Friday, May 8, 2009

The Clear Signal To Go Long

No, not right now. I have been thinking of when is the clear signal to go long. It certainly is not now, even though we may go higher from hear.

The clear signal is if the S&P goes down to the 680 level within the next few months, that is the signal to go long and not worry about it. I want to see the double bottom so many bear markets end with. I don't see this bear market ending with a single bottom and then a V recovery. Show me a W and I will be the bullest of the bulls. The tech bubble bottomed with a double bottom as did the bear market of the 80's. Who are we to say this one won't end with a double bottom?

Until then, I will play this market very tentatively short term. I want to ride the slide down for sure but until the VIX shows life and until the SPX's 20 day MA starts to move toward the 50 day MA, I will stay cautious. The signal to go more aggressively short is when the 20 and 50 day MA's start to converge. This may not happen until the 200 MA is touched or sniffed.


  1. you're right, the clear signal was 2-3 weeks ago when companies started missing estimates & then rallying hard. dude, fighting this tape is fruitless, trade the trend until it busts you a good one and then look for fatty shorts. the levered garbage is all going to decay teh living shiz out of guys holding it. FAZ is already on it's death stroll here, will never hit even $10 again.

    long: COF, HIG, IYR, TBT, DRYS (spec, ouch!)
    long: SPY 80 puts / hedge

  2. long: BAC ($40.25), JCG ($37.50), DRYS (target $21.65)
    short: -

  3. To Beamer Dog and QevolveQ:

    Do you really think FAZ will go to zero and die away? I was thinking FAZ would go to $1 or even less by the time P2 tops around S&P 1000-1100. But then if P3 goes down to 600 or 500, I figured FAZ would multiply again to $100 or even $200. If the S&P falls from 1100 to 600, why wouldn't FAZ compound and increase to $100 or $200?

    Please tell me our opinions and your reasoning that supports your view. Thanks very much!

  4. SRS, I think all the 3x and 2x ETF's are doomed in the long run. Once they get into single digits, it is really hard for them to make a big move due to the nature of their leveraging.

    If FAZ goes to $1, it will never get back to $100. Ever.

    It sounds like you are looking to get rich quick. That is what destroys most retail investors. And you are assuming it is as easy as seeing P2 ending and P3 coming. P2 (if we are even in P2) may not end for months if not years.

    Stay away from FAS and FAZ. Use only as a trading tool and nothing more.

  5. Beamer Dog. I thought that I share an interesting post from SRS board in case that you have not had a chance to see it.
    Open Letter to Alan Abelson @ Barrons 57 minutes ago
    Hello Alan:

    Thanks for your insights, my weekend is always better when I read your work. Please think about doing a piece on the hand and glove situation of the FED and Goldman Sachs. The Chair of the New York Fed holding $15 million of GS stock, this could strain his objectivity when it comes to oversight of all that TARP money. You also might want to look into GS influencing CRE via several ETFs, IYR (long CRE to a facor of 1x) and SRS (short CRE to a factor of 2x) in particular. Yahoo Finance has great message boards on these two ETFs, some of the posts are compost but there are green shoots here and there. It looks as though GS is buying IYR and selling SRS to keep CRE stocks much higher than they should be. If they are doing it with government money it is not right. REITS are "discounting debt" and paying some of it off with new offerings. The underlying asset has massive problems, I know I own some. I called my old friend and local real estate magnate to ask his thoughts on CRE, he says there are always has two people waiting to see him. One wants a rent reduction and the other one is going out of business. Baby boomers are reigning in spending so our malls will not see the traffic as in years past, yet SPG is having it's second offering in eight weeks. Take a look at the chart for SRS in the last month, note the crazy volume. I own some and I feel like the kid that is continually being shaken down for his lunch money. Someone comes in almost every day and cleans out SRS. I spoke with someone from your sister company, the WSJ and they said that there were "interested parties" that were purchasing these new REIT stocks. I think the "interested parties" are banks that hold CRE loans and GS. In the process the debt holders take a haircut but the stockholders now have the equity. When the music stops and everyone runs to a chair, this will be the next big sorrow of our times, Mom and Pop will find out that their 401-Ks hold REITs that own empty; malls, office buildings, and warehouses. The debt holders will also require a higher rate of return to compensate for the added risk in the future. The whole thing has implosion written all over it. Buy the way, SRS just hit another new 52 week low!

    Thanks again for your writings and objectivity,

  6. Why I am not surprised that the recent big rally based on one bad news after another is because the banks are using the tarp money to manipulate the market and push it towards the direction to their benefit. The Evil Hunters as the banks are the whole cause of this entire global disaster, they win it both ways by taking most everyone's money from the very beginning and then using everyone's tax dollars to screw those whoever stands in their way regardless of right or wrong. Biggest crooks in the country. Too big to fall. Too big to fight.

  7. The best thing to do right now probably is to put most things into cash and stop trading until the sanity returns otherwise it is pure gamble.

  8. Dilution is used to be bad for the stocks, but today dilution turns into a great thing for stock. How stupid they think the general Americans are! Although it is our 750 billion dollars helping them to to create such a huge manipulation. Too big to fall so today we still vow to them after they stole most Americans' entire saving and 401k. I still think the truth will prevail in the end, but it will take time until they find enough bag holders to help them to hold their bags before they move on to the other sectors. After all, there isn't enough money to go around in every sector, but you can see what are their best interest and likes are themselves(financial)energy and Real Estate. You once mentioned about walking away and not trading as the only right idea when you think the market is not running based on sanity. I think that I might start just doing the exact same thing you do. Put most things in cash and only some at risk and trade with our heart. The long over due correction since 900 then 930 then 940 then 950, TA people seem to keep raising its bar, it makes me feel that no one really knows what's going on, but just following the market. Too dangerous time.

  9. Thanks, Beamer Dog. Point well taken. But I have to ask you then if you are still holding SRS, how low you think it will go, and how high you think it will return to when CRE finally implodes.

    BTW, I'm not looking to get rich quick. I'm only looking to protect myself and my family from the financial harm the banks and the government are causing (and will cause) average Americans by their outrageously dangerous and destructive actions.

    I truly wish the best for you and yours.

  10. To Mandy,

    Thank you for your four posts. You make excellent points. I am seriously considering the advice of your third and fourth posts. Best wishes to you and yours.

  11. Bsen

    you should (if you want to of course), submit your next good article on Seeking Alpha, to get that "certification".

    You are a good writer, (far better than I). Heck, I don't even use correct grammer most of the time. I have always been borderline expression imparied for writing papers. I have always been one of those top tier math/science/memory factiod types, low tier english students.

    Next good thoughts I have, I am going to be sending to seeking alpha tho, see what happens. Be nice to get that stamp to put on your blog, etc. (see like site, for what the certification looks like)


  12. Mandy, regarding goldman. See my article on March 15th about that. I am way ahead of you. Yet, no outrage from the public or the media.

  13. Mandy, regarding dilution, etc. this reminds me so much of the tech bubble in 2000. People wanted to believe what they were hearing and disregarded all fundamentals. You don't want to get in the way of it but you want to be ready when it falls.

  14. SRS Player, SRS has been my biggest mistake no doubt. I had been playing it right by holding and selling covered calls at a high premium. It brought home the bacon quite well even when going down. But at 47, I made the mistake. I doubled up and removed my covered calls. I rode it all the way down although I did have some covered calls along the way, but no where near enough to cover the losses. So I feel your pain.

    Sometimes you can be right, and the market wrong but what matters is the market.

    If you are trying to protect your finances, FAZ and FAS are not the way to go. TBT and GLD are a better play if you feel the banks are putting the screws to everyone.

  15. Erik, I have started and not finished 3 different books. I do love to write. Each of the books started out with a great idea, a good outline, a good plot. As I write though, I change plots, characters, etc. to juice it up. And then I lose what I was trying to get to and I get frustrated and scrap it.

    One of these days I will finish one.

  16. To Beamer Dog and SRS player,

    I started to play SRS the last 3 months. In and out, it gave me some scares. Each time I started my position and it went down, I managed to get out with small gains, thankfully. Time after time, I told myself maybe I shall stay away from it, but the truth and figure encouraged me to get back in again. So far I have an old position of 2000 shares of SRS at low $26, but in between times, I have traded longs and shorts a few trips, to cover more than half of the losses already. I want to trade with my heart based on fact so this one is like a magnet that draws me in each time. I added more than double position last Friday right before the close. I have a couple box positions that I am looking to close early next week and put them back in cash, but will keep SRS into end of May or early June if necessary. At this time, emotion discipline is important, too many bears joined the bulls to help the cheers. Crowd makes me very nervous. My gut feeling tells me that we really are nearing the top. I maybe wrong, but I am watching my bullets and bottom line carefully. Market can't go up forever. We have rallied from 6500 almost none stop to over 8500. There is no easy money in the world. I caught some good profit by playing contrariwise from the bad news with some financial stocks when SPX @ 900 to SPX 922. Don't feel too good with the trades for it is pure gamble, but it made some good money. I am risking it no more. I have a feeling that dollars face some serious rebound next week and the market shall pull back. When the pain and the fear get to people the most on long srs and faz, it's the time that mm will lift them to keep the interest alive. After all, what's the fun for mm when there are only the shorts left on faz and srs. I am in faz and srs short term and I think there is still some money to be made. it's better than throwing my money away by joining the crowd with all the insanity and chase the high. Truth has to prevail in the end otherwise we are all screwed living in this world of deception and crimes. Let's all try to work real hard together to share our thoughts and support. Good luck next week.


    (that's my entry, see if they pick it up)

    Bsen, i am talking in refferal to SeekingAlpha or something in terms of Market or Economic opinion.


  18. To Beamer Dog and Mandy,

    Thank you very much for your replies to me.

    Beamer Dog, are you going to hold SRS until CRE eventually collapses? It might take 3 to 6 months more, but SRS seems likely to profit well starting in late '09 or all of 2010 through 2012, when it is said the problems will really hit.

    Mandy, You've done well, in your trades and your exits. Are you still thinking of going to cash at some point, until the market seems saner and fairer?

    I'm thinking of going to cash soon because I feel it's very risky to short this rally -- as I have been -- AND to buy this rally at these levels -- which I think is based on lies and tricks, and could fail at any time. If I trade at all, I'm thinking of going long briefly only after substantial pullbacks, or going short when this rally eventually fails and the market falls from way too high a level.

    Good luck to you both.

  19. Beamer Dog,

    I will also look into TBT and GLD. Thanks.

  20. To SRS trader,

    I will not go all in cash with my portfolio, but I am planning to trim more next week. I made over $8,000 day trading WFC last Friday and am willing to use the profit to bet on FAZ to go back up next week based on very short term. SRS to me is a good bet so I plan to give it a bit extra time and patience. There are certain stocks you know in your gut feeling that you can keep and ride it out and if with any huge pull back, you will have the cash ready to add some more. I am planning to make sure that I have good comfortable cash position to weather when market has substantial pullbacks. It means that I plan to put more back in cash, but not for the entire portfolio. I am trying to have a portfolio that is hedge both ways so it doesn't hurt me too bad regardless the market goes up further or down. I need to slow down my trades after bringing back more cash in my account and discipline myself to focus on no more than a couple active. I sincerely believe that the oil is overbought so as the Real Estate and financial sectors. Unless some pull back, the sectors are not good nor healthy to stay in or get in. Let's keep sharing our thoughts and our work to help and support one another. Good luck to you next week.

  21. "We're going to run out of steam," Manus Cranny, market commentator from MF Global, said. "We've had a fantastic 9-week run, nothing lasts forever."

  22. Mandy,

    Thanks for your detailed reply.

    I would be glad to keep sharing thoughts with you. But I have two concerns: One, you sound like a much more advanced and active trader than I am, so I don't know how much I will be able to contribute to your superior knowledge. Two, I am thinking about going to cash and reducing my trading until I feel the market is saner and fairer -- and that might take a very long time! For both these reasons, let's just see if I can maintain the conversation. With all due respect to Beamer Dog, you will find me more often commenting at Kenny's Technical Analysis blog. See the link here at the right.

    Good luck to you too.

  23. Mandy,

    If you visit Kenny's Technical Analysis blog, and find one of my comments, you can click on the "face" to the left of my name and read as many of my previous comments as you want. That would give you a quick idea about whether my knowledge and reasoning have anything to contribute to yours. Also, you will a lot of knowledgeable people commenting there. Beamer Dog's blog is excellent and worth reading every day...but there are a lot more people commenting over on Kenny's blog, if you want more conversation.

  24. Mandy,

    I meant to write "you will FIND a lot of knowledgeable people"...

  25. SRS, I am not suggesting you go out and buy TBT and GLD. I mention them as protection if you feel you need protection. TBT protects against the falling dollar (in a round about way). GLD also protects against the falling dollar and against inflation.

  26. Beamer Dog,

    Thanks for being conscientious to clarify this for me.