Monday, March 30, 2009

A Look At Some Market News

"The White House pushed out GM's chairman and directed Chrysler to move quickly to forge a partnership with Fiat if it expects to receive additional government assistance. GM CEO Wagoner forced out as part of gov't plan. Time and time again, General Motors Corp.'s board of directors reaffirmed its support for Chairman and CEO Rick Wagoner"

"Asian stock markets tumbled Monday as downbeat comments from major U.S. banks and mounting woes at American auto giants underlined that recent optimism about economic recovery might be premature."

"However they satisfy their nicotine cravings, tobacco users are facing a big hit as the single largest federal tobacco tax increase ever takes effect Wednesday ... The major cigarette makers raised prices a couple of weeks ago, partly to offset any drop in profits once the per-pack tax climbs from 39 cents to $1.01."

"President Barack Obama and congressional Democrats are stepping through an economic minefield and sowing the ground with unprecedented initiatives that capitalize on the recession to rein in Wall Street and broaden government's reach."

"The dollar weakened to 96.70 yen Monday"
----
My view in a word... Change.
In a few words... let's not count on the recession ending any time soon. How can we predict what will happen next?

Friday, March 27, 2009

More bullishness for now... wait a few minutes


Click for larger image, hit "back" to return.

The chart above, SPY daily, indicates the trendline in the sand has been well breached. Yay for our side! As I write, the index is only down 1.3% for the day and seems to be improving.

I hope to see a pullback to test and prove (bounce off of ) the trendline soon. If that happens, we're good!

I'll be in touch.

Tuesday, March 24, 2009

Is it healed now?

Yesterday was a huge day for the markets. The 18th was also huge. Considering all of that strength, and our hopes for an end to this recession, one would dare to consider that the market's woes have been cured.

Nobody hopes that more than me, however, as I study the data, I conclude it is not... Here's why.



Notice the chart of the broad market index above. We recently made a nice V which resulted in yesterday's close above the 20 day moving average -- very bullish. Yay!

Now, notice the volume indicator. The market has made several V's resulting in rallys. They all coincided with extreme levels of volume. The current rally did not.

My conclusion:
Nobody is sufficiently confident in the economic environment to invest large amounts of cash.
Therefore, I am not either.
If there are relatively few buyers, we can expect to see more chop and downside. Sniff.

Saturday, March 21, 2009

More on the printing of money, and the AIG bonuses

This is a partial repost of of a Cato Institute document:



Sparked by outrage over the bonus checks paid
out to AIG executives, the House approved a
measure Thursday that would impose a 90
percent tax on employee bonuses for companies
that receive more than $5 billion in federal bailout
funds.

Chris Edwards, Cato's director of tax policy
s tudies, says the outrage over AIG is misplaced:

While Congress has been busy with this particular inquisition, the Federal Reserve is moving ahead with a new plan to shower the economy with a massive $1.2 trillion cash infusion–an amount 7,200 times greater than the $165 million of AIG retention bonuses.

So members of Congress should be grabbing their pitchforks and heading down to the Fed building, not lynching AIG financial managers, most of whom were not the ones behind the company's failures.

Cato Executive Vice President David Boaz says
this type of selective taxation is a form of
tyranny:

The rule of law requires that like people be treated alike and that people know what the law is so that they can plan their lives in accord with the law. In this case, a law is being passed to impose taxes on a particular, politically unpopular group. That is a tyrannical abuse of Congress's powers.

----

The Cato people are a good reference for me... Their publications are well thought out and clearly written. Often, the mainstream media overlooks certain details and other sources must be consulted for alternative viewpoints.

The act of injecting a trillion dollars into the system would have to have an impact on Price. In fact, our old standard, gold, skyrocketed.

Here is what happened to GLD, a gold ETF...




As the value of the dollar is deflated through dilution, everything that is based on the dollar is also. Our homes, our investments, and our paychecks, all devalued.

Now, if the reaction to this cash injection is inflation, all of us will find ourselves in higher tax brackets and thus pay more for a lower standard of living. That is the reason smart investors moved out of dollars and into other types of investment vehicles, i.e., gold.

----

While this $1.2 trillion thing is going on, the government and news is focusing on the AIG $165 million thing.

$1,200,000,000,000
$165,000,000


While considering the preponderance of digits in the recent flood of dollars. perhaps the AIG thing still deserves some attention. It is rather outrageous that public funds have been converted to government funds, and then converted to corporate profits, only to be converted to personal bonus checks. That was a huge oversight by those entrusted to guard our taxes.

Didn't someone once say: "To you - he’s Mr. Vice President, but around the White House we call him ‘the Sheriff’- because if you’re misusing taxpayer money, you’ll have to answer to him.”

This is a mess!
The government does not really seem to be in control of the economy or its self.
With that, how can anyone expect the economy to improve?

AIG Bonus Update:
I just received an email from Michael Steele the RNC Chairman:

"It was a mystery all week how this happened. No one could seem to figure it out. But then... it leaked out that Democrat Senator Chris Dodd snuck a provision into the massive spending bill that allowed the bonuses to happen. Dodd denied it at first, then changed his story and now admits that he did it, but says he did it at the request of "Administration staffers". Finally, the Democrats have been forced to admit that they allowed the AIG bonuses to happen."

Hmm... What did Senator Dodd say about it?
"Dodd said he agreed to the Treasury Department's request, which made the limits apply only to future bonuses. Dodd's provision, as originally proposed, operated retroactively, meaning that it would have applied to any firm, such as AIG, that benefited from the first wave of federal assistance."

http://www.youtube.com/watch?v=Tz1yeX8Fh30

Hmmm... What did the Treasury Department say about it?
"As pressure mounted on AIG employees to return the bonuses, new details emerged yesterday about what the Fed, the Treasury Department and the White House knew regarding the payments and when. AIG executives said the Fed was informed three months ago by the company that it would pay $165 million by March 15 to employees working at its most troubled division. The Treasury and White House said they learned of the payments from Fed officials only days before they were due…"

Hmmmm... What did Tim Geithner say about it?
"Treasury Secretary Timothy Geithner admitted that he was the one who urged Dodd to make the changes. "

Hmmmmm.... What did Obama say about it?
"President Barack Obama declared today (3-16-09) that insurance giant American International Group is in financial straits because of "recklessness and greed" and said he intends to stop it from paying out millions in executive bonuses."

Hmmmmmm.... What was it that Barney Frank said?
"Congress should rewrite a Depression-era law the Federal Reserve used to give AIG its initial government bailout."

Huh? Excuse me Barney, Didn't Geitner accept responsibility? Shouldn't someone in your position be on top of the facts? Oh.. I get it... this is a Red Hering argument so you might deflect attention away from the truth.

Hmmmmmmm... What did Joe Biden say about it?
"It is no wonder that when earlier this week Vice President Joe Biden told local officials in Washington that he was "serious, absolutely serious" about policing wasteful spending in Washington, he was met with the only rational response his audience could muster: laughter."

Hmmmmmmm... What did Robert Gibbs say about it?
"White House press secretary Robert Gibbs attempted to deflect blame for the AIG bonus scandal away from the Obama administration by reminding reporters that Treasury Secretary Tim Geithner inherited a bad situation and had to make the best of it when he took over from the Bush administration."

OK. So what was the Bush policy?
"Despite their deliberations at the time, the Treasury and Fed officials, which were part of the Bush Administration, eventually decided to restrict compensation on just the top 75 company executives".

And Pelosi?
"Pelosi said that House Democrats had been out front for months on the idea of cracking down on bonuses and executive compensation at firms that take federal money. "The CEO compensation issues were completely resisted by the Bush administration, so we are sweeping up after them," she said.

But what about the economic stimulus bill, which included language that permitted the AIG bonuses to be paid? Sen. Christopher Dodd (D-Conn.) is in hot water after admitting that he amended the bill to allow the bonuses, though he says he did so at the request of the Obama administration. The point, Pelosi said, is that the House had nothing to do with it."

----

GeWhiz! Thats a lot of finger pointing. Who would want to invest at a time like this?
Sorry Brian, The best we can hope for is a steady paying job if you can't keep a continuous eye on the market's activity.

Friday, March 20, 2009

SPY pullback




Any wonder why the market is pulling back? In view of the SPY chart above, there shouldn't be.

To make matters worse, the Fed is printing money to intentionally spur inflation... this could be very bad for America; it has never been beneficial before.

http://www.theaustralian.news.com.au/business/story/0,28124,25212624-643,00.html

Remind me to not go long for another few years.

Thursday, March 12, 2009

Charting Ticks

This site offers a very good description of the Tick chart and provides tips in how to trade with it. The tick is so important that I'll never trade without it again.

As we can see in the chart below, today's tick was much higher than yesterdays, and in a very lovely uptrend. For that reason, and since the market was basically up all day, I traded with a smaller share sizes, and tight stops. ARG! While my profits represent an honest day's work, I failed to capitalize on the huge opportunity today presented.

I was having stress all day and poised to exit my meager positions at the drop of a hat. I couldn't believe what I was seeing; surely a sharp profit taking pull-back will begin any second.


Click for larger image. Use the browsers' back button to return to blog.

Since the tick is so volatile, I add the 4 and 10 period Simple Moving Averages (the values may change as I gain more experience). These MA's were bullish almost all day and so was the market... hmm... I guess it works.

The tick was difficult for me to find. I still havn't found it in Yahoo! charts. My broker's software calls it the $usm/tick (Chicago), $usn/tick (NYSE), and $usq/tick (NASDAQ). Even that was difficult to find so there may be more of them.

The tick is one of the key market internals and tells us in general, if Price is moving up or down. This is a key piece on information in understanding the way the market is -- Market Tao.

Tuesday, March 10, 2009

Stock Trading Malware

A dear friend of mine just gave me an important warning; Somebody has created a Trojan that can affect my trading platform.

I did some research (I googled it) and discovered that it is true. in this article, we see that several platforms are affected: "Among the unusually short list of institutions specifically targeted by Tigger are E-Trade, ING Direct ShareBuilder, Vanguard, Options XPress, TD Ameritrade and Scottrade."

My computer was affected by a particularly obnoxious piece of malware last month leaving me only to trade on my backup laptop. We eventually repaired it by converting the operating system to Linux. Sadly, my IT guy could not get the trading software to run so I had to switch back to Windows. Fortunately, we were able to do that, and get everything working, before the backup laptop got the same @#$ing infection.

Now I am afraid to do anything with my computers except trade and train to make better trades. Neither McAffe or Norton were able to discover last month's malware so I think I'll investigate AntiVir which was recommended in the article.

Be safe!

Friday, March 6, 2009

A Beneficial New Law

I'd like to propose a new law. I think that since America retires on their investments in 401Ks', IRA's, and annuities, this law will be beneficial to all.

Here's how it works; When a politician is placed in office, all of his re-election campaign funds go into a brokerage firm and into the SPY. Now, that politician is very interested in the success of American businesses and their customers.

When said politician monkeys around with a sector, finance for example, a significant portion of his account is shifted to the broad sector's bull ETF. Now, he/she is very interested in doing things that would be beneficial in that specific area as well as contribute to the entire market system.

If the politician sees a particular sector falling, he/she would be motivated (well paid) to reverse that trend.

Should the sector fail, his/her re-election campaign funds evaporate. Yay! the system is self cleansing.

Let's try it. Who do I call?

Wednesday, March 4, 2009

Trade #1 and Bollinger Bands

I already had a stellar morning so I pause from trading to document my most reliable setup -- Trade #1.

This morning, the market gaped up. The news was all about being overdue for a rally, which is counter to the overall trend, so I went into the market internals to get a better feel. The S&P was certainly in rally mode. however, the TICK indicator was showing flat/bearish. It seems that something is out of synch in the markets; some important sector must be failing with big-time momentum.

My charts are set up pretty clean so I can observe Price with few distractions. I use volume and Bollinger Bands (settings: 20,2), nothing else (rite now -- it might change later).

BBands are a wonderful thing to me... the center line is a 20 period moving average. When Price is below, that's a quick check bearish indication. Conversely, when Price is above, that's generally bullish. The outer bands encompass about 90 percent of Price action. When Price is outside of the bands, it deserves special attention. Often, when Price exceeds the bands, it is soon to reverse, at least temporarily. This fact is phase 1 of a very reliable trade.

I noticed this happening this morning. FAZ (FAZ is a bear market ETF) bucked its up-trend (as seen on longer period charts) and exceeded the lower BBand on the 1 minute chart, and others. From there, it reversed quickly.

Since the Bband channel is still forming a down trend, I waited. When Price closed above the 20 period moving average, I watched very closely. When the upper band went flat and began trending up, I bought a bunch of shares.

From there, Price rose to hit and then exceed the upper band (1 minute timeframe chart). Since it was out of the bands, it pulled back a bit. I wasn't concerned because that is normal behavior. After forming a choppy bull flag, Price took off towards heavenly profits with renewed momentum.

I sold half of my shares at about the peak, and sold the remainder when a lower low formed. Now, my highest profits of the week are locked in and being readied for re-investment.

Here is the chart:

Obviously, I passed over several buy signals.
I might have bought while Price was outside the lower band. That setup has worked (very well) and sometimes failed. (I reserve the right do this in the future, with just a few shares.)

I could have bought in at each of the three pullbacks during the initial recovery. These are fairly reliable, but since the bands are still displaying a down channel, its safer to wait.

Conclusion
The trade described above is so very reliable that I am comfortable enough to invest lots of shares. Hopefully, you will profit from it too! Start small until you get the feel of it.

PS
I understand that the above description might be a bit confusing, please feel free to comment any questions you might have. I will use those comments to update the description as needed (depending on my caffeine and blood-alcohol levels).

Now I think I might go take a nap!

Update: See also my Situational Awareness Post.... Its important.

Tuesday, March 3, 2009

What can I say? Not much going on... Price is still being driven by politics, not the strength of hardworking Americans and seasoned managers. The indexes are all down, peoples IRA's, 401K's, and annuities are being further decimated.

Here's a look at our leveraged bear market moneymakers:

- FAS/FAZ, Financial Sector: FAZ, up 5.25% today
- ERX/ERY Energy Sector: ERY, down 1.12% today
- TNA/TZA Small Cap Sector: TZA, up 6.37% today
- BGU/BGZ Large Cap Sector: BGZ, up 2.43% today

TZA and BGU are in confirmed rally's, and are pretty much oversold.
FAZ is very choppy and not as reliable to hold overnight.
ERY is choppy, oversold, and in a confirmed rally all at the same time.

As long as there are politicians, the markets will have a level of fear. These days, that fear is on steroids. Through these ETF's I am cashing in on it! Since fear levels vary from day-to-day, it is best to trade what you see from hour to hour; no long-term positions yet.

Generally speaking, the market is very oversold; we are now down to second-term Clinton era recession levels now; Price wants to be free to run.

Since the trend is down, we will likely gain from the above mentioned ETF's again tomorrow.