The first bank failure this season! And dear little NTBK too! I remember buying it at $95 one Friday and selling it at $160 the next Monday. On Tuesday it went to $240! Talk about opportunity cost! LOL.
This afternoon, NTBK closed at 6 pennies. Next Monday, 1 penny? Anyone?
The party begins on October the first. Don't be late.
Friday, September 28, 2007
Thursday, September 20, 2007
Eager Bears Eaten Alive [model portfolio opens]
Tomorrow's option expiration day. Over-eager bears have bought 2.2 million put contracts on QQQQ, representing a short equivalent of 200 million shares worth 10 billion dollars. At least half a billion dollars must have been spent during the last month buying these contracts. By closing bell tomorrow, 95% of these contracts will expired worthless.
Internet rumors said that some trader(s?) have spent 1 billion dollars buying put contracts betting major European indexes will fall by a third to a half by closing time tomorrow. Yet right.
Heed me on this one: don't buy options, neither puts nor calls. At least not when everyone else is buying. I don't care if you have a billion dollars to burn. The guys who dare to sell you those contracts have much deeper pockets than you. And they have Ben Benanke working for them.
Major indexes will fall by a third to a half, or perhaps, to two thirds. But that won't happen in a month's time. It's a process that will take up to 18 months.
And before that can happen, the big guys will need to first finish eating up all the eager bulls, bears and the weaker shorts. They don't want to leave the table until they finish their last meals.
Only then will they awaken the sleeping 401(k) account holders: wake up! sell! The avalanche will then begins. The big guys will set up traps 2/3 of the way down harvesting all the much cheaper shares from the 401kers.
So, we will be patient, anxious, even a little eager, but not overly so. We will take advantage of the Fed-triggered short squeeze to open up a model portfolio before option expiration tomorrow. We'll come back in a month to track their performance.
We'll be shorting the following indexes: Real estate, Nasdaq, S&P500, DJIA, RMV & RUT. Let's say we put $20,000 into each positions at today's closing price as follows:
Short ICF 217 shares at $92.38 each.
Short QQQQ 400 shares at $50.03 each.
Short DIA 145 shares at $137.70 each.
Short SPY 131 shares at $152.28 each.
Short IWS 132 shares at $151.56 each.
Short IWM 248 shares at $80.79 each.
We'll set up 10% sliding soft stops for each position. If stopped out, we'll re-enter at the next high point using the remaining funds allotted for that position. Otherwise, we'll check back in a month.
Elliot wave theory says that the China bubble will top out around Jan 2008 with the Shanghai Index (currently 5446) going to around 8000 points by then. If so, FXI (currently $163) will top out around $235. However, we consider this market too volatile at this point to play on the long side, but instead will wait for a signal to enter on the short side.
Internet rumors said that some trader(s?) have spent 1 billion dollars buying put contracts betting major European indexes will fall by a third to a half by closing time tomorrow. Yet right.
Heed me on this one: don't buy options, neither puts nor calls. At least not when everyone else is buying. I don't care if you have a billion dollars to burn. The guys who dare to sell you those contracts have much deeper pockets than you. And they have Ben Benanke working for them.
Major indexes will fall by a third to a half, or perhaps, to two thirds. But that won't happen in a month's time. It's a process that will take up to 18 months.
And before that can happen, the big guys will need to first finish eating up all the eager bulls, bears and the weaker shorts. They don't want to leave the table until they finish their last meals.
Only then will they awaken the sleeping 401(k) account holders: wake up! sell! The avalanche will then begins. The big guys will set up traps 2/3 of the way down harvesting all the much cheaper shares from the 401kers.
So, we will be patient, anxious, even a little eager, but not overly so. We will take advantage of the Fed-triggered short squeeze to open up a model portfolio before option expiration tomorrow. We'll come back in a month to track their performance.
We'll be shorting the following indexes: Real estate, Nasdaq, S&P500, DJIA, RMV & RUT. Let's say we put $20,000 into each positions at today's closing price as follows:
Short ICF 217 shares at $92.38 each.
Short QQQQ 400 shares at $50.03 each.
Short DIA 145 shares at $137.70 each.
Short SPY 131 shares at $152.28 each.
Short IWS 132 shares at $151.56 each.
Short IWM 248 shares at $80.79 each.
We'll set up 10% sliding soft stops for each position. If stopped out, we'll re-enter at the next high point using the remaining funds allotted for that position. Otherwise, we'll check back in a month.
Elliot wave theory says that the China bubble will top out around Jan 2008 with the Shanghai Index (currently 5446) going to around 8000 points by then. If so, FXI (currently $163) will top out around $235. However, we consider this market too volatile at this point to play on the long side, but instead will wait for a signal to enter on the short side.
Tuesday, September 18, 2007
Current Market Trends
The real estate sector has been in a down trend since Feb 2007. Since late July ICF has entered into an upward tilted wedge continuation pattern, signaling that the down trend will continue. However, most wedges would have resolved to the downside during the last week or so. This one seems destined to delayed resolution -- it might exit the wedge to the upside in the short term, but since the downtrend since February has not reversed, it should continue on its down trend shortly there after. Eventually ICF should fall to the 50-60 range over the next few months.
Look at the charts of DUX (utility), RMV (mid-cap value), RUT (small cap) -- they are amazing. It seems a group of people have set up their 401(k) accounts for these funds around 2002 and 2003, buying the same amount of stocks from the same group of companies month after month. Moreover, not one of these people has tempered with their accounts since then, nor were there anyone new joined in later. The result is a straight line along the bottom of these charts, with the occasional hot money pulling the charts away from the line to the upside, but only slightly. But watch out, at least in RMV's case, some of these people have begun to pull their money out of their 401(k) accounts during the last month or so.
Nasdaq has been on a long-term down trend since the Spring of 2000. Recently it has completed its primary fibonacci retracement -- that is, it has recovered 38% of its losses between Spring 2000 and the Summer of 2002 (see chart). The fibonacci retracement level around 2700 will pose as strong resistance forcing the index to resume its downtrend.
SPX (S&P 500), on the other hand, has come back to the same level as its Spring 2000 peak, while DOW has proudly surpassed its 2000 level. We are closely watching the actions of these indexes -- it is quite possible that the actions in the market during the last 2 months, particularly the heavy sell-off during mid-August, may have constituted a reversal signal to the downside. If this is true, SPX will have exhibited a perfect double-top in its long chart: an ominous signal for the future of this economy.
Gold: not much to say here, the up trend since 2002 is still intact. Getting a bit too volatile lately, though.
The China bubble is a short one -- it's barely two years old, not the kind of 10-year bubbles that was in Nasdaq or Japan. The Chinese market is showing signs of fatigue, however, as the volume of its most recent 2-month uptrend is significantly less than last two up legs.
The Fed action today produced a bit of a short squeeze. This sort of short-term actions usually has no effect on longer term trends. But will it somehow delay or disrupt the pending reversal in Dow and SPX? We shall watch closely.
Postscript: this is a resumption of a market commentary series I've put out during the Nasdaq bubble/bust years. Selected articles from that series are being reposted to a sister blog.
Look at the charts of DUX (utility), RMV (mid-cap value), RUT (small cap) -- they are amazing. It seems a group of people have set up their 401(k) accounts for these funds around 2002 and 2003, buying the same amount of stocks from the same group of companies month after month. Moreover, not one of these people has tempered with their accounts since then, nor were there anyone new joined in later. The result is a straight line along the bottom of these charts, with the occasional hot money pulling the charts away from the line to the upside, but only slightly. But watch out, at least in RMV's case, some of these people have begun to pull their money out of their 401(k) accounts during the last month or so.
Nasdaq has been on a long-term down trend since the Spring of 2000. Recently it has completed its primary fibonacci retracement -- that is, it has recovered 38% of its losses between Spring 2000 and the Summer of 2002 (see chart). The fibonacci retracement level around 2700 will pose as strong resistance forcing the index to resume its downtrend.
SPX (S&P 500), on the other hand, has come back to the same level as its Spring 2000 peak, while DOW has proudly surpassed its 2000 level. We are closely watching the actions of these indexes -- it is quite possible that the actions in the market during the last 2 months, particularly the heavy sell-off during mid-August, may have constituted a reversal signal to the downside. If this is true, SPX will have exhibited a perfect double-top in its long chart: an ominous signal for the future of this economy.
Gold: not much to say here, the up trend since 2002 is still intact. Getting a bit too volatile lately, though.
The China bubble is a short one -- it's barely two years old, not the kind of 10-year bubbles that was in Nasdaq or Japan. The Chinese market is showing signs of fatigue, however, as the volume of its most recent 2-month uptrend is significantly less than last two up legs.
The Fed action today produced a bit of a short squeeze. This sort of short-term actions usually has no effect on longer term trends. But will it somehow delay or disrupt the pending reversal in Dow and SPX? We shall watch closely.
Postscript: this is a resumption of a market commentary series I've put out during the Nasdaq bubble/bust years. Selected articles from that series are being reposted to a sister blog.
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