Click chart to enlarge Here is a chart of how the Dow may look after next week. Of course nobody knows what next week will bring, except for extreme volatility one way or the other. The way we see it, if the market is going to crash, it will most likely happen next week. This is because it takes time for fear to build to a crescendo, and that is certainly happening right now. Second, October is the month that crashes take place, and bottoms are put in. There's only one week left, so it's show time. Third, the market will likely stabilize after election day (Nov 4), so the window for a crash is closing. Fourth, October 28th and 29th, Black Monday and Black Tuesday mark the anniversary of the stock market crash of 1929. This year, the 28th and the 29th are this coming Tuesday and Wednesday.
As we've said before, there is a regularly scheduled Fed meeting next week, ironically taking place on the 28th and the 29th. Many are predicting a 50 basis point cut, and some are even looking for 75.
A very wise man told us today to stick our head in the sand and re-emerge after the election. It's good advice, but we plan to peek out of our hole every so often to place some very low bid buy orders on SSO. Should be an interesting week whichever way it plays out.
47 comments:
Hi snot,
do you have an approximation for what the DOW/S&P levels would need to be for DDM@25 and SSO@22.Can you share what your low bids on DDM and SSO will be.Thanks in advance
The American financial system is at a crossroads unlike anything ever seen before. One path leads to hopelessness and despair. The other leads to total destruction. I only hope we have the wisdom to choose the right path.
This is a woody allen quote and i thought it apt given the market.
In reality though this situation is nothing new. Stock in the south sea company experienced a bubble that at its peak was bigger than the gross domestic product of the whole of Britain. It actually took on the national debt of Britain in exchange for stock and caused a frenzy of buying in first time investors throughout the land. Other companies started up and went to IPO to take advantage of the frenzy including one which advertised itself as "a company for carrying out an undertaking of great advantage, but nobody to know what it is". When the bubble burst the company lost 90% of its value in a year and banks all over england went bust as people failed to repay loans used to borrow the stock.
That was nearly 300 years ago in 1720.
Swap south sea stock for houses and you have todays scenario, although the difference is that 300 years ago the govt wasn't stupid enough to actually guarantee the Ponzi scheme at its peak like banks all over the world have today. What will happen when a bank goes bust and teh govt is actually called on to pay up the deposits that have been lost in the market. Ireland is on the hook for E400BN... Laughably the same govt is taking massive flak for cutting medical cards for the elderly in order to save a paltry $100m... What will they cut to cover a bank default i wonder..
It's truly scary stuff, Sniper. Do you have any positions going into next week? There will be no end to gloom and doom articles and talk this weekend. We're going to try our best to avoid all of it and just have a good time. At the end of the day, unless you're financial well-being is tied to the market, none of this matters. Of our total assets, only 6% of them are in our stock portfolio, of which only 40% is invested. So we're looking at losing about 2.4% of our net worth if the Dow goes to zero. And yet, this whole thing is depressing to us. Makes no sense. Maybe it's that we realize that we're the lucky ones. Some people are really getting hurt by this. Hope you are doing ok. Enjoy the weekend, have fun -Snot
I'm still holding the 25% of my Citi Puts and also some google puts which are at about break even. I am holding a small (as in small now, not when i bought it!) LDK and Yingli long which has been creamed of course. You can only laugh, and i swear i'll listen to you in the next bull run!
I have 50% in cash which i am sorely tempted to toss in the ring, but i cant decide what to go for. All my short candidates look like i'm late to the party and the longs are falling like rocks. I'm thinking theres value in JP morgan puts given how well its held up so far and HPQ have great potential for collapse given their ludicrous strength so far.
Long FRO has what looks like a 40% dividend now and zero chance of bankrupcy, so i'm struggling to see a downside to it. God help me i'm also thinking of buying LDK and YGE given that (YGE at least) is priced for bankrupcy. The only think stopping me is the actual risk of bankrupcy..
I sure wish I could remember how to sign into this google account. I finally played around and got it right this time.
I'm not invested right now, But I have to admit this whole scenario really has me peeved. While I don't have a portfolio wasting away to nothing, I sure do have family who do, and it winds up affecting my well being in the end. There's too much evil and greed in this world that has been allowed to go unchecked, and has spread to cause this crisis. I'm even more peeved because I've seen it coming for many years. At the same time, I didn't have nearly the understanding of the bigger picture that I have now studied and tried to learn. The bad part of that is that the more I learn, the worse it sounds.
Sniper, I have to completely agree with what you've said.
Hey Snot, I really love that last chart you posted! Gotta appreciate your sense of humor. That baby is hilarious!
I'm on here trying to have fun, too, but I keep looking at stuff about this mess! What a challenge.
agr8gem57
Sniper,
Why you are long YGE over other Chinese solars such as STP, JASO, TSL, CSIQ? Does not YGE need to raise money for its expansion? Most other Chines solars have issued second offering this year, but YGE has not.
Sniper,
We have the same problem in bear markets... what to buy. In past bear markets, we've learned the hard way that buying individual stocks is a disaster. Buying the indexes is a disaster, too, but at least with them we can fall back on the "someday they'll come back" theory. We don't have faith that any individual stock will ever come back, so it prevents us from buying them. Even GE. So what that Buffett bought it. It could go to $6 and spend 18 years there. Wouldn't suprise us in the least.
JPM is a good choice if you must buy financials. So is GS, of course. Both were chosen by the Fed to be among the survivors, as you probably already know. We'd avoid the financials alltogether. Not sure where we read it, but the sector that caused the bear should not be bought until the next bull is underway. Makes sense, seeing as how they could have residual problems even after the fallout.
Wish we knew more about the whole dividend thing. A 40% dividend sounds great, but will FRO just cut it? The chart looks terrible.
You're right that YGE is priced for bankruptcy. Once they're below $5, there's little hope of them ever being growth stocks again. Speaking of which, wonder if SIRI is going to go bankrupt soon. Now there's a horrid chart!
During the next bull, everyone on this blog will become wealthy. We will all help each other find the strongest stocks in the strongest sector/s and we'll ride the wave together. Then, when they break down, we can all short the very stocks that made us wealthy... all the way to $2. Sound good?
We're curious to see where LDK goes. If it really does deliver earnings, maybe it will be ok. We don't know much about value investing. We only know to avoid Stage 4 stocks. It's a simplistic thing to know, but it's very important. It's amazing how many fundamentalists don't ever bother to learn the basics of technical analysis. Just knowing one or two little things about it could save them so much frustration and money.
Kay, that baby says it all, doesn't he?
You know, if they just suspended financial media coverage for a week or so, this whole mess would be over!
He sure does!
And just one more comment about that cute little guy......What does that expression tell you he's really doing? It's similar to what our economy is doing. lol
agr8gem57
Uh-oh, that did it, we couldn't resist watching a Roubini video we probably shouldn't have...
http://www.bloomberg.com/avp/avp.htm?N=av&T=Roubini%20Sees%20Crisis%20Worsening%2C%20Hurting%20Emerging%20Markets&clipSRC=mms://media2.bloomberg.com/cache/vcYqArJFMJgA.asf
Hey Snot,
You need to check out FRO and TNK. These are tanker shipping companies and they have taken a dive with the dry bulk shipping sector. I've been looking at the industry reports and the market for dry bulk shipping has plunged by 90% in its rates whereas the tanking industry dropped about 15-20% depending on ship size. Current rates can drop another 30% before these tanker companies get close to their break even operations. In otherwords, the dividends on FRO and TNK are pretty much safe. Assuming FRO's yearly diviend drops to $4/sh (2005 rates) it'll be 16% at its current price.
I hope the markets dive by 4,000 pts next week so I can jump on these cash cows :D
At the moment FRO's dividend is $3 per quarter on a share price of $26 or so. That is pretty damn good in my book. Now i have done zero research on the (dirty word, please look away snot!) Fundamentals, so if anyone out there knows about them or can send me good links for researching them i'd appreciate it. Mainly my interest is because they strike me as a company who has declined due to the general market rather than a change in thier business and that dividend would suggest that they are in no danger of collapse due to financing drying up as many other companies are. Therefore they could be in line for a significant bounce when things turn around. Even if they dont a 40% dividend would go a long way to covering any loss you might see. Now maybe this dividend is not due to continue or maybe there is something i dont know, like i said i haven't done the research yet to be at the point of buying in!
Anon asked about Yingli and why i am long there over other solars. Most of the reasons were only valid before the credit crises so they dont really apply now, however Mainly it was because i thought the vertical integration would protect them when the market consolidated and i liked TSL for the same reason. I bought both originally in the IPO week. Now its a different story and i would be wary of TSL. They could easily go bust i think due to a lack of credit. However YGE is in a joint venture with another chinese company (kind of like a small chinese GE) who owns 25% of the actual producing company, yingli green energy. YGE owns the remaining 75%. I think this offers some level of safety as far as running out of money goes as Tianwei would probably loan them operating capital rather than lose thier investment altogether to a lack of short term credit. They seem to be priced as if they will go bang tomorrow so they look cheap. This was of course true last week also and they lost 30% since wednesday so who knows how much further they have to fall. Maybe they could go bust and it is this danger that would stop me throwing more money in there at this moment. At some point i will average down though.
Snot
Any way to have a private aside?
sbbuilder
sbbuilder, you can email us at snotwheel@yahoo.com
We rarely check that inbox, but will look out for yours.
Sniper - I've been following FRO and other high yielding stocks for a while. There is no way they will pay out 40% ish. 1. It is common to readjust the dividend for market conditions. 2. They would be taking too much risk by paying out that much rather than setting some cash aside, especially in light of the fact they have an 80% debt ratio. However if you are OK with 16% ish then they may be a good play.
FUTURES - Worry, Worry
So, where all are the very best places to get futures info from around the world, starting with Asia futures....I check Bloomberg. It shows Nikkei down a little, nothing yet on Hang Seng.
I wish I could have found a way to get this mess out of my head this weekend. I couldn't manage to concentrate of stuff I needed to do, so nothing much got done. :( Shoulda spent the whole weekend chopping wood. Or at least raking leaves....Something, anyhow. Read a chilling John Galt blog post at http://johngaltfla.com/blog2/2008/10/26/closed-for-business/
As you said Snot, I probably shouldn't have read that, but the truth is, I can totally imagine a scenario just like he presents to us.
agr8gem57
Kay, we use this for futures because it also shows fair value:
http://www.cnbc.com/id/17689937/
And this for world markets:
http://money.cnn.com/data/world_markets/
Looks like we're in for a real doozy today, with futures down 300, 400 when FV is taken into account. This is the only thing that can get us up at 4:30am!
This is a nice place:
http://finviz.com/
Got my buys in on SSO: 24,23,22,21,20,19,18 & 17. Do we really think the S&P will drop another 20% in the next few days? Possible, but that would be -40% on SSO which would put it right around 20.
SSO probably won't get lower than 22 today...unless the S&P wants to drop 175 pts in one session. Again possible, but unlikely.
So tomorrow if the market gaps down on the open again then I readjust my buys and keep on scaling in. S&P @ 600pts? Awesome. But unless the Fed leaves rates unchanged on Wednesday I just don't believe we'll get that low. But I'm hoping that we do!!
GLTA, we're gonna need it this week!
Whoops...two days of -10% on the S&P would bring SSO down to about 17...not 20...that's why I've got buys submitted all the way down to 17.
The media has been pushing this "bottom in October" theme, and they're very influencial. Hopefully enough so to stop people from withdrawing their money from hedge funds. We're looking to add to our longs only if the market breaks support. If we've already seen the bottom at 7882, then we'll be going uo with less than half of our account invested, as will many people.
dumped some more of my FXP and bought FXI @ 20
Yes, it kind of makes you not care which way things go which is nice. I want to add so I hope we go lower, but at the same time what's the worst that will happen? We'll make less profit than we'd like. There are worse problems to have!
C'mon imploding hedge funds dump your crap!
Snot, as to which stocks will become the new strong equities when we get into the second half of this recession, would not a good candidate be whichever company Paulson goes to when Obama gets elected, possibly GS?
Hi Snot,
Market seem hold on strong...Time to go long? Still waiting for get some SSO and DDM? Fed meeting tomorrow and may be cut rate to 0%. What is your thought? Thanks
Howdy.
I've been a lurker here cause I like your TA.
I didn't expect an up day.
Anybody watching LDK right now?
Big jump on low volume.
I used up nearly all of my dry powder on LDK when it was under 14. As much as it sucks to sell at 17, I have to do it in order to have a healthy amount of cash.
Taking the 3 bucks looks smart to me. This is a traders market right now. Investing makes no sense for the near future.
Are you guys locked out of TD Ameritrade too? Yet another reason to have your buy orders submitted ahead of time...what is their deal?!?
Usually you get locked out of the brokers because of a high volume day. That's not the case here. I'm a schwabby....
What a close
Damn! 5 more minutes and SSO would've gone through 24 no doubt. Maybe the selloff continues tomorrow morning?
I set SSO for $18 and DDM $22. This market will get there. DOW down again today...I expect DOW will down more tomorrow morning...
To me that's a bad close. Below 8188 and a lot of things closing below their gap down this morning. All trades during the day were a head fake to hide a run to the door. I think Asia gets nervous again tonight and tomorrow is dangerous for anyone long. Could be Snots DOW chart. Time to review orders for silly entry points.
I bought a bit of LDK and YGE today. Mainly because YGE announced a new line of credit from a state owned chinese bank and that alleviates my concern about them gonig bankrupt and LDK as peng said that they dont need additional financing or two years. I'm guessing that they will scale back thier expansion somewhat to reduce thier reliance on finance, but even so thier next earnings figure should be just ridiculas in comparison to thier share price giving a PE of 3 or something!! Thats actual trailing PE, not forward PE or anything! I'm expecting them to run up in anticipation of these earnings on Nov 10th. Also, this run down has to rebound at somestage. I'm looking for short candidates everywhere and every potential is already down 70%. Its too much too fast.
Man, you guys are ballsy (read: crazy) to trade this market. I remember some sage advice that said that when there are too many external factors affecting the market, stay out. We're in the mother of all external factors now. I've been out for a couple months now and can sleep well every night - now that they are backstopping money market accounts. Now I'm wondering if things will be back to normal 10-100 point daily swings anytime in the foreseeable future or are we in the new paradigm?
Well there comes a point where you have to say that if these companies dont go bankrupt then there has to be a certain amount of value to be had. Sure MTL and the like have suffered a collapse in the price of steel, and POT has suffered from a collapse in the percieved future demand for fertiliser but lets be honest, Steel and fertiliser prices were a bubble in thier own right, just like oil so i wouldnt be expecting massive recoveries there in the near future. However, There are plenty of companies out there (like half the market!) which have fallen due to funds deleveraging and these groups could be expected to return to a fair value at some point. Extreme selling pressure has caused this drop and i see no reaosn to think that there coudlnt be a bounce in the short term.
Long term of course America is screwed and will be looking at a fully stateowned (or foreign owned) banking system before long..
Would love to read the comments, but too busy today... at least Japan is up tonight. We'd be suprised if a bottom weren't put in by the election, but nothing is predictable in this market.
Anyone buying FXP up here? It keeps looking too high, but just goes higher. We can't bring ourselves to touch it over 140. It can drop as quickly as it rose.
The only way to play FXP now is looking at intra-day 15m/60m charts and watch the oscillators. Otherwise any rally will basically kill you. I wish it was possible to short the damn thing when the market rallies as it seems to go down very easily.
Still holding 100% cash.
I wouldn't touch FXP at this levels, It would be so against my rules :-)
and during this times is good to stick with them.
There's still a lot of uncertainty out there and I don't feel like gambling.
If there is a rally i wouldn't mind getting in late/ better safe than sorry right?
And BTW, who said that you can't short FXP? Of course you can, try harder.
Good luck to all!
I was able to short FXP before. It is actually a good arbitrage strategy based on the theory that FXP loses value in the long term. Thus, FXP is not a good long-term hold, but a good long-term short.
Lightsource
Another trade to consider with FXP is EEV, the ultra short of emerging markets. It is a little more diversified. It runs pretty much in lock-step with FXP but it is a slight bit less volatile. And yet another is EFU.
Seems like it will rally to Wednesday and once the rate cut is announced, it drops a few hundred points and from there on, a big crash?! That was what happened for all the rate cuts.
FXP is down 30 in premarket. If it drops another 30 in a rally to the rate cut and/or after the rate cut, then that would be the time to jump back into FXP and/or EEV, SDS, DXD, etc. etc. etc. right? Sell the rallies and go short? Cover the big dips and go cautiously long?
That descending triangle for DDM is playing out to a tee. Unfortunately, the odds that that pattern breaks down is greater than 75%.
The timing of it doesn't quite add up, though, because we've only got until Nov 4 to hit bottom. Maybe it will be such a quick capitulation that it'll be painless. Enough people already see value in this market. If we should plunge from here, it's hard to imagine we wouldn't rally strongly out of it, if only back to where we are now.
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