Thursday, December 11, 2008

Today's Tom Sawyer gets high on you.....

Seeing a lot of bullish confirmation out there. The hold of 818 SPX on last weeks dip set up for that nice rally. 952 is the next inflection point on the way to some August levels (1125-1175). Volatility still pumped so use that to your advantage when using options.

My background as a trader lets me look at certain situations and break them down into simple risk reward equations. Take a look at the TIPs market. They are at an alltime low vs. Treasuries. With the government backing, you have a risk free call on the CPI index while getting paid CD like returns. Great idea for the cashlike part of your portfolio.

Merger arbs are still running scared. BUD closed with $1.48 spread remaining on the table. Show that the playas have zero bullets. Allows the smaller fish to get some nice trades.

Thankful that College Hoops is here. That Curry kid on Davidson is pretty fun to watch.

Tuesday, November 25, 2008

That's Amore

Nice action on Friday, with a new low followed by a 10% rally. Technically, we have set up for another 25-35% move from here. The market is making it hard to stay long, blowing thru stops, and then reversing. Next target is 1006 SPX with a final move to 1125 ish. But as Kenny Chesney says, don't blink. This could be done in a matter of days, not weeks. Good strategy here would be backspreads on your favorite blue chippers. With VIX over 60, you will be selling the meat of the vol.

Jets over Titans, ...there was once a dream called Rome.

Wednesday, November 12, 2008

"All the Gold in California... in a bank in the middle of Beverly Hills, in somebody elses name." Austinite Larry Gatlin.

A once infamous bank robber was asked why he robbed banks. His answer, that's where the money is. In this market, you have to go where the money is. So far that has been on the short side. Looking at a slew of charts today, I can't find anything that looks positive. The one chart that is really sticking out is Gold. About 18 months ago, we broke out of a $730-$660 trading range and made new highs at $1000. So far with every other asset making new lows, this has held. Even with the dollar index on a tear from 75 to 88, the shiny metal seems to have support. GLD, the gold future ETF, made a low recently at 66. Today it settled at 70. A good trade here would be to sell some near month put spreads to finance later dated out of the money calls. I believe we can see GLD back in triple digits in a years time.

By the way, nobody is thinking about the Titans going 19-0. No respect.

Wednesday, November 5, 2008

How can I miss you, if you never leave?

"Barrack Obama became the 44th U.S. President last night in a practical landslide victory. Unfortunately, the stock market melted down on fears regarding his economic leadership skills and true ability to navigate the country."

Not being too political, but the stock market really does not care who is President. People asked me about my views on the election and I told them all that since the economy was slowing, the incumbent party would not be reelected. Proof, see 2000, 1992, 1980, 1968. As for possible economic policies like higher taxes and spending, well it seems a lot of the recent weakness in the market began once the polls started to reflect an Obama win.

My main concern in this matter, is whether or not we will have to continue financing a buildup in the national security budget. Although the dollar has had a pretty good rally lately, I would not be surprised to see a test of the 72 level on the DX (about 15% decline). This is bullish for gold, bearish for bonds, and neutral for stocks.

Tuesday, October 28, 2008

Skyrockets in flight, afternoon delight.

Combination of pension rebalancing, end of redemption selling, short covering, and good old fashion buying will get you a 10% move off of the lows. Still many skeptics out there, but one thing is true, the market makes it hard to sell when you have to, and then rips to the upside when you think its time to get back in. I mentioned to someone this morning, that 9700 DJIA was my target for this week. That could be a conservative number. The "news" being a rate cut/credit ease/commercial paper buy/full moon/end of the baseball season/beginning of the NBA season, you name it.

Tuesday, October 7, 2008

Whoa Nelly, We got a barnburner here!

Boy did I miss this. Biggest plunge in 7 years and I was long. Still there, looking for a retrace back to 1200 SPX to get out. Elliot Wave of 5 in progress, making 890 a possibility out there. VIX should come back into the 35-40 range that will show a nice bear rally.

Sunday, September 28, 2008

I may be crazy, but it keeps me from going insane.

Nice rally on Friday after a gap lower on fears of Congress taking its usual course. Looks like a gap higher that should take us to 1265. A weekly close above that level will put in the bottom, and get us moving up for the next six months or so. 1450 here we come.

Tuesday, September 23, 2008

I Love You Just the Way You Are

Pretty normal post expiration Monday retrace. After a 120 pt move on the SPX, we do need a little breather to take care of some overbought indicators. Really like the VIX not moving on this low volume downdraft. We should see a close above 1265 in the Dec futures to really knock the socks off of the shorts.

Good arguments made by Merrill's Rich Bernstein on why the banks are close to a bottom but not quite their yet. I think once we see the Treasury's plan on mortgage bonds, the financials will skyrocket. Playing the range right now in the XLF (19-23). A close above this will start a new bull run.

Getting down to the wire for the Mets. The Brett Favre acquisition is going as I thought for the Jets. Spend a lot of money on past talent, and you get a mediocre offense.

Friday, September 19, 2008

Yowza, Yowza, Yowza

So that's what you call volatility. For those of you playing the home game, hopefully you did not get whiplashed too much. Now with this short sale restriction in place, we will see the rally I have been looking for. A move of 10% to 15% from here on the quick is in the cards.

Get back in there and buy, Mortimer.

Thursday, September 4, 2008

Back in Black

Well almost in the black. The market has done what I thought it would by staying in a tight range even with oil coming down. The economists at Merrill Lynch are still seeing slower growth throughout the world economy. My view is that these numbers are already priced in to most stocks so we are at bargain levels. Financial stocks have stabilized and are poised for an upmove here. Made some good short term trades on the airline and retail stocks as fuel prices have stabilized for the time being. Move to neutral on those sectors now. Pick up some good names in the commodity sector here as the 4th quarter approaches and yesterday's winners will be marked up.

For those of you not too familiar with my trading style, let me revisit some of my themes:
1. Buy stocks when they are in a cheap market.
2. Buy good names in good sectors on pullbacks.
3. Buy volatility in beaten down stocks that have based for a few weeks. Time is needed to wring out the sellers.
4. At all times, sell out of the money calls. Take in some premiums and trade around the positions. You can always buy them back if you want to. Remember, a cheap sale is better than an expensive buy.
5. And most importantly, the market will always move to the point of most pain before it reverts to the norm.

My Mets still 2 1/2 games ahead of the Phillies.

Thursday, July 24, 2008

Surfin' USA

Looking for gasoline to hit that $3.25 level, do not know what crude price that translates into since the crack spread ( how many gallons of gasoline per barrel of oil) is pretty screwed up these days. But let's say I would not be surprised to see double digit crude come October. This should keep a bullish wind behind the market, as long as a major financial institution does not fail this summer.

This rally is "the end of the world is not tomorrow, so I need to own stocks." probably looking like 1250 to 1325 SPX as a good trading range for a couple of weeks.

Hey, the Mets are now tied for 1st, good luck to the boys of summer!

Wednesday, July 16, 2008

Where have you gone Joe Dimaggio?

So its been about 8 weeks since I posted anything. Let's recap what has happened in the markets:
1. Banks are struggling to stay solvent.
2. Home sales keep dropping.
3. Non-financial earnings holding steady.
4. Commodity prices soaring.

Gee, same news from last year, but what's different? Perception. Last year we saw this as a short term blip. Now, all the pundits are calling for a "New Deal" type of legislation to shore up the system. If you let the free market react, we will wipe out the non-performers, while letiing the stronger players survive. This happens every decade and will continue in the future.

Still bullish, see new highs by end of year.

Tuesday, May 20, 2008

Let the Good Times Roll

Oh by the way, seeing topping of commodities trade as the small fish is looking to move from stocks to grains. Also, lots of interest in energy as well, which will make the dip buyers carry the pain. A good trade here would be to be long some indexes and short a portion of energy against it.

By the way, doesn't Chris Paul remind you of Carlton from the Fresh Prince?

Monday, May 19, 2008

What's Love Got to Do With It?

Using the top of the March lows, you can draw a nice channel for the SPX. With the top being hit today, I am looking for a quick pullback down to 1375-1395. with volatility relatively cheap for the past month or so, it is easy to pick up some downside protection for this move. I am unwinding a number of buywrites at this cheap vol and setting up index hedges. Still bullish for a summer move to new highs, but we need a little work to be done first. Financials still under performing and will lead on the downside.

Mets crush Yanks. Stop the season now.

Wednesday, April 9, 2008


Lots of nice looking charts out there. Take a peek at some transports, tech, and consumer staples names. Yes, they are all defensive, but that is where the money is flowing, so stay with the trend and stop trying to bottom tick Wamu.

Dividend yields also very attractive, combo that with call sales and you got yourself some nice returns. Thats what I like.

Thursday, April 3, 2008

Moon Shot

I will say this in print, we will see new highs in the market by July expiration. Why is this? Successful retest of the January lows followed by 3 300point up days in a month. All this converging with a 40 week cycle low in the Elliot wave cycle and bearish sentiment at all time highs. If you add that to all the liquidity added by the Fed, you have a recipe for a quick run to the upside. The sell in May crowd is short right now and will create demand quickly for stocks.

Ah, Final Four, first weekend of MLB, it couldn't get much better than this.

Monday, March 31, 2008

Day Tripper

Well its been a while on the old blogger. The more things change, the more they stay the same. Still like stocks here. Cheap valuations, oversold technicals, bearish sentiment, low interest rates. Buy writes still give an awesome risk/return in this environment.

Take a look at Muni Bonds. Yielding 120% of Treasuries. History has shown this to be a great trade. We are talking 15%+ on a bond position! The market is pricing in huge defaults by municipalities, way out of whack with the risk profiles.

Wednesday, February 6, 2008

Born on the Bayou

Nice pullback here. We trade down to the recent weekly pivot, should see solid support 1335-1340 SPX. Took some of the nice sub 1300 buys off the table around 1380 on the Fed rip. That's what you got to do here. My strengths tend to be entry and exit points on a trade, but holding them as an investment can be hard, especially at this volatile period.

Still love them buywrites as the VIX new range of 25-35 will get you paid for selling premium.

8 days until pitchers and catchers. I only have to say one thing for the Mets, Oye come va.

Wednesday, January 30, 2008

Fed Shmed

So we are all going to sit around all day and wait. That is the feeling I got from an institutional broker yesterday. He said his clients are doing nothing. I guess they have better things to do than make money. I see tons of opportunity in this market, whether long, short, or neutral. It all depends on your style, risk tolerance, and ability to get liquid.

By the way, I'll take the Giants with a 50 basis point cut.

Tuesday, January 29, 2008

Duke and Duke

Buy, Buy, Buy. Please don't ask again what I think the markets doing. When the local news yesterday morning had a "Global Market Sell off" with Europe down 1% as one of the top stories, it reaffirmed my instincts. I strongly subscribe to the shoeshine/cab driver theory. We are poised for a new high this year.

Sunday, January 27, 2008

Lord I was born a Ramblin' Man.....

So Societe General decides to unload a $7 billion loss onto one trader. They say he hacked into their systems and created offsetting trades to make the position look smaller. I executed trades for their prop desks in the past, and would take a beating by them if we were off on a couple of hundred shares. Trust me, they know of every position on every desk at the bank. They have risk controls for how many rolls of toilet paper are used in a week. The only way I see this as a "rouge" trader, would be if he ran up commissions with one of his broker buddies. A couple of thousand euro Bordeaux's on an expense report would be the first place to look.

So back to the market. A classic panic and rally to end the week with some consolidation. Feeling the bottom is near as the public is getting chills of 2001 all over again. Remember fear and greed are the real drivers of financial assets. Right now fear is on top, then greed will take over once the easy money is made at these levels.

Trade long here until April Earnings. Then I would look at shorts as that will draw the public back in.

Wednesday, January 23, 2008

I am the walrus, goo goo ke choo.

I guess that was the reversal. Breadth never went positive so it was hard to close up on the day, but opening down 400 on DJIA and trading up to -50 was a pretty good rally. With the 2yr yield below SPX dividend yield, it is easy to make the case that stocks are cheap. Still in for a bumpy ride, but the trend will soon change and new highs will be in the cards for 2008. A close above 1400 SPX will be an all clear signal.

Wednesday, January 16, 2008

Happiness is a warm gun

"Sell at the sound of trumpets, buy at the sound of cannons." Not sure where that quote comes from but we are under artillery fire now. Looking for a reversal bottom any day soon. Probably today as we are in an expiration week and the dealer community is probably short gamma at these levels.

Thursday, January 10, 2008

Back in the USSR

So I have been a little too premature in picking the bottom of this market. As we bounced of support at 1380 SPX, we have not damaged the weekly chart too bad. A close above 1435-1440 would be the springboard to a nice rally. Still waiting for those mutual fund flows to come in.