Click chart to enlargeHere's a chart of DDM at the close of the day. The projected channel is intact but slightly damaged. Ideally, today's low would have been higher than yesterday's to keep the uptrend since bouncing off of 7882 alive. You can't be all long here without nerves of steel. We're still holding all of our DDM and SSO, and have been in and out of FXP (currently out) each time the market crosses its intraday moving average. We just aren't willing to go without that insurance when the market is trending lower intraday. Needless to say, if we ever did close below 7,882, all of the stars would be aligned for a global crash that would be historic to say the least. With that threat looming, it is very hard for us to up our 40% long exposure. We would only add to our current positions if the market takes out its lows. We're still hopeful that this oversold market has tested the area of the lows for the last time and is ready to launch a sustainable rally. We feel more and more alone in that thinking, as the market does not seem to be able to hold a rally for more than an hour or two.
You may look back at a chart of the market someday and wonder why you didn't just put everything in right here. After all, you knew the market was low, and Buffett just bought stocks in his own account. But here you are, worried about a global market crash, nervous to even be 20% long, wondering if being all short wouldn't be better. So it's never easy.
The market will rid itself of one of its uncertainties on November 4th when Obama wins by a landslide. We still don't see how the election is an uncertainty at this point, but such is the market. We'll just be happy when October is over, because the greatest crashes in history (1929 and 1987) both occured during this month.
29 comments:
Referring to the whipsaw action at the end of the previous blog, if you aren't monitoring things at a minute by minute basis in this screwey market, you're going to get burned. When I started trading I made a promise that I wouldn't become a 'day trader'. Oops, that has fallen by the side. But here goes... bought QID at 77.96 this morning and sold at 83.00 this afternoon. Had I held to the end of the day I would have just broken even. However, I feel like I'm tip toeing past the graveyard. Much more of this and I'll get traders' ulcer. Back to 100% cash.
haha..
very funny,
I'm in the same position as you.
Nothing beats 100% cash. its not worth it, I'm actually hoping for a rally so I an get in and short with no worries :-)
Snot,
I posted a comment a few days ago worried about being stuck in FXP at 114 with 60% of my portfolio. I sold at 127 for a nice profit. What are you looking for when you jump into FXP? This thing is like crack-I get out I want more!!
sbbuilder and hk22, what you two are doing is probably the best approach to take in a market like this. Our swing trading usually works, but the market isn't swinging, it's just dropping!
sco3putt, we may have different reasons for buying FXP than you. We're using to hedge long positions, not trying to make a profit on it. Truth be told, we get very nervous buying it "up here". We just buy it each time the Dow drops below its 100dma on a 2 minute chart. Above the line we don't need it to feel comfortable with our long positions, but below it we feel very vulnerable. We originally planned on accumulating FXP when DDM reached 40, but that never happened. We'll set our sights lower if the market rallies again. We only put 4% of our portfolio into FXP when we do buy it, because it's such an effective hedge. It is like crack when it goes your way, but it can also totally wipe you out. Just be careful with it. If we get an emergency intraday rate cut, it could easily drop 20+ points in about a minute.
On October 4, 2008, in the Porter Ranch section of Los Angeles, Karthik Rajaram, beset by financial troubles, shot his wife, mother-in-law, and three sons before turning the gun on himself. In one of his two suicide notes, Rajaram wrote that he was "broke," having incurred massive financial losses in the economic meltdown. "I understand he was unemployed, his dealings in the stock market had taken a disastrous turn for the worse," said Los Angeles Deputy Police Chief Michel R. Moore.
The fallout from the current subprime mortgage debacle and the economic one that followed has thrown lives into turmoil across the country. In recent days, the Associated Press, ABC News, and others have begun to address the burgeoning body count, especially suicides attributed to the financial crisis. (Note that, months ago, Barbara Ehrenreich raised the issue in the Nation.)
http://www.tomdispatch.com/post/174991/nick_turse_going_to_extremes_in_america
Very Sad story,
It is starting to sound more like the Great Depression,
at least for people, since the government thinks that everything is fine and they won't even accept the fact that we are in a recession.
One thing people shouldn't forget is that money is just paper, shouldn't stress and shouldn't let it dictate your life, in this case other people's life.
Quote of the day
Jim Reid, Deutsche Bank:
It’s a depressing world when the only safe haven at the moment is a country that has recently nationalised its two largest mortgage companies, bailed out the world’s largest insurance company, is spending $700bn buying toxic assets, is injecting $250m into its largest banks after high profile failures and is about to go on a fiscal expansion the likes it has never before seen in its history.
Worst is Ahead'
``This is the worst financial crisis in the U.S., Europe and now emerging markets that we've seen in a long time,'' Roubini said. ``Things will get much worse before they get better. I fear the worst is ahead of us.''
Developing nations' borrowing costs jumped to the highest in six years today as Belarus joined Hungary, Ukraine and Pakistan in seeking a bailout from the International Monetary Fund to help weather frozen money markets and a slump in commodities. Argentina risks defaulting for the second time this decade.
``There are about a dozen emerging markets that are now in severe financial trouble,'' Roubini said. ``Even a small country can have a systemic effect on the global economy,'' he added. ``There is not going to be enough IMF money to support them.''
I am not about 15% equities, 30% bonds, and 55% cash, and I can't wait to sell my last stock holding and reduce the equities to 7% (in a mutuals account). I overhear people talking in moans and groans, because their 401-Ks and IRAs are devastated. Mine doesn't look so good either, even though my losses are less that that of the major indexes. I feel the most sorry for all the people losing their jobs. New jobs numbers tomorrow morning. Won't be very good most likely.
Snot,
You don't use stops. But if one uses stops, investing in something like FXP should be safer, rather than just using it as a hedge, shouldn't it? Because the stop will engage if you are away from the computer and the FED throws in an emergency rate cut, right? It may fill a couple of dollars on the other side of your stop, but you shouldn't get wiped out, right?
FED statements usually happen before market opens making your stop orders worthless.
hk22, look on the bright side, at least Jim Reid thinks the U.S. is a safe haven.
There are always these really depressing articles and events (suicides, murders) during bear markets. It makes for interesting reading, but it can affect your trading if you read too many of them because you start to think that the world is coming apart at the seams, which makes it very hard to go long anything. We try to keep these doomsday articles in perspective. There's certainly no shortage of them nowadays. If the Dow is down 2,000 points one of these days, we'll go buy some canned goods and bottled water, but until then, this bear is just business as usual. The news always talks about the end of America when the market is down this far.
Anon, we don't use stops, but we use Ameritrade's Strategy Desk software which allows you to set audible alerts when a stock or ETF or index hits a specified price. If we want to leave the computer, we just set the alerts and walk away. As for the stops triggering when the market is moving very rapidly, we can't answer that because we've never used them.
As for the rate cut, it is widely expected that we'll get one at the next regularly scheduled FOMC meeting on Tuesday. Only if we break 7882 would there be a chance of an emergency one.
looks like the asia market is tumbling now.... it seems tomorrow will be bad... buy fxp at open?
Asia down 4 or 5% is not so bad. It seems to do that every night recently. Let's see how Europe does.
Snot,
4 new threads in one day? That's gotta be some kind of first! But these are unusual times, and unusual measures are called for.
Isn't it interesting that Greenspan is admitting he had "flaws" in his thinking regarding how well banks/mortgage investment firms would protect themselves from what is now happening? Greenspan was opposed to setting limits on CDS activity, and believed we should simply TRUST the execs not to become greedy past the point of good sense? Link: http://biz.yahoo.com/ap/081023/financial_meltdown.html
Did he not learn anything in grammar school I wonder? I guess that I am completely amazed that Greenspan didn't support required guidelines which would have allowed auditors to more authoritatively identify when reasonable limits of questionable mortgage investment would constitute doubts about the financial health of major financial institutions in this country.
My early training was audit and tax with a CPA firm, and it strikes me that the facts coming to light only now about our trusted financial institutions are tantamount to criminal in that they have not, in fact had appropriate guidelines within which they were required to work mandated by law. The leaders of these firms have been allowed to effectively act without any disciplinary oversight, and the auditors have not had power to control that resulting bad conduct due to the lack of law in place to prevent it.
On another note, what in the world is this tiny little thing below your ticker about conjugated linoleic acid? That stuff sounds positively nasty, and like something that we'll someday learn was evil to the bod......
Agr8gem57
Agr8gem57,
Greenspan comes from an era in which people could be trusted. In his day, there were such things as patriotism, personal accountability, pride, social responsibility, truth, and, you know, a whole bunch of other good qualities that CEO's no longer possess. It's no wonder he finds it shocking that any one educated person would destroy the lives of hundreds of thousands of people in order to make themselves marginally wealthier.
Our old counter blew up, so we got this cool new one for free as long as we leave the ad for conjugated linoleic acid below it. If it is discovered someday to be evil to the bod, of course it will not be the fault of the person who chose to ingest it. That would assume that people make their own choices about what they put in their bodies. Of course we all know how ridiculous that notion is. Personal responsibility for one's own health was a fad that died out years ago.
from bloomberg-
S&P 500, Dow Average Futures Reach `Limit Down' Level (Update1)
By Sarah Jones and Alexis Xydias
Oct. 24 (Bloomberg) -- Trading in futures on the Standard & Poor's 500 Index and the Dow Jones Industrial Average has been limited after declines in the contracts of more than 6 percent triggered a so-called limit down restriction.
The S&P 500 futures will not trade below 855.20 until U.S. exchanges open for regular trading at 9:30 a.m. New York time, said Jeremy Hughes, a London-based spokesman for the Chicago Mercantile Exchange. Dow Average futures won't trade below the 8,224 level, he said. The ``limit down'' suspension allows both contracts to trade above those levels, he said.
Stocks tumbled around the world today and U.S. index futures fell on deepening concern the global economic slump will crimp corporate earnings
Looks like there's going to be No Trading today/
If so, they better come with a miracle during the weekend.
If a big crash happens I wouldn't dare to jump in tho.
Not yet.
What do you think Snot?
I dont think people realize that this bailout was an economic 9/11. The country has been completely taken over by corruption. Right now, billions of dollars of bailout money is being placed into the market for the sole purpose of boosting certain equities after corrupt bankers buy with their personal holdings. Yes, they buy with their own money then use the bailout funds to initiate a dead cat bounce. Then they sell their personal stake, turn around and pull out their bailout money, and do it again. If we dont get a major crash I will be shocked.
Has anyone ever seen the game show "Sale Of The Century"?? This is it people, in real life.
QUESTION FOR SNOT- I also trade on TD Ameritrade and as you know on 10-10 their system froze from 9:30:30 until 9:40 and if you didn't have buys in before that you missed the entire move. What are you doing this morning? Any buy orders in ahead of time? DDM @ 25 perhaps? SSO @ 21? And would you ever buy pre-market?I usually avoid that like the plague.
The reason I ask is because I'm looking to add more SSO today and it was very frustrating last week when I couldn't submit a buy on it at 24.50 even though I watched it get all the way down to 24.10.
Thanks!
PS- Everyone better be polishing their big brass ones for today's action!!
This is what everyone has been fearing most. If we break the lows, it could be 1987 all over again. Buy or sell, we have no idea. This is a once in a lifetime buying or selling opportunity... who knows which. Unless, of course, you're McCain in which case it's a three times in a lifetime experience. We sure envy those of you 100% in cash, although if we were in that position, we wouldn't know how to handle a day like today either way.
Ike, today is not your "run of the mill" selloff. It's a global crash with stops in place. We don't know what the best thing is for traders to do. You could get those big brass ones cut off today.
I've got sell orders for fxp ready to go at $10 increments from 160-250
DTO @ 75, 80, 85, 90
DZZ @ 45, 50, 55, 60
Buying FXI @ 21 20 19 18
LDK @ 13, 12, 11, 10
I have been long in this market since September last year when I decided it would be fun to try putting some money in stocks. ha ha great fun. My favorite trade to date was RIO which is down 66% in my portfolio. I also have some fxi, ung, uso....ha ha all good fun. Yesterday after reading the decending triangle post by snot and seeing that I may well get pushed into a margin call with a big drop. I swallowed hard and sold about 20% of my portfolio and bought FXP and EEV. Thanks for that post snot.
The first question that should occur in all trading/gambling is 'what can I afford to lose?' Honestly, I can afford to lose very little right now. So although I'm tempted to jump into the once- or twice- in a lifetime fray and make some serious money, I think I'll watch from the sidelines this time. Good luck to all.
If there were to be a halt today, would it go lower or higher after the halt? Would FXP will go high on Monday? I think I'll sell my FXP today - they will do something during the weekend for sure.
Thanks.
hk22, thanks for the reminder that a FED statement before trading begins makes a stop worthless. I guess that is why I don't use stop losses overnight, only sell orders, and also why I am fearful of holding shorts overnight in normal times and in this market I'm fearful of holding anything overnight.
For the poster who placed a buy order for LDK at 13, 12, 12, etc., I see that LDK opened at $13. Was that you? Let us know if you got it that cheap.
yeah i grabbed a bunch of LDK at 13 and at 14. I actually got some at 12.98. Not sure why they're reporting 13 as the low.
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