Lessons

1. If VIX is under 26, buy the dip. If VIX is over 26, sell the rip.

2. Always trade in the direction of the larger trend. Find the strongest trend in your time period.

3. Nothing as bearish as a failed breakout. Nothing as bullish as a failed break down.

4. Don't worry about the last dollar. Take your money and go to the beach!

5. No more than four positions at a time. Preferably 2-4. Scope out others. Pick the strongest.

6. Buy the strongest; sell (short) the weakest.

7. Nothing is guaranteed. Nothing.

Friday, April 30, 2010

Friday Trades

1. Sold GS Puts around GS 151. Bought at 160 so it was okay but still bummer. Was sick and didn't want to be watching all day.

2. Sold XLF Puts for small gains.

3. Bought Silver futures at 18.6. Target 19.4.

4. Long AUD/USD at .9290. Swing trade, no target yet. Stop .9200.

New Lesson

Sold GS Puts at open at 151 or so.

Don't sell too soon!

Well, today I was sick and didn't want to be inside and trading, so I have an excuse, but I need to sit on my trades until I see a reversal.

Thursday, April 29, 2010

Lesson from Today

Have to become more conservative. Need to watch for topping/bottoming action before buying. Need to keep at least 30% in reserve.

Stopped out of SPY Puts at ES 1204

For a nice loss. Still holding XLF and GS Puts. Added GS Puts at 160.4. We'll see what happens tomorrow. I doubt that financials are just going to go straight up, with the bill in Congress going the way it is.

Wrong! SPX is going to 1210-1212 minimum

SPX will fill a gap at 1210-1212 before any drop.

Update 11:58 a.m.

This could be Wave 5 of 5. I may close shorts slowly and consider going long.

1:35 p.m. But the NYA still has a declining 5 MA (classic short call) and an H&S pattern.

And NASD and SPX have sell signals on the daily MACD.

Trade Update

The Russell is weak. I am short XLF, GS and SPY via Puts from 1197 to 1200 on the ES. Went short between 9:30 and 10 a.m. this morning.

Update at 10:45 a.m. I could be wrong. TICK is very strong today.

10:49 a.m. Is this Wave 5 of 5?

Wednesday, April 28, 2010

Looking to (Possibly) Short Baidu

See what happens after earnings releases -- whether to the upside or downside.

Dollar, Gold, or Silver?

One of the the dollar or Silver will break an important trend soon. I think it might be Silver. I will short the ES at 1195. If it doesn't get to 1195, I may try to short sooner. I believe Silver will fall with the ES (from 18.25 or so).

Gold may fall too, temporarily at least. GDX and SLW are at the top of their channels. A retrace, at the very least, is likely. The dollar will move up to 84 soon.

If Gold manages to close over 1170, this point is invalidated.

As I have said before, the dollar will rise in the SR. The main alternative to the dollar is the Euro, which is getting a downgrade a minute. Until Standard and Poors downgrades the United States, the dollar will rise. When S&P threatens to downgrade U.S. debt, watch Gold. It will make a $100 move in one day.

SPX

This is turning into a 5 wave move down.

Daily charts have turned.

Important turning point.

I will short the 3 wave retrace.

Gold is looking strong.

If gold closes over 1170, I will go long gold, not Silver, not GDX.

Tuesday, April 27, 2010

Wednesday Plan

Today is a full moon day. I guess I should have known.

Gold is up, equities are down.

I will be buying SLV calls, GDX calls, and SPY Puts tomorrow.

I expect SPX to descend to between 1150-1175 minimum, and possibly more. I expect a nice bounce tomorrow. By Thursday we should be up to 1200 or slightly more.

Trades:

I will try to buy June SPY Puts at 2.32.

I bought Silver at 17.99. I may get out of this soon.

Out of Silver for break even.

If the market collapses, Gold will hold out better than Silver.

Why the Dollar Will be Strong (in the SR)

- It is the funding currency!

- Where else will people park their money? In PMs? Sure. But you can't give PMs to your grocer to buy milk! (At least not in the SR!)

- In every crisis, money goes into the dollar.

- Yes, this time it could be different, in the intermediate-term, but in the first response to the crisis, the dollar will rise, as will Gold and Silver. And then, when dollar debt becomes an issue, gold and silver will rise even more. The dollar will still rise against the Euro, but maybe not against the Aussie, the Loonie (Canadian $), the Japanese Yuan and emerging market currencies.

Look at Gold!

Long GBG at 1.73. Will add other miners or GLD/SLV.

Tuesday-Wednesday Plan (Waiting for the Fed)

1. I think that 1192 - 1198 will mark the end of Wave 4 down on the E-mini futures; 1195 - 1201 on the SPX.

2. I think that Silver will bottom around 17.9 - 18.0 zone.

3. All this depends upon the Fed. If they indicate tomorrow that tightening is coming soon, then SLV and equities (SP 500) could fall to 1160. Therefore, until the Fed statement tomorrow is released, speculative long positions are somewhat risky.

Monday, April 26, 2010

Long-term Outlook

Hello,
I had told some of you that I wouldn't buy equities long-term at these levels. Firstly, I want to explain the limitations of my experience and predictive ability. This equity bull-market is remarkably resilient and may keep going for a while. If Ben Bernanke and the Fed keep short-term rates low for another year or so, as is possible, then markets could keep rising and make new all-time highs by late 2011. We could conceivably keep going up to bubble valuations. This would not be good.

Most smart people I know (and even some not-so-smart ones like me) have been wrong about this bull market. While I have a good record of predicting short-term movements in the market, I have not thus far been good at predicting the longer-term. (I am zero for two so far -- on the extent of the 2007-08 crash and the subsequent recovery). These are just my thoughts. I could be all wrong.

Secondly, I want to point you to Jeremy Grantham's letter, not because he knows what will happen, but because he is very intelligent, experienced, honest and moral, and, unlike me, he is right more often than not. Link: http://www.gmo.com/websitecontent/JGLetter_ALL_1Q10.pdf

Thirdly, I want to clarify what long-term means for me -- it means, for me, a time-frame more than 2 years. I think that the United States faces significant debt servicing problems in the future, and that there is no good way for it to service its massive debt obligations other than to cut spending and raise taxes. If debt stays high (or becomes higher, as is happening), then interest rates should rise. If interest rates rise, this will stifle the recovery. So the government will want to cut spending, so as to prevent interest rates from rising. Whenever this happens, and this must happen within the next 2-5 years (and probably sooner to avoid losing its credit rating), whenever the U.S. government spending cuts spending, equity markets will struggle.

In the current political climate, we will not be able to cut spending or significantly raise taxes, which means that the Federal reserve will be under pressure to keep short-term interest rates low. (If interest rates are low, it is easier for the government to service its debt.) While this will be good for equities in the short-term (next 6 months or less; which is why I'm short-term bullish), I think it will also be inflationary in the long-run. The current short-term bank-to-bank interest rate in the United States is 0.25 percent. Extraordinarily low short-term rates over time beget asset price inflation. When bonds are not a good alternative, money goes into commodities. As those of you that live in developing countries know, food inflation is real and it is here. We in the United States haven't seen it recently, partly because of the strong dollar.

The dollar is strong because of the crisis in Greece (the Euro is the biggest alternative and sovereign defaults are increasingly likely in the Euro zone). This instability elsewhere brings about a demand for short-term U.S. debt, because the U.S. dollar is a funding currency as well as a safe haven. This demand for the dollar helps keep interest rates down in the short-term. Right now the attention is on Europe. However, sooner or later the world will catch on to the debt crisis in the United States, either through the ratings agencies putting out warnings, or otherwise. The way I see it, one after another debt crises will start surfacing in the second half of 2010 and 2011. When this happens, the gold boom will start in earnest. Thus, for the next 5-10 years, I am a gold and commodities bug.

Finally, in the very long-run (beyond the next 5 years), I am very bullish on all asset classes. For the last 6 months, I have been telling my friends that we began an 80-year bull market on March 9, 2009.

All the best!

Mistake

Sold GS Puts too early. Wanted to sell the morning weakness and buy again - but there was no chance to buy again. Need to hold tight on the swing trades until target is reached, or at least until I see a turn on 10 or 15-minute RSI. Now I don't have a GS Put.

Sunday, April 25, 2010

Weekly Outlook and Tentative Plan

Long-term

Upside in this bull-market is limited to about 8-10% depending upon the index you're looking at.

Short-term

I think we may be about to begin Wave 5 of 5 of this 14-month bull market. If I am correct, it should begin some time in the next week or so.

CRB is setting up for a big move.

Gold and PMs are about to make a big move.

NAS breath looks very healthy; ready for a big move.

NYA shows chop zone may continue for a little longer, but after chop, trend will continue and next target is 8500.

BKX chart looks very bullish short-term, but I think there is some trouble ahead. Financials will be heavy; GS will suffer.

BSE (Bombay) is starting to look bullish, at least short-term.

GDX (Gold miner) index is very bullish.

Put-call ratio is still very toppy.

Bull move should start within the next week.

I will close shorts and go long, PMs and Tech.

Friday, April 23, 2010

Friday AH

80% short now. Just one small long left, in a Silver stock (PAAS), which I will drop on Monday.

1. Bought GS Puts earlier at GS 158.

2. Entered BGZ at 12.25 AH.

3. Entered FAZ at 11.11. This is a swing trade. Market may go higher but I think risk-reward is good here.


Update on Saturday at 11:22 a.m.:

I may sell BGZ, in view of my earlier analysis that we are setting up for one more move up to at least 1220-1230 on the SP 500.

I'm pretty sure I will get good prices on my FAZ, if I choose to sell it and on my GS Puts, although I will only sell these at a profit. The spotlight will be on financials next week, and I think they will struggle.

I think that bulls have made a point by closing above 1200 SPX on four consecutive days. The point is this: 1200 resistance has likely been broken.


Closed all shorts

Closed all shorts around 1204 on the ES.

Thursday, April 22, 2010

Friday Plan - Bounce Coming; Wave 4 Almost Over

1. Sell most/ all SPY Puts between 1190 and 1200 on the ES.

2. Buy SLV Calls.

3. Sell GS Puts?

WAVE 5 of 5 is coming.

Wave 4s are choppy.

This is Wave 4 of 3 of this entire move from March 2009. Wave 5 of 5 is coming. Next week?

Trade Update

1. Back into SPY Puts between ES 1198 and 1202.

2. Back into GS Puts at 158.1.

Bullish day today, by any measure.

Look at the Russell!

Trade Update

Closed two out of three GS Puts at GS 156.8 or so.

Closed SPY Puts at ES 1189.

Bought FXI Puts at ES 1194.

Bought small portion of SLV Calls at SLV 17.5 or so. 20% of position size.

Closed last GS Put at GS 157.10.

TICK is strong today. May not be a trend down day.

Wednesday, April 21, 2010

State of the Market Review (Incomplete)

1. BSE is at classic 5 MA daily short position. Weekly MACD and RSI is also bearish.
2. Brazil weekly very bearish RSI and MACD.
3. Copper weekly bearish RSI.
4. CPC and CPCE 5 MA just now indicating a turn; 10 MA barely dented; both very bearish.
5. TRIN indicating possible selling peak. Bounce possible!
6. CRB 5 MA daily somewhat bearish, but MACD making pattern of higher lows; trending higher!
7. CRB weekly looking very weak.
8. Gold daily pattern of higher lows on MACD!!
9. Gold:SPX ratio - making a bottom?
10. Gold: UDN held support at retest of prior highs. Bullish!
11. Dow RSI making a lower high??
12. $GYX (Industrial Metals) indicating daily RSI has peaked but perhaps higher prices to come after dip.
13. MSEMX death cross! 5 MA very bearish. What's up?
14. NAAD (NASD ADV-DECL) 10 MA has small bearish divergence.
15. $NDX lower RSI high? bearish divergence?
16. $NDX closed at prior highs - pre Lehman highs. VERY IMP resistance.
17. NYA bearish MACD, bearish RSI. !!!
18. Cumulative NYAD (adv-decline) - bearish divergence!
19. 10 MA NYAD bearish divergence!
20. NYHL 5 and 13 MA - bearish divergence!
21. NAUD (NASD adv-decline volume) bearish divergence.
22. NDX making lower RSI high?
23. NA200R - stocks over 200 DMA - bearish divergence
24. New highs - bearish divergence.
25. NYMO - bearish divergence.
26. NYUD - terrible bearish divergence on 5 MA.
27. RUT - could be bullish, but can't say. At resistance. Same as NDX.
28.RUT: SPX bullish
29. SLV - buy the coming dip? Weekly MACD looks bullish.
30. SPX - bearish RSI divergence.
31. Shanghai daily chart has fallen apart. Any strength should be sold.
32. TNX (ten year rates) and TYX (30 year rates) indicating trouble ahead. What does the bond market know? Up valuation in Remnimbi coming? This would be bullish for PMs.
33. Dollar - inconclusive.
34. EUR/USD -- Look at the EUR/USD - it is falling apart. Maybe a small retrace to 1.3300 and then a crap out to 1.31 or so.
1.3200 - 1.325 - 1.300 (tomorrow). 1.3000 will likely coincide with about

That should mark the end of Wave 4 of this bull in the SPX - at about 1170-1180 on the SPX.


Conclusion - ST bearish. Even if there is strength tomorrow.



Thoughts

Lots of selling today - I was watching TRIN all day, intra day.

But $TICK was strong.

http://stockcharts.com/h-sc/ui?s=$TRIN&p=D&yr=0&mn=9&dy=0&id=p07704086370&a=148395627

Given the extreme TRIN position today, I will take partial profits tomorrow. I am thinking a move up to 1220-1230 is possible. I am now heavily short GS (profitably) and SPY (somewhat profitably). No front month calls, but still...

I will also start legging into Silver soon.

Reminder for self: Focus on the LR in one account.

Louise Yamada

I just happened upon a wide-ranging and thought provoking interview with Louise Yamada. Here it is, in case anyone is interested:

http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2010/4/17_Louise_Yamada.html

Tuesday, April 20, 2010

Thoughts

The market is playing along, just as expected. My GS Puts are doing well. I expect AAPL to fall to 226-230 within the next couple of days, where I will buy July or August calls.

Tuesday Plan


Buy AAPL May 240 Puts at 5.6. Sell for 6.3 before earnings.
Sell some SLV July 18 calls in the a.m. for .76 or better.
Sell AAPL May 260 Call for 4.9 - 5.2 if possible.

Tuesday trades

sold AAPL 260 calls for break even.
Sold SLV Calls for break even. Will reload soon.
Bought SPY Puts at ES 1202.5-1204.5.

Monday, April 19, 2010

Monday/Tuesday

Trades on Monday

1. Sold small part of SLV position at a slight loss; just freeing up some capital for possible lower prices.

2. Bought GS June Puts at EOD (small position) at around $164. I expect GS to open high tomorrow, after good earnings, and GS to go up to 170 tomorrow. Didn't remember that earnings were tomorrow when I bought. Oh well. It doesn't change my basic scenario of further weakness ahead.

3. Sold earlier AAPL calls for $0.40. Bought AAPL calls at 244 or so. Will sell on Tuesday.

Thoughts

Correction is not over, even if tomorrow opens bullish. I will use any strength on Tuesday to sell a little more of my long SLV position, so I can reload at lower prices.

Gold will rise to 1145, IYR to 50.9, GS to 168 and AAPL to 250 before further correction on Wednesday.


Saturday, April 17, 2010

Change of Mind

The big red candle on the daily charts is saying - WATCH OUT - in big, red letters. This is the end of Wave 3 of 5.

Friday's action was also NOT conducive to the bull case for PMs. Also look at the TNX daily chart; in hindsight, its action over the past few days could be said to be flashing a warning.

I now believe that PMs may be headed down further, along with the general stock market. Accordingly, I will exit all PM longs on Monday. If I am wrong about this (20% chance), I will take my minor losses and be wrong. But based upon a number of factors -- Friday's action in all market sectors including PMs, TNX, etc., I believe that upside in PMs, in the ST at least, is limited. Gold could fall to 1100, Silver to $ 16.6 and SLV to $16.25.

Also, for the ES, this could be a test of the 1150 break out zone.

Added 4/18 at 9:23 p.m.

I think it is quite possible, however, that the downside in Gold will be limited to $1120 and Silver to 17.45 (SLV 17.1) (about 20 cents lower). There are rising trend lines meeting us there. At the very least, we should get a nice bounce there.

Accordingly, because I am bullish the stock market and PMs in the medium-term (1-2 months), and bullish PMs in the long-term (fundamentally so) I will start to leg back into PMs a few dollars down. I will also hold on to part of my position and not sell at a loss.


Friday, April 16, 2010

GS, AAPL...

I may try to buy GS $150 Puts at 3.4 or so. I expect a move down to $140. This is based upon a 3 year weekly chart. I will not chase this trade. If I don't get it, I may wait for GS to hit $140 and then buy longer-term.

I may also buy AAPL May 240 Puts for 5.50 or 5.60, again selling them before the expected volatility spike on Tuesday before earnings. If AAPL hits $249, I will probably do so. Will not chase either trade. These could easily net 30% by Tuesday 4 p.m.even if the price of the underlying doesn't move.

Silver, PMs and the Dollar

I am at max position size in SLV, bought at 17.7, 17.5 and 17.3 (on the SLV ETF). (I didn't expect to buy at 17.3.) Silver correlates well with the /ES, and because of the dramatic fall today and my expectations about the ES, I think lower prices are possible - before any new highs. I will look at charts carefully this weekend (the dollar, gold and the ES) to decide the future course.


Trade Update

Bought AAPL May 260s at $4.50 - this is a strictly ST trade meant to cash in on the Volatility spike. I will sell this before AAPL earnings, and may sell it today.

Trade Update

1. Sold all SPY Puts around 1195.

2. Sold all SLV Puts around SILVER 18.05 (SLV 17.7).

3. Bought SLV July Calls around SLV 17.7. Bought more at SLV 17.5 and 17.3. Max position size now. Will unload a little at SLV 17.65 or so, expected on Monday.


Thursday, April 15, 2010

Friday

ES Range:
1194- 1205.

At this point, I do expect the ES to come back up on Monday.

No Spike Yet; Wave 3 of 5 to continue?

I really want to see a spike. If today is the end of Wave 3 of 5, then we should get a spike up. If we don't get a spike, we may go higher tomorrow.

AAPL earnings are next Tuesday, and we can drift up with minor pullbacks until then and hit 1230 or so on the SPX. That might be the end of Wave 3 of 5.

But NDX has already hit the upper horizontal line on this chart.

http://tinyurl.com/yl2x6ys

and that is significant.

p.s. I do think that this topping process will take a few days -- perhaps until April 20-25. I don't think the market will collapse before AAPL earnings on April 20. I will take profits on my May Puts at the first weakness and re add June Puts on subsequent highs.

I will consider buying a few AAPL Calls or Puts tomorrow, to sell before earnings on Tuesday afternoon. They will be worth more before earnings because of increased volatility.


Thursday

Trade Alert

I sold my IYR puts this morning -- the gains were too nice to let go of.

Bought SLV May Puts (at 18.05) and SPY May Puts (at around 1213). I am expecting higher SPY prices in the late afternoon (perhaps 1217-1220) and plan to buy a few more SPY Puts before close today. Tick suggests possible higher prices.

Wednesday, April 14, 2010

Wednesday

Trade Update

1. Sold SLV calls at SLV 18.05. Will buy again later.

2. Added to IYR Puts at IYR 52.5.


Monday, April 12, 2010

Monday/Tuesday

Monday Trades

1. Sold ZSL for average 3.7. Small loss.

2. Went long SLV via June calls at SLV 17.81 or so.

3. Short IYR via June Puts at about IYR 51.6.
(I expect IYR to weaken in anticipation of higher interest rates. Technically also, it has been weak.)

Plan

PMs: I expect a 3 wave correction in SLV to 17.5 (Silver 17.8) or a flat to 17.8 (Silver 18.1) or so. Gold should correct to 1140 or so. First, however, Gold should rise to 1160 and Silver to 18.25. I may sell my Silver calls at 18.25 and buy them back at the bottom of the third wave.

SPX: I expect a similar 3-wave correction. PMs has started first, so it will probably end first.

Friday, April 9, 2010

Friday, Weekend Update; Silver Target 19.5

Trades

1. Covered GBPUSD at 1.534 for a 60 pip loss. Staying off forex for now.

2. Shorted Silver (at $18.25 or so) via ZSL (bought at average price of 3.74).

I was anticipating a correction in Silver to around 17.8, which I am no longer sure about. If this happens, I will buy it with AGQ, which should be around $59. My target for AGQ (before a bigger correction) is around 66.2.

There are two alternatives:
1. That 1200 is a temporary pit stop which pushes the SPX back down to 1180 or so before a final push up to 1230-1250.

2. We go straight to 1220 or so before a major correction.

I suspect 1 will happen. If 1 happens, then Silver should still correct to 18.2 or so. I will probably buy back most or all of my ZSL at Silver around 18.2 so that I have dry powder for the bigger top I am anticipating. This means I will accept break even, small loss, or pennies on my ZSL.

Medium-term (next one-two months) I am still bullish on PMs. However, as said earlier, they will correct with the general stock market, either on Monday-Tuesday around 1200 on the SPX or within the next week around 1220 or so.

Basic scenario: I think we will small-correct before earnings season and larger correct after earnings season (last week of April).

The next two months will be choppy - large up down moves.

All the best!

Thursday, April 8, 2010

Are We Nearing the Parabolic Stage?

Quite possibly.

Thursday

I think the E-minis will bounce here from 1173, which is a nice floor, all the way to 1181 or so, before they fall to 1163. That should be it for the correction, which should end tomorrow. It will be a great buying opportunity in PMs; it should coincide with Gold 1130 and Silver 17.8 or so.

I may try to buy:

1. Silver Calls at 17.8; May $18 calls for 0.43.

2. AGQ around $59.

3. BGU around 1164 on the ES.

4. AUD/USD around .9210.

5. Still holding GBPUSD short. Looking to sell around 1.5010.

Wednesday, April 7, 2010

Monday/Tuesday

Outlook

Money is flowing into commodities. The AUDUSD just broke out of overhead TL resistance. Is in the process of retesting. I am expecting a positive test, but we are in a resistance zone. This is the big trade here. Long PMs, long commodities, long AUD/USD.

However, in the VSR (today and tomorrow maybe) the USD may rise. There is potential for a ST top in the US indices on Wednesday. This is not clear, but some sort of consolidation in the indices is necessary after a bunch of recent breakouts. Also remember that earnings season is near, and we need a little pull back for a major run ahead of Tech earnings around the week of 4/25.

Tech is the other big trade here. Long AAPL at around 233? 226-7 would be a great entry, but I'm not sure how you would get it. Long BRCM?

The EUR will likely fall against the USD, but in fits and starts. This is a very crowded trade, with lots of non commercials, but its also a fundamentally sound trade. Right now, I expect it to fall to 1.31 or so, within the next day or so.

The GBP will also fall, but it's not in terminal decline and may show some strength against the USD after this VSR fall.

Trades

1. Covered EURUSD at 1.349. Mistake.

2. Shorted GBPUSD at 1.5275. Target 1.5010, but it may go down to 1.4934 or so today or tomorrow.

I may try to:


1. Buy SLV calls around SLV 17.3; Gold 1130; Silver $ 17.6.

2. Buy AGQ around $58.7.

3. Buy AUD/USD at around 0.9240. Target 1.1113.

Saturday, April 3, 2010

Week Ahead 4/5 onwards


- I think that the USD will rise on Sunday and Monday, and the Euro should fall to 1.33 or so by Tuesday. I will try to short this move in the Euro. This fall should give a nice opportunity to load up on PMs. I will buy around Gold 1120 even though Gold may fall to 1107 or so.

- The ES should fall with the move up in the dollar. This would be a good opportunity to buy. At this point I expect the downside to be limited to 1150 or so, but it's possible that we will fall to 1140-1145.

I may try to:

1. Sell EURUSD around 1.349. Buy 1.345, then sell a bounce. I expect 1.3300 on this move down and probably 1.3200 by mid week. Sold at 1.3496.

2. Buy SLV calls around SLV 17.0; Gold 1120; Silver $ 17.6.

3. Buy AGQ around $58.7.