Market is crashing but where is the fear?

Market is in a slow motion crashing, and the weekly charts are even more bearish than the daily's (barring a super rally tomorrow), but there is little fear (just take a look at the vix chart), in fact, more traders I know have becoming more bullish today and some of them have already started scale in long positions today. I originally had plan to bottom fish aggressively if the market gaps down big tomorrow morning, but now I am having a second thought on this plan. When there is blood on the street, yet not many has the fear, what does it really mean?

I will carefully examine my last weekend's calls to see if I should get in any of them tomorrow if I get chance.

Bears may be crazy, but bulls are just nuts!

Trading Calls for the next week or two -- Feb 16, 2009

I am yet to have time to write down a manual of my TA and along the way really tie up everything. When that is finished, I will have to make quite a few changes about setups and trading plans. Before that, let me just pencil down some trading calls here in case those setups come to life in next 2-3 weeks, I will probably focus on DT GS/AAPL in the meantime if I ever get some time.

Some new abbreviations:
QT=quick trades, to be held from a few minutes to 2 days (including day-trading)
ST=short term trades, to be held from 2 day to 2 weeks
MT=mediate term trades, to be held from 2 weeks to 2 months
LT=long term trades, to be held from 2 months to 2 years.

1. AAPL: ST-CTT: between 90/93 on the long side (stop below 87) and 112/125 on the short side (stop just above 130).

2. AKS: SW-MT-L3=7.5-8.5, CS just below 7, IT=14/15.

3. DVN: MT-S2=55-63, CS just above weekly MA10, IT=40/42

4. FCX: MT-L2=20-26, CS just below 20, IT=40

5. GOOG: MT-L2=310-325, CS below 300, IT=380; LT-S2=420-440,CS just above 460, IT=330.

6. GS: MT-L2=80-87, stop just below 80, IT=95; LT-S1=110-140, CS just above 140, IT=80;

7. MA: MT-L2=140-145, CS just below 140, IT around 180.

8. MCD: LT-S2=58-64, CS just above 64, IT=40/45

9. POT: MT-L2=75-77, CS below 75, IT around 95.

10. SQNM: LT-L1=10-14, CS below 10, IT around 25.

11. AXE: MT-L1=29-33, CS below 29, IT around 42.

12. XOM: LT/MT-S1=76-80, CS above 80, IDS above 82, IT around 60.

I know that the MCD and XOM calls are a bit against both common sense and popular views, but my TA says that's what's likely to unfold, so we will see ....

Getting better before getting worse, or the other way around?

The market has become increasingly bipolar in the past 2 weeks, and the schizophrenia can be clearly seen on the charts of the major indices: while SP500/DOW are not only bearish both mid/near-term, but poised to break down further, NASDAQ has been unmistakeably bullish (mid/near term). At this point, the market could either break down as both DOW/SP500 overpower NASDAQ or break out to the upside as NASDAQ lifts all the boats. Another likely scenario is that the market continues its maddening and muddling way and stays within the trading range of the past 3 months for a few more weeks.

At this point, I am unsure which of the above scenario will play out, and as such, I will continue not to initiate positions (short or long) meant to be held for more than 3 days. I day-traded only (mostly on AAPL and GS) in the past 2 weeks and got some pretty good profits.

A couple of more observations and thoughts:

1. The Chinese stock market has finally broken out the multi-month range and now in pretty solid rallying mode. TA wise, I expect the rally to continue for next 2-3 months with 20-30% of gain. FA wise, I think the rally will fizzle out when people find out that the Chinese economy will not thrive on just domestic consumptions. Before that happens, however, it is possible that the Chinese rally ignites sympathetic rallies in stock markets around the world.

2. Obama administration has been really pressing hard and marching ahead with success in terms of passing important bills, but the "Yes we can" mantra will hit a iron wall pretty soon as both the Republicans and the economy are increasingly unfriendly, to say the least. If the market disappoints again next Weds when the details of the new housing bill reveal, the honeymoon may end sooner rather than later.

Might post some trading calls later if I get chance.

I am back!

Got back last Monday, believe or not, it was the first time that I actually felt that the vacation is too long :P. Obviously was happy to see all the family members and sure enjoyed lots of good food! But it was a bummer missing the entire NFL playoff, especially the Superbowl which said to be one of the all time best. On the other hand, my Saints disappointed me again, wasting a great performance by Drew Brees was just terrible, now that they got a good defensive coordinator, I am once again superbowlish on my Saints, hehe, just never learn!

I did some trades during the vacation, mostly quick trades (all options) from the short side and enjoyed pretty good gains. Also spent time to really think about my TA system, and I thought I have cleared up a lot of issues and possibly leaped to a higher level, we shall see about that :P

Some observations and thoughts on the market:

1. TA wise, the intermediate trend is poised to turn up, led by the techs. The long term trend is still solidly down, and the talk of "bottom is in" is still premature until the major indices close above their Jan.09 highs to say the least.

2. FA wise, the ongoing rally is once again largely based on hopes not fundamentals, the deterioration of the later is actually still accelerating, which as the results will likely to put a ceiling on the counter trend rally.

3. Aside for the black holes in the US/world financial system, the biggest wild card right now is China (my home land). After spending nearly 2 months there, my conclusion is that China is at a very critical stage right now: if China can decelerate the slow-down or even hold off further sliding of its economy/housing market in next 3-6 months, the hope of its stabilization, which would really help the global economy, could become a reality. If on the other hand that it fails to do so, I am afraid that economy/stock markets of China and the rest of the world could suffer a catastrophic breakdown in the second half of 2009, and along the way pushing the eventual recovery to 2010/2011 at the earliest.

4. My personal take on the rosy scenario is 50/50 at most, which is why at this point I have been holding off any initiation of long time positions from the long side in US stocks.

I notice that there was an average couple dozens of visits to my blog every day during my hiatus, which was unexpected and I sure appreciate that! I am pretty sure that you won't be disappointed reading my future blogs, in fact, I ask you to get ready to help with my beer fund with the profits that you earn based on my trading calls, LOL!

Still unwinding down and got a lot at hands, but will try my best to start regular posting soon.

One quick question: overall, have you won or lost since early Dec.?

Best!

Happy Holidays!

I have been busy preparing for a long-waited home trip next week that would last for nearly TWO months. All my accounts are back to cash now and which most likely would stay that way till I am back.

As for the market, the major indices might continue trending up to test their weekly MA10 in coming days if the shopping season is not worse than anticipated. I also tend to think that the market could continue its counter trend rally in next 2 or even 3 months, along the way to test their MA50 or even Mid-Oct08 highs. But such rally is likely to be choppy as it pins mostly not on the fundamentals but on the hope that the Obama administration would quickly turn the economy around, which obviously will be crushed. Looking into the longer time frame, the market is now pricing in the possibility that the global economy bottoms in late 2009 or early 2010, if this scenario gains traction, we might see the ultimate bottom in summer 2009.

Finally, a word of caution: for the next 2 months, regardless you trade long or short, you will be better off if you are not greedy and quickly lock in your gains because the market will not have any strong and lasting trend, one way or the other. The only things you can count on are volatility and choppiness.

If I don't get chance to post again till I am back, here is my best wish to everyone for a great holiday season!

Does this scare the crap out of you?

I got a chance to watch the clip below regarding US national debt, and while I did not shit my pants, it did send chills down to my spine and made me started to think about the years yet to come.

This could be the best 30 min you can spend.

Could someone tell me this is really some liberal/conservative scare tactics, or some deeply flawed junk, or indeed the Sword of Damocles high above this nation?

What you don't know cannot kill you, can it?

A Momentary Lapse of Reason or FEAR?

Biting my fingernails all afternoon last Thursday, but finally decided to move all my 401/403 accounts back into the index fund in the closing minutes instead of waiting for a possible Friday morning gap-down. So far so good.

I have gone through all kinds of charts on all major time frames over the weekend, and they all point to a fledgling counter trend rally, well, maybe except the key financial such as C and GS, whose charts gave me a chilling sensation. I will keep eyes on last week's lows and may consider to pull out at least 2/3 of the funds if the major indices close solidly below those lows. The current initial profit target is around MA50s of the major indices on their daily charts.

Yes we can!

What an incredible, transforming and historical night it was last night!

Besides listening to the gracious and the uplifting post-election speeches last night, I paid close attentions to the reactions of the ordinary people on the TV, especially their facial expressions. What I saw once again reaffirms my belief that USA is one of the greatest nations on the earth. As for the American people, sure there are scumbags, jerks, idiots, nuts, and fanatics among them, but overall, they are the most admirable folks in this world with their passionate, genuine, and kindhearted spirits. Their unyielding pursuit of dreams, unwavering optimism, and above all, their innocence make them truly the seeds of the promising future of the mankind, and there will be many fruitful seasons to come!

Yes we can!

Now, where was I? Oh, yeah, back to aggressively shorting both calls and puts for the NOV OE. I shorted a bunch of FSLR NOV195 calls yesterday, made a bundle despite of exiting too early. I am hoping for some sizable pullbacks for the rest of this week, especially this Friday, before re-positioning my retirement accounts for a multi-week counter trend rally.

Rally on?

While my long term view of the market remains firmly bearish, my bias on the short and intermediate term trend is turning bullish. The chance is decent that the recent low will be held throughout 2008. As we are moving within 3 weeks of the NOV OE, my primary strategy for the coming days will continue to be shorting naked calls and puts. In any case, I will try to hold back fire until the election is over.

Vote!

Biding my time......

This whole thing is getting scarier by the day, and with all the uncertainties, it is the bulls who are hibernating. However, nature (or should I say the human nature) rules ultimately, by saying that I mean the bears will go hibernating, maybe sooner than you thought.

I flipped 1/3 of my retirement account (moved to money market since Oct. 2007) a couple of times between money market and Spartan 500 index in the last several days, netting just over 10% and moved back in last Thursday. May flip that out again mid this week. Will consider moving all in if the market could get a quick 10-20% down from here for a multi-week, possibly a year-end rally, we shall see.

After sitting tight for 4 days, I shorted OTM puts for X, WLT and MON last Friday, all with 1/3 position size, and may consider close out the positions in X and WLT tomorrow ahead of their ER. I probably won't aggressively short the OTM puts until we are through the election, which for some reasons, is making me really nervous.

Be careful out of there!

Bouncing market, leaping wabbit!

Shorted a bunch of ISRG OCT140 and 135 puts this morning, and now looks like your wabbit will pock some decent profits tomorrow even if GoldmanSucks strikes again!

As the market bouncing around violently, booking quick profits is the only way you can play. I am still waiting for a new price low following this Monday's momentum low to really build up swing long positions. In the meantime, a quick short around MA10 or MA20 should work for most stocks, the key here is QUICK!

Good luck all!

Now, that's history!

Ok, it is official: history does repeat itself (from the 1930's crash), and people never change! Good thing that I made out fine and kicking, despite some sub-par executions last week AND today that burnt a big chunk of the expected profits. Closed all positions except the short WLT OCT25 puts, which I collect every penny of it.

The market rallied nicely today, but with volumes so light, the bulls will run out of steam as early as tomorrow. Unless you DT, now is the time to be a bit patient, long or short.

Is it time to not believe everything you know about human nature?

The insane market, whose decline was underestimated by about 10% on my side, and the **&#$&^ GoldmanSucks, who promptly downgraded FSLR, AKS and X this week, are leaving your wabbit in some hot water (not simmering yet). Had chance in each of past 3 days to get out with a couple grand of profits, but no thanks :P In the hindsight, I should've chosen shorting calls instead, but then again, not one foresaw a drop of this magnitude (and I know quite a few top traders).

More and more people are throwing in towels everyday, but my belief in human nature (driven by extreme emotions) is still in tact, though a bit shaken. I will get my IRA accounts ready shortly and there better be a real crash, soon!

Good luck all!

Steel balls!

Well, for almost 3 hrs, I thought my steel balls were going to be crushed by the bear claws :) Shorted OCT puts of X ($55), AKS (15), FSLR (125), WLT (25), and FCX (35), and did not cover. I did chicken out on AAPL, MA, DVN, MON, and APA, well, you just cannot win them all. The only question now is if I should lock in some profits tomorrow or hang in tough to let all options expire. Make no mistake, it is still a bear's country....

Be greedy when everyone else is fearful!

All major indices are sitting around 3% above their major support levels, but weekly charts suggesting more trending down in next 2-4 weeks, and another crash of 10% is totally possible. Nonetheless, when the panic is thickening, and everyone else is fearful, it is time to get greedy. Considering the high IV and only 2 weeks left for OCT OE, I will continue focusing on shorting the puts of many near-death stocks (mainly in the broad commodity sectors). That strategy brought me some decent profits last week, and should offer more rewards. Too busy to write more, just let you know that my focus list includes the names like: AKS, FCX, X, ENER, WLT, JASO, APA, AAPL, BIDU, SQNM, DYRS, MA....

Control your risk and good luck!