No, we don't think tomorrow will necessarily be Black Tuesday, but it would be irresponsible for us to not voice our concerns about the state of investor confidence. Crashes don't just happen out of nowhere. They are a result of a steady deterioration of confidence. We are approaching that point now, with the almost daily failure of major financial institutions. The crisis is only now becoming broadcast as a global phenomenon, and the conditions are in place for a substantial global market meltdown. The possibility for this is higher now than at any point throughout this crisis because of what's happening in Europe in particular. These are truly phenomenal times, and we think there is a strong possibility that this whole thing ends with a loud bang.
Now is not the time to be long any individual stock. The risk clearly outweighs the reward. We are particulary leary of Tuesdays for obvious reasons. Perhaps the bailout package will save the day once again, bringing traders back to the long side for a day or two. But void of that, this crisis is on the verge of reaching a boiling point.
Subscribe to:
Post Comments (Atom)
20 comments:
This is similar to the Asian Contagion, for those of you that go back that far. It's only when it was recognized as a global problem that the market really started to drop. It could easily play out the same way again.
We dumped DDM. Sure the Dow could rally 1,000 tomorrow, but the risk here is far too great. The stars are aligned for a global sell-off.
Snot, I hear that this will pass on Wednesday. Their is serious negotiatoins occuring. My cousin in a house member and he spoke directly to my grandfather and expressed his NO vote will change to a Yes by wednesday.
Major horse trading happening.
As for DDM, I dont think you should sell DDM. We may have one more down day but the up day is going to be huge and progressive.
It's Tuesday we're concerned about, particularly if the world markets collapse overnight.
The "NO" voters just wanted to delay the vote to let the market tell them how necessary the bailout is. It's a dangerous game they're playing. If the market drops 1,000 and recovers, they can breathe a sigh of relief. If instead, the market drops 4,000 and does not recover, we're in trouble.
We sold DDM already, but have every intention of getting back in if the market sells off tomorrow.
Just bought back some DDM just below 50 (Dow off 720) Only 15% of our portfolio, just in case there is a rate cut or something in the morning. If world markets collapse, they'll have to close the market tomorrow, or cut the rates, or something. We're betting that they don't let us drop 4,000 points because we don't have the police force to deal with the looting, etc, that comes with that kind of move.
You caught the absolute bottom. Did you have a limit order in for 50? It didn't stay there for more than a couple minutes!
Spoke to my grandfather and he expressed disdain for speaker Pelosi's indictment of my cousin and his collegues on the house floor today. I'm neutral in providing blame as to why this vote was sunk. I can say that my grandfather is convinced that this vote will pass the house Thursday.
Our family has a gathering for holiday tomorrow and I will be able to listen to James speak to our family about this bill in greater detail.
As for trading, I bought DDM at 51 today and I believe that this will be one of the best trades I have made this year. I also bought into YGE as more of a random trade.
I fear Tuesday and Wednesday and have 72% of my portfolio in cash in preperation for a large move. I'm evauating S&P Calls....
We feel the same as you that the bill will likely pass. It's the next few days (particularly tomorrow) that could be dangerous. It should be interesting to watch the world markets trade tonight. Good luck with the S&P calls. Remember to layer into them rather than buying all at once. Unless, of course, we open down 1,000, in which case we'll be getting at least 2/3 of our porfolio into DDM. The other 1/3rd can wait until we're down 2,000. If we fall more than that, then we'll have bigger problems than the size of our portfolio!
Hey Snot,
How do you like LDK here as an entry point?
Will you advise when you enter?
Look at the chart of SMN after they banned the short selling of financials. As expected, the shorts flooded out into other sectors. Obviously Basic Materials was one of them.
The question is, what happens Thursday when the SEC ban is supposedly lifted? Assuming they dont intervene any further, one would assume that it would be time to go long Basic Materials. Especially if the bailout is passed that same day. No doubt there are hundreds of traders asking these questions, and I suspect that the market will head upwards in anticipation over the next couple days. I am seeing UYM as an incredible buying opportunity at anywhere near $40. I can easily see UYM doubling in a week. The problem is that its movement is entirely dependent on whether the SEC releases the ban on shortselling of financials.
What is up with DDM? The DOW is up 240 points and DDM is up .17 pennies?!?
That's because DDM is only a composite of the DOW 30, which is only a small pool of 30 stocks. Go with SSO or QLD for more diversity.
DDM did not close at its low yesterday, whereas the Dow did. It was the unsettled trades near the days end that made the Dow continue lower after the bell. DDM was frozen off its highs as the Dow continued lower after 4pm.
We just sold DDM and are back to 100% cash. It's not because we think it's headed lower, just that we bought in at 50 and sold at 54 a day later... can't complain, and don't want to get greedy. This is a lot more than we expected out of the market today. We'd buy DDM back maybe at 53 or so.
Snot - what caused you to sell DDM? Futures are pointing down validating your move. Was it any specific market activity or just gut?
Good question AK. We like taking profits.
The way we see it, the Dow can only do three things. It can go down, sideways, or up. If it goes down, we win. If it goes sideways, we win. We'd be able to buy it back cheaper as it fluxuates sideways. If it goes higher, we lose. So we have a 2/3rds chance of being right by selling. Now consider the odds of the market continuing to rally.
Here's the quick math:
1. We're in a bear market
2. We just tacked on 500 points...
3. ...in one day!
4. We priced in the bailout
There you have it. We are just playing the odds. We're not betting that the market will drop from here. We're merely betting that by selling DDM at 54, we'll be able to buy it back at 52.5, and then maybe again at 51.
Of course we are not always right. The market could rally strongly from here. All we do is play the odds, and try to put them in our favor as much as possible. And always keep in mind that a lost opportunity is a lot easier to overcome than lost capital.
Thanks. Your trading logic jibes with those of successful traders in Market Wizards, a book that convinced me that it's possible to beat the market by learning to stack the odds in your favor.
Have any books influenced you or do you chalk it up to experience?
AK, Stan Weinstein's "Secrets for Profiting in Bull and Bear Markets" has influenced us more than any other book. It's an older book, but it lays out the basic stages of a company's (and it's stock's) growth cycle. It makes the 4 stages of the cycle very clear. When we say that ferts are going to $0, we mean that they are in a Stage 4 downtrend. The odds are so against you when buying into a Stage 4, that the correct mentality with which to approach the stock is to think that it's headed for bankruptcy. Stage 4 stocks often are.
You must read that book if you can still get it. It puts your brain in sync with how stocks really move.
Snot,
It looks like LDK is now safe above $30. Are you in it now?
Thanks. Amazon has the book in stock and the reviews are uniformly superlative. I'm all over it.
Post a Comment