday, September 20, 2008

Fidelity screwed its customers!

I have an IRA account with Fidelity.
On Friday their web site was down for at least an hour at the open. Their phone line was down also, Once the phone line started to work, hold time was more than an hour. Their web site was still locking up for about 2 hours after it was supposedly fixed.

I was unable to close long position in (YUG)/(XHB)/(UWM) I opened on Thursday afternoon.

When I finally spoke to a life person the answer I received was, in plain English: "Take it and shovel it up your arse - we cannot honor sell order you have not placed no matter is WE ( Fidelity) made it impossible to place such order"
To make things worse Fidelity representative stated on recorded line that "All brokers have technical problems today" - I wonder if TDAmeritrade's Joe Moglia and ThinkOrSwim Tom Sosnoff would be interested in their competitor statement. ( Both AMTD and TOS account have not had a single problem on Friday)

I have not made profit I expected to make on the trade I was unable to place due to complete and utterly failure of Fidelity to provide quality service - and Fidelity is hiding behind some convenient rule of "not creating individual prints for customers"

Any lawyers in the house?

P.S. Customer is always right? No wonder why United States are gradually disappearing in the "New 3rd world" bottomless pit.

Thursday, September 18, 2008

Calling "The Bottom" in Financial

Now is Sep18Th 2008 time 11:58AM - XLF is 17.90 and XHB is 18.10

They call me Mad Russian for a reason.

1P.M. $VIX is at the level not seeing from July 2002-October 2002 period.
The problem is - "period" - $VIX spiked in July 2002 and vacillated in high 40th for almost 4 months. The "bravery" or "stupidity" of "bottom in financials" call should play out by today's close.

Wednesday, September 17, 2008

Cramer: "The last thing I feel today is smart"

That is a historic moment - Cramer stating the fact.

DavidDT:"The last thing I feel today is smart"
That is how I always feel when I try to play a hero and step in front of a moving train by taking the "Hard Trade" - today that was buying Oct (SMH) and (XLF) calls.
Sometimes such trade might produce astronomical profits ( Like going long calls financials on July 14th), but more often it will destroy your finances and, most importantly, rid you of "superior attitude".
After today's close, even sitting on flat new position I feel exhausted, unsure and, once again, tired.
Most likely I will take some loss tomorrow and will get on cash for some time - I made quite a few costly mistakes lately and don't want to press. Well, I still have all night to do some thinking...

Took off 1/2 of (GLD)/(SLV) trade ( I sent "Regular Contributors Letter" on September 11th to entire "Free list" - looks like I can be right once in a while )

My decision to suspend posting on my sites partially due to "yet another strange email" I received today, here is the text: "
why did i get this email so late?"
Firstly, I am not the one who is sending emails (mailer does as soon as ...whatever), secondly I do not guarantee "timing" of neither "free list emails" nor "RCL" emails, thirdly I post my opinions for "educational" purposes ONLY and not recommendations to buy or sell any security" - PLEASE READ FAQ and
DISCLAIMER on the bottom of the page (as well as on the bottom of every single email)

On a serious note - this is the most horrendous market I've seen since 1992, even IF I am right 70% of the time - retail part time trader will not be able to "keep up" with this market's pace and swings and if someone decides on his own risk to treat my opinions as something he/she might use - I, myself, might change my decision 10 seconds after I expressed it (read DISCLAIMER on the bottom of the page)

Before I say "Goodbye" for few weeks, I'd like to express my gratitude to anonymous contributor who "PayPal"ed enormous contribution with note "GLD", Thank you, but I already returned this contribution - I can not accept THAT unacceptably LARGE amount(4 figures!), but gesture is GREATLY appreciated - I am glad someone made some money along with me on that trade.

"See" you in few weeks...preserve your capital

P.S. As a favor - can you, PLEASE, email and call CNBC and ask Larry Kudlow to shut the ...hell up? I am just wondering of how much they have to pay him to be the way he is? Or he is just "IS" that way?

Tuesday, September 16, 2008

(QQQQ) about to bounce? Evening update

Nasdaq bounced indeed, so did SMH and IBB and XLF and... most other major indexes.
Could be a quick move up 5-7% where major resistance areas will be hit.
Short post - was not it?

QQQQ about to bounce?

No need to write long posts today, we all know that the "last shoe" dropped, if it was the last is not important anymore, shock waves went all around the world, we hear corrupt politicians trying to capitalize on disaster by saying "we will not let it happen again" ("They" said it after 2000 meltdown, after 9/11 and I bet people heard it after 1929 and after 1987 and after 1998 and after ...what else can "they" do when entire system has been build on incompetence, lies and camouflage, just like painting the "front of the house" before sale)

Anyhow, from technical point of view, FED or no FED, White Knight or the Apocalypses - (QQQQ) is about to bounce - Biotech oversold, Semiconductors oversold, Consumer stocks in NASDAQ100 oversold - and FED being known for applying pressure at the most vulnerable points where their meaningless and corrupt actions costing taxpayers lots of past and future money would produce max results.
Would it last? Markets testing prior lows, forming what is called "ugly double bottom" on most indexes on huge volume - we might be witnessing the beginning of the end of bear market. May be...still, going to be one hell of a day today...
P.S. If there is one good news than I hope I will not have to watch "Laughing AIG" commercial ever again.

Thursday, September 11, 2008

The answer I'd like to know...

Don't get me wrong, I am a perpetual Bull - unfortunately, but I do hate deceit and stupidity and "Hope" is not the word in my vocabulary.
Here is my question: "

Can "Laughter can add +8 years to your AIG life?"

7 years of nothing, but bubbles...(in Observance of 9/11)

To all my friends who meaninglessly lost their lives in the flames of WTC - you are remembered, you are forever in my heart...

Tuesday, September 09, 2008

"Tomorrow might have been a brighter day..."

Do you feel it? Can you smell it? Can you see it?
It is right there, everywhere...
This is a smell of a lost hope.
There is no help. not from anywhere, not from anybody...
Even the "best government of the best country in the world" (my fingers are shaking from laughter, but is is really very sad) cannot help by wasting taxpayers money (which they wasted in the good times and going to replenish in the bad times by raising taxes on you and me, never mind corporations - they will GIVE them money)

This is a beginning of the end...wait, it is not, "beginning of the end" started long time ago...
This is the end...nah...there is not such thing while we live...
Lets try again - "It is 2:30PM Tuesday of September 2008 and This is a beginning of the end of the end"

Not making much sense? So what, so do you, so do they...

Monday, September 08, 2008

(FRE)/(FNM) action opinion?

So, what happened?
Shareholders lost everything - check.
Bondholders - will be paid by USsA government ( remember "good old" USSR? Union of Soviet Socialist Republics?)
China will get their money back - if anyone thinks US government acting out of decency, think again - we are afraid once again - China is the largest holder of US debt.
Housing will turn around? Why? Because mortgage rates might go down? Do you think Big Brother will be able to manage insolvent companies better than prior "I happen to know someone" management? You REALLY think so?
Financials? - that is a good question now.
That is the answer I REALLY want to know.
September 30th quickly approaching - you know what that date is? Do you? Well, since you would not be investing/trading if you would not know, I presume you just forgot temporary that this is when according to FAS157 all level3 assets MUST be marked to market. Do you know what percentage of total assets is in these worthless assets? My best guess is that crooks from financial companies placed at least 50-70% of "New Big Pot induced Everyone Can Buy a House Thing " into this "may be it is not going to happen" place.
Do you think market participants don't know about it?
They do know, so why (XLF) is STILL up?
Because it is becoming "the secret everyone knows about" very soon?
Is it priced into financial markets?

As a trader I am placing my bets on "It IS priced in financial markets...for the time being" - and I am buying (UYG) - 2x financial ETF around $22.80 even after it went up almost 14% from Friday's bottom. My stops are placed hard, which I don't do too often, at $22.40
So far we had "2 waves of reaction" - "UP", then "DOWN" - what the 3rd one is going to be?
This market is loco ... and since stock market is a reflection of mental state of the nation ... "WHATZUP" with the nation???
And economy is REALLY sick...no matter what cheerleaders are telling you.
Have you seen lots of people waiving flag lately? (except for politicians)