Click chart to enlargeWe sold MTL when it made a simultaneous, decisive break of its trend channel and moving average, in the area of the red arrow. We often go back to charts months later to see if we made the right call. In this case, as with the fertilizers, the break of those lines led to an accelerating selloff. For new readers who question the legitimacy of technical indicators and such, we urge you to uncover our post on MTL to see that this is not hindsight. In certain circumstances, when the lines are very clear, timing a stock (or an index) is very possible.
We feel a sense of nostalgia when looking at the chart of MTL, SID, MOS, MON, CF, POT and AGU, because they go back to the last bull market (only months ago) when stocks had predictablity. The predictablity of the market has recently been lost. The current market is no place for a technician, and certainly no place for a fundamentalist. Anyone, no matter how seasoned, predicting the market's next move lately is just guessing. The whipsaw movements of hedge funds and the like become predictable after a while. They are designed to get the weak hands out, and they vary only slightly from one correction to the next. What we're experiencing now is not manipulation by the funds, it's real, which is why fear (VIX) is at historical levels. The funds no longer control the moves of this market. People have been withdrawing their money from their accounts, forcing fund managers to liquidate positions they would not otherwise sell.
Hedge fund managers only get paid when they profit. Now that they are down 30% - 60%, they will first have to make back those losses before being able to turn a profit on any gains beyond that. Caught in this situation, it is more profitable for a fund to close and then reopen anew. If they value their clients enough, they instead renegotiate with them in such a way that they are able to profit on all gains from the current level, at a reduced fee. Either way, these managers find themselves at the mercy of fearful clients.
They will someday regain control, but for now, we're left to trade without a backstop.
32 comments:
That chart makes a great case for why you should only trade index ETFs during a situation like this. I hope that the DOW and S&P won't be allowed (by the P.P.T.) to duplicate something as ugly as MTLs swan dive.
And I said to sell 2 weeks before that! Anyway check out DRYS now! It has a PE of 1.00
Good call selling MTL 2 weeks prior to the breakdown! We sold on July 2, the day of the actual break. It's buried in a post from July 2 which isn't really about MTL or SID. DRYS is the perfect example of why fundamentals don't matter on the way down. When we call for MOS to 14 cents, it stems from our understanding that it does not take selling to push a stock lower. The absence of buying is all it needs. It is every stock's natural inclination to fall, and to continue falling until it gets enough media coverage to revive it, if ever. DRYS, by the way, shows no signs of stopping. It could easily reach single digits in a matter of months.
Just bought back the DDM we sold on Monday. Our goal is to double our DDM position at 30, making our break even price 39 or so. It's a bet that the market bounces back to current levels after the big crash. At least that's the psychology anyway.
DDM @ 30 would put the DOW @ approximately 8,800. Looks like the 'below 9,000' voters may be proven correct.
Wouldn't it put the Dow a lot lower than 8800? Amazing how it's just barely staying above this morning's lows. Usually when a chart hits the same low several time (like the dow is doing today), the low doesn't hold. Odds favor more downside today, but of course anything can happen.
If they lift the ban on short selling, I would expect this to the bottom. The chart for SMN should begin to reverse.
It looks like we will have a late rally. Hopefully it will close green and continue till tomorrow.
Boughtg yesterday at 43.30
Bought again today at 39.60
Sold all with an avg. price of 41.80 for 41.50.
This market is wild.
I will be on the sidelines for a while.
Good luck to all.
And I was talking about DDM :-)
Boy did DDM take a smack down in the last five minutes of trading today.
For a while really means for a couple of hours :-)
I regret it that I didn't by DDM at the end of the day for 38.5
IBM gives me some hope that tomorrow we are going to end up green. Anyway I will put a limit buy for 38.10 tomorrow.
Lets hope it goes thru. (I highly doubt it) I will by more if it goes lower. This cant go down forever. If you get out of your house you will see that life goes on. People are still eating, buying, moving, working etc etc.
Good luck to all.
Hi Snot,
I got burn on DDM from the high '50 and I don't know should I bail now or keep average down from here. DOW down for last 7 days and I don't know I can take it more! As I can see, there is bottomless for this market. Everytime I see BUSH, PAULSON and BERNA speak. The market tank more. These guys need to SHUT UP.! Scary indeed!
If a position makes you nervous, you should not be in it. Often when you're nervous about being in a position, it's simply because you own too much of it. Sell some. Whatever you do, you shouldn't be losing sleep or else it isn't worth it. We chose to buy the Dow itself because it makes us very nervous to be in a stock that is going South with no signs of a bottom, like MOS, CROX, GM, etc. We sleep at night holding the Dow despite what the market does for two reasons:
1.) Eventually, the Dow will come back.
2.) We have dry powder.
We don't care if it goes up or down. If it goes up, we profit. If it goes down, we add to the position and profit even more. Just takes longer is all.
Don't look at the market every day if it bothers you. The truth is that if you just bought the Dow every time it was down over 20%, and then spent the interim time saving money to buy more the next time it was down 20%, you would become a very wealthy person over the long run. Don't sweat it, just focus on the big picture and don't let the daily fluxuations lose sight of the fact that someday the Dow will be 20,000... perhaps sooner than you think.
Hi Snot,
Do you see a relation between Obama's rise on the pools and the market downtrend? Is there a fear factor playing that will only clear after Nov's election?
Obama doesnt mean anything. He's for the bailouts. He's for the trillion dollar defense budget. He's for everything status quo. The change he talks about is just rhetorical token change. (Which is worth less than pocket change.) There is no reason wall street would fear Obama.
What a day! All my investments are up. LDK, FXP, and SKF! I never thought it was possible that they could all go up on the same day.
I feel much better buying SSO. Added more again today at 33.50 and if she wants to keep plunging I've got plenty of dry powder so bring it on! When this market finally decides it wants to turn around it's going to be quite a fun upside bounce!!
I feel like either kill someone or end my life... I feel so bad right now...
Snot, have you ever seen the documentary "Who Killed The Electric Car"?
After seeing that I have zero sympathy for GM or any other American car company. They all deserve to stain the bottom of the bowl as they get flushed.
Damn,...I didnt think I was going to get that buy order for 38.50 I placed last night. This is crazy!!
And here we go again..bought some more at 38.12.
Avg price 38.44
Went out for lunch today,, the place (restaurant) was packed..Life goes on, gas stations were full of cars..
This is ridiculous.
These end of day swoons are becoming all too predictable.
Yeeeee Hawwww bring it on biotch!! UYG @ 9.25? SSO @ 32? Awesome. Load up the truck.
Bring it on is right! We'll gladly add at Dow 6,500 if that's what it takes. When this market does finally decide to snap back, it's going to tack on 1,000 points in a day.
General Motors (GM) has been our favorite chart to short. They look like they're headed into bankruptcy, and we think they deserve it. It would not come as a suprise if one of these major automakers fails before this is all over. GM is down 50% to $5.50 in the past few weeks. Ford is not so lucky, it's down 50% to $2.33 in just the past 7 sessions.
We haven't added to DDM yet (except for the lasy buy at $40), but we're looking to add at around $35, then again at $30. We used to do this with individual stocks, and we had incredible fortitude. We could last until our last penny was gone. In hindsight, it was pretty dumb. But applying that kind of fortitude to an index, and never giving up on America's ability to recover from hardship should be a winning hand. It always has been, anyway. With the Dow down over 5,000 points from its top, we feel safe buying here, even though we should probably have fear. Buffett, Snotwheel, and the small handful of people who read this blog are buying. Everyone else is selling. Only time will tell which was the right call.
Met a friend this morning. He works at commercial lending of BAC. It's still hard to get credits approved to lend to his clients. But he thinks, as Fed buys bad loans from banks in a few weeks, credit will be eased. Currently, banks are still burdened by the bad loans in their portfolios and so credits are still tight. Sounds like situation should improve in a few weeks.
Damn this is really feeling like people just want to GET OUT!!!!
Capitulate you pussies!!!!
If it weren't for the bell which will ring in 12 minutes, this would be 1,000 point day. Maybe it will be anyway. We're going to buy at the close, and then buy more at 10:00 tomorrow if we gap down another 500-1000 points.
We're making history here, you'll be able to tell your grandchildren about the crash of '08 the way people talk about '87. Good luck everyone!
whoa, WHOA! all my GTC orders for FXP just went thru... that cant be good because one was $199. lol. Nice lil windfall that made. But I think its time to head for the woods because there went all my hedge
uhu...This was a hell of a ride..I averaged down to 36.15
Couldnt keep up with the ride.
Are you doing any buying Snot?
Feels like The entire market is a falling knife.
Should have lowered my limit buys to 35 instead. Who would ever thought.
Haha, why are you going long? If it opens up in the day, we short at sight and smile at the end of the day for Huge Huge gains!
this is similar to your iteration. We have been iterating so many times, rinsing and repeating that it has become obscene. Yes, if we fail one day - we will look back and say at least it worked for the last 7 days.
There aren't too many people profiting from this. Maybe a handful, but make no mistake, most people are hurting big time.
We're going long because we don't mind holding a stock for a few months, unlike the ritalin-driven young investors out there. We have enough dry powder to cut our break even price down substantially, so unless the Dow makes it to 5,000, we'll be ok. We are not allowed to short individual stocks, unfortunately. We've been calling for GM's bankruptcy long before it's become the "cool" new thing to talk about. Too bad we can't do anything about it! We are working on getting a margin account so we can add shorting to our repetoire, but it will pale in comparison to the size of our long account. Perhaps it will grow to match the size of our long account, as we've always found choosing losers to be a lot easier than choosing winners.
Post a Comment