Click chart to enlargeAt least for the short term, DDM's channel is perfectly horizontal. These linear regression channels are computer generated using the opening price of each session. Until DDM 40 or 28 is broken, trading will be simple... buy at 30, sell at 40. We're going to do this more aggressively (with less hedging) than we've done in the past. We cannot continue to have our account go sideways along with the market. It is getting very frustrating to see so much volatility and not profit from it. If the market keeps dropping, we're going to unload almost all of our FXP and EEV and start moving back into DDM as it nears its lows. We'll keep a sliver (3% FXP) just in case the market drops 1,000 points one of these days. Other than that ugly scenario, FXP's effect on our portfolio will be dwarfed by the size of our DDM position if we can get it at 30 again.
Other than FXP, dry powder is our only weapon against a drop below recent lows. Anywhere below DDM 28 is longer term buy-and-hold territory as far as we're concerned.
12 comments:
Depending on how you draw the channel, can also be a bear flag in the making.
All right, officially I'm not touching FXP again. Sold my position last Thurs., so was not touched by today's action. But this has gotten silly. From now on, I'm sticking with QID as a short. See where it is today. And, as a bonus, you don't get yanked around for no apparent reason.
Snot, GS closes just above 70. What is going on here?
don't quit yet.
FXP is fun and QID is boring. :-)
You know that the moment you give up it will skyrocket. :-)
and GS is about to go belly up. well if it wasnt for Paulson :-)
They are gonna keep injecting drugs till it dies from overdose :-)
sbbuilder, When GS broke 70 intraday, it dropped over a point in about a minute. It was a great little trade if you can short individual stocks because of how quick it happens. As far as the big picture is concerned, GS's weak performance today doesn't bode well for the broader market. It's the last general, so to speak.
FXP can get frustrating because it doesn't mirror the Dow, just FXI, so it can have a mind of its own.
We're just waiting for DDM 30 or DDM 40 to make a major change to our portfolio which will be almost entirely unhedged. Days like today where the market makes a big move and then closes almost at break even are very frustrating because we're looking for something that lasts for more than a day.
Sometimes I find market easier to understand if I ignore the direction. For example, if we ignore the fact that the market went down from a morning gap, and just focus on the price range, then we will realize that today actually achieved a higher high and a slighly higher low than yesterday. I think as far as we are making higher lows, the daily closing price does not matter much.
I would say it is still a bullish chart.
Lightsource
The Chinese Stimulus plan was actually no news for wall street.
Initially it was supposed to be in the amnt. of $730b (5 trillion yuan).
here is the link - dated 11-06-08
http://www.cs.com.cn/english/ei/200811/t20081106_1645472.htm
And to add fuel to the fire:
Nov. 7 (Bloomberg) — Bloomberg News asked a US court today to force the Federal Reserve to disclose securities the central bank is accepting on behalf of American taxpayers as collateral for $1.5 trillion of loans to banks.
The lawsuit is based on the U.S. Freedom of Information Act, which requires federal agencies to make government documents available to the press and the public, according to the complaint. The suit, filed in New York, doesn’t seek money damages.
Oh, i dont like the sound of that.. Was it not lending money to people already up to thier neck in debt and accepting poor security that got us into the mess in the first place??
Essentially my problem with the whole bailout process is that its like giving a gambler who just lost everything more money to try and win his inital stake back but this time with his house as security.
The banks are still over leveraged at a time when the market is going against them every day and to date we still havent had an impact from credit default swaps.
I'm guessing that Goldmans sudden collapse over the last 2 months is as a result of exposure to Lehman Bros swaps. There will also be major payouts due on Ambac and Mbia Default swaps just as soon as they go bankrupt. The problem of course is that there is no way to tell who was doing the writing until its way too late to short.. Just gotta guess.
Good chance the market remains weak anticipating U.S. automaker bankruptcies. It'll rally when there is some kind of bailout or other resolution for them. In typical American timeliness, they'll wait until the market has a really bad day to even hint that they're close to resolving the problem. There's just not enough pressure on them to do anything yet. Not until it becomes an emergency. Leave it to Wall Street to create an emergency situation by selling everything off until the problem is resolved.
GM/Ford problem must be resolved. A socialist attitude and decisive leadership works better in situations like this.
I think the longs are still in control. SPY 90 is a must-hold.
No work today so I am wearing trader hat for the day. Looking to bottom fish solars. JASO reports tomorrow and seems to be well sold-off now for a bottom fish candidate.
Thoughts?
- Lightsource
Lightsource, buying a downtrending stock (or any stock for that matter) just ahead of earnings is crazy! It's a game of roulette. If they disappoint, JASO can easily go to $1.75, a 50% loss. Your odds are better at the blackjack table. Even if their earnings are good, their guidance could ruin them. News is not being received well in this market. Can't you find an uptrending stock for the day, and trade that intraday instead? Or something similar to that on the short side intraday?
Snot, thanks for the advice. You are right it is a gamble. I guess I have more faith in the Chinese companies being able to deliver. They do work extremely hard to build their companies. I am also assuming that the longs are still in control based on the higher lows in the past few days despite terrible news.
I like its option-like volatility. The daily chart looks like a possible double-bottom for me. I only have option-sized exposure to it. I treat this as a call option that never expires.
Can't find any uptrending stock in the stocks I follow :-)
- Lightsource
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