Change of Mind

Equities to continue up until Thursday/Friday.

Will stop out of TZA tomorrow, take profits on SOX.

SOXS at 51.7; TZA at 38.7

May be too early on the TZA. Looks to me like we may get some more upside until Thursday-Friday.

SOXs is at a nice profit and may take profit around 35.2 to reenter later.

TZA is part position; may add if RUT moves higher. Stop is above Feb highs.

NFLX still looks like a good short. Would've been better $10 higher.

TLT, SOX short, AGQ long

TLT is a buy at around 91.56. TBT Puts can be bought around 38.8

Indices are nearing a major top.

I may risk a SOX short via SOXS at 49.8 or so. Stop 48.

/DX nearing a bottom of sorts. Non-farm payrolls on Thursday/Friday?

AGQ is a long at 166-169 zone. Target at least 195.

Trading Axioms

http://www.ritholtz.com/blog/2011/02/the-zurich-axioms/

INDL long?

INDL long Monday?

Maybe.

Prognosticating

So far, I am treating this as a two wave decline. Dow and SPX will touch the 50MA at least. Bonds (TLT), which are in a bear market, will retrace at lease 23.6% and possibly 38.2%.

However, there is a distinct possibility that this is the start of something somewhat bigger. the NDX is at the 50 MA, and did breach it. It could sink a lot more than the others, quite possibly to the 2007 high, at 2210 or so, another 4% down from here, for a 10% correction. There are major divergences in the New Highs and other breath indicators, both in the short-term and in the intermediate-term (from the April and November highs). Also, there was increasing complacency in the trading community and the blogosphere - do stocks ever go down, was a constant refrain.

The safest policy is to go long bonds TLT upon a bounce in equities. Shorting NDX may also be worth exploring, as might shorting SOX or other erstwhile high flyers.

However, if this was the beginning of something bigger, I do expect there to be a substantial bounce before another fall. At major tops, drops are initially bought. There is a great deal of volatility. This is a ST buying opp, not a selling opportunity.

My Biggest Faults

1. Knowing how and when to stop out.

2. Taking on too many trades.

TLT, AGQ

Looking to re-enter TLT around 90 - 91 range.

AGQ 165.3; Silver $31.9.

Looking for shorts

Will wait for good levels.

Out of TLT long, but will re-enter around 90.

The Big Picture

Remember the big picture:

Year 3 of Presidential Cycle.

We went up too much too fast. Much of the gains are already made

QE 2 continues until June, then QE 3.

Bonds are indicating that we are at the beginning of a larger correction - uptrend in Bonds.

This decline could easily become a 5-10% correction with the larger uptrend fully intact.

Emerging markets are still in free fall.

In the bigger picture:

It's very unlikely that we came all this way to stop before SPX 1360 and RUT 852 (double/triple top).

Finally, in the even bigger picture, this is a bull market in equities correcting. Remember, in the very big picture the bottom was 666. This is all a bull market. And we have crossed the 61.8% retrace on the SPX.

Buy DBA on the dips.

ST

I am long and looking for higher prices before the correction continues.

RUT 852? SPX 1260? Maybe not that much.

MT

Long bonds again at TLT 90.

LT

Still a bull.

VIX, Silver, ES, YM, TF TLT,

VIX is showing positive MACD and RSI divergence on the daily charts. Should go up to 21.4.

That's when I plan to go long equities.

Silver is a buy in the 31 - 31.5 zone.

Gold is a buy around 1380.

ES and YM (SPX and DOW) outperforming TF, NDX by a mile! Very interesting. Oil services, I bet. DOW ES very strong!

DOW, ES may become a global hedge. Not TF. Large cap US equities.

Bonds going nuts. I will stay long TLT calls for now.

PMs

Will try to get out and long AGQ on Monday/Tuesday. I think we will get a dip in Silver and equities next week. Silver is going to 35, but will hopefully dip to 31/32 first.

AGQ buy around 163.

GDX is going to 62 - 62.5, but will dip to 58.5 first.

GDXJ target 44.5; buy around 38.5. Look at AG.

UEC

Really hurting on this UEC trade.

Not only losing money but also could have made a nice 5-10% profit if I had trailing stops.

Instead I had a target.

Also blocking funds that I could have had in AGQ.

Remember that there is nothing as bearish as a failed breakout!

Will try to get out of position on Monday.

TLT update

Long TLT at 89.2. Should have waited. Will touch 89 and possibly 88.75.

Stop is 88.75.

TLT, TYD, GBPUSD

Looking to buy TLT calls at around 89; TYD at 51.5

GBPUSD may be a good short at 1.628 triple top.

Still also looking for bullish plays on pullbacks.

TNA, INDZ, UEC, JASO

TNA will go up to 92, but may correct at around $87. I went long from 82.55 and got out at 86.2, too early.

INDZ is a buy at 29.5 or so.

UEC - long average price 6.3 or so, getting impatient. Looking for 7.4 but may get out sooner.

Am long JASO from 8.1, target 9.2.

Long TNA 79.2

SOLD TNA AT 82.55. Will try to buy again on Monday. ST target is 83.9.

Edited - ST target is minimum 84.4, but quite possibly 87.

I.T. target on TNA is 92 - 93.

Today's list (What I may purchase)

AGQ at 148; target 156

INDL 36.2; BSE at very strong support. At least a bounce here. HSI is also at very strong support.

TNA 77.5?

Short GBP

SP will double top at 2007 highs

SPX will double top. That’s when the bear market will start.

Next serious pullback when the RUT double tops. For now, long RUT.

Plan to get long TNA today and tomorrow. Also looking at INDL long.

Best Method For Trading

(For me)

1. Find individual stocks that are the best patterns. Find optimal entry. Set buy order. Find exit. Set sell order. 5-15% moves.

2. At all costs, avoid shorting bull markets, except as a hedge, with a small position.

3. At all costs, avoid going long bear markets; same rules as #2.

4. Avoid shorting or going long indices. Find individual equities in pullbacks from the major trend. Remember, in a bull, individual equities (and even sectors) may double or triple while the overall index moves up by 10%. Don't be afraid of the work. If you can't find individual equities to go long/short, that means you shouldn't go long/short. Maybe the trend is changing or there will be a reversal soon.

5. Maintain 2-4 different positions. Don't put all capital into one position. This enables you to move on from one losing position. Always be looking for other positions; other equities.

6. Always know the exit point -- or where you will exit this trade if things don't work out.

7. Plan to make money in the long-term. No doubling in two weeks.

Barry Ritholtz on Shorting

from The Big Picture (www.ritholtz.com)

Basic Rules for Shorting Stocks

1. Shorting Momentum names is dangerous: Unless you are Superman, never step in front of a speeding locomotive

2. Valuation alone is insufficient reason to get short a stock — History teaches us that cheap stocks can get cheaper, dear stocks can get more expensive

3. ALWAYS work with a pre-determined loss – either a physical or mental stop loss — Never leave yourself open to infinite losses

4. Fundamentals tell you WHY to short something, not WHEN to short it. ALWAYS have some technical confirmation before shorting. Make a short selling wish list, then WAIT for technical confirmation. (We use Money Flow, Short Term Trend lines, Institutional Ownership, Analyst Ratings).

5. It is tough to be a contrarian: During Bull and Bear cycles, the Crowd IS the market.

You have to figure out two things:
…a) When the crowd is wrong — Doug Kass calls it “Variant Perception”
…b) When the crowd starts to get an inkling they are wrong

At the turns — not the major trends — is where contrarians clean up.

6. Look for Over-owned, Over-loved stocks: 95% Institutional ownership, All buys or Strong Buys (no sells), and 700% gains over the past few years are reasons to put names on your short selling wish list. (That is how my partner Kevin Lane found and shorted Enron and Tyco back in the 1990s).

7. Beware the “Crowded Short“– they tend to become targets of the squeeze!

8. You can use Options to either juice your short returns, or pre-define your risk capital (options)

Update

Out of 3/5 of short position at ES 1290; Still long Silver

Case 1 30% probability

The bear case:

ES 1310 is very strong overhead horizontal resistance. Look at a 3 year weekly chart.

NDX was rejected at 38.1 retrace of entire 2000-2008 bear market. NDX and GOOG charts look tired; time for a break.

Dollar is charging, finally.

Rally is very long in the tooth.

Daily RSI on the NDX is indicating a negative divergence. SPX too, but NDX is more clear.

Earning season over - sell the news.

Case 2: 45% probability

The bull case:

However, equity PC data is indicating a ST BOTTOM.

We may be making a bull flag under major resistance.

And a LOT of people seem to be waiting to get long.

And this is a godawesome bull market.

This may be the last leg up before the pre-summer fall.

Case 3 25% probability

I think there is also a possibility we see 1315 then a fall.

Plan now? See reaction to employment report. Prepare to take a loss on the remaining short.

Update

Will probably get out of shorts on a pullback. Still like Silver.