Leveraged ETFs

http://etf.stock-encyclopedia.com/category/leveraged-etfs.html

Ritholtz

Ritholtz is a rollicking debunker of market shibboleths. Do stocks reliably forecast the real economy? “Bull****. There is no consistent correlation,” says Ritholtz. Where are stocks headed from here? “The data and historical trends suggest the 2009 bull rally is about 75% played out. After that, the market will roll over and saw-tooth sideways for a few years.”

Nice!

LT picture

-- Rates are staying low in 2010.

-- Fed can't raise rates with mortgage resets (peak end 2011) looming and Commercial RE problems.

-- For the next year. Buy the dips in Gold and SPX.

-There will be dips. Buy only below 1040 SPX. Short at 1120-1140 at ST overbought SPX.

-Rangebound for 1 year.

-Look at Soybeans.

Will there be dips? What's the floor? Is there a floor?

Yes, there is a floor. At zero interest rates, I don't want to buy bonds. That means that there is a floor under risky assets like commodities, Gold and stocks. They're the only game in town. As soon as they start to go down, people will buy.

China has already declared that it will buy Gold at the rising trend line. This means Gold is a buy anywhere close to $1100. Buy 4-6 month call options and sell the rips will near-term calls.

Although the fed continues a zero rate policy through 2010, we will increasingly hear noise: fears of the fed raising. This is all it will be: "fears." These will drive the $ up and will be buying opportunities in stocks, commodities and gold.

People will buy the dips until they can't any more. Here's the issue: If interest rates stay zero, there will be liquidity that can't go anywhere except into stocks and commodities -- not into bonds, for instance -- and we will get a huge rise in the stock market led by commodities and gold stocks.

Short-run we may have more correction, but I believe we will stay range-bound. Problem for bulls is that Russell is really tired now. Profit taking by institutions may happen now, but I doubt that we will drop below 1020 or 1000 SPX at the lowest. If something extreme happens and we break that, there is a big floor at the 900-950 level.

Long-term we have begun a 40-year bull market.

Big Picture Economy Thoughts - Semis

The New Chip Cycle:

http://www.forbes.com/2009/10/13/whittington-apple-japan-intelligent-investing-electronics.html?partner=relatedstoriesbox

This post is a quote from the article at the link above:

SUMMARY:

This is the early phase of both a Tech Cycle and Global Economic Recovery.

Semiconductors have been underinvested in for nearly 10 years.

There are few new fabs under construction and the installed base is rapidly aging.

Semiconductor demand is coming from both Enterprise and Consumer customers.

New geographies have increased purchasing power, and tastes appear universal.

Pricing and margin degradation of the 2004-2007 time frame is over.

Electronics end markets are fueled by new product cycles.

Wireless spectrum swamped by broadband multimedia spurs infrastructure.

Smart Grid dictated by energy costs and demand for electricity to run the Internet.

Computer services are undergoing major consolidation and M&A activity.

The PC installed base has reached the obsolescence point.

Internet neutrality is a driving force for new electronics infrastructure.

Smart phones are a component-rich form factor displacing cellphones.

Mobile connectivity is an essential of the modern economy.

Windows 7 promises a viable upgrade path for Microsoft PCs lacking in Vista.

Apple software and applications drives constant upgrades within its ecosystem.

Applied technology infuses industrial, mechanical and vehicular applications.

U.S. companies have outsourced volume production but remain innovation leaders.

Software, system architecture and services remain American strong points.

Typical chip upturns see 4x-6x trough to peak share price returns.

Trading - LT and ST Timeframes

I would like to have two accounts or at least two time frames: the LT/ MT (2-4 months) and the ST. The ST can be high leverage trades which I can watch carefully. The LT/MT can be 3X leveraged ETFs. For instance, at 1090, where because of fundamental and technical reasons, I was expecting a selloff. it would be fine to buy FAZ or TWM or something similar.

But to play the e-minis, I would have to be around my screen and watching.

Setups and Economic Calendar - George Rahal

"Nothing epitomizes the novice mentality like the phrase "set-up." If your trading strategy is to wait for set-ups to emerge and to act upon, I believe you are bound to fail. Technicals, indicators, methodologies, set-ups, etc are all secondary. There is no holy grail-- the search for it frames the mentality that traps many novices. You primarily need an understanding of what the market's condition is, and have the technicals aid you. There are some important indicators that give you a picture of the market's condition, but they are also just aids, and subject to interpretation.

My best advice is to follow the market. Watch the market everyday. Also, know the economic calender, and read the detailed reports of their releases. That was the only advice my father gave me years ago.

Following the market is how you develop a feel for it-- what others call an edge. I think this edge can, in part, be learned. If you ignore the market as a whole and wait for technical patterns you studied to emerge, you will not develop a feel for it. I also believe that following others too closely can impede the internalization of your understanding of the market. One you have your own footing, feel free to assess others' opinions."

Conclusions:

1. This was and is my strategy -- waiting for the technical set up -- for the past few months. "There is no holy grail; you primarily need an understanding of what the market's condition is, and have the technicals aid you."

2. This was NOT my strategy for my most successful trading -- I did NOT rely on technicals. I just tried to understand the market.

3. Over the past few months, I was looking for certitude from Joe, Tim Night, Futia... I was looking for a helper. Not relying on my own work. My work meaning my understanding. Look at the post below; look at the prediction in bold. back in July, I had predicted 1000 by September. I bolded it then -- NOT now.

4. Other traders will always be wrong. Read Yahoo, read the Econ reports, understand the fundamentals of the economy.

JULY 15 Update

1. Bought August and September QQQQ and IYR Puts, sold July Puts against them but am losing money because market jumped much more than expected.

2. Last night, INTL blew earnings out of the water and upped guidance.  Real quality company and is a bellwether.  AAPL, GOOG, BIDU earnings still ahead.  Q's hard to predict -- will go up today.

3. Qs should rise to 36.5.  I will get out of my Qs August-July Put spread in the a.m. and look for a bounce to short with longer term Puts.

4. IWM and individual smaller Techs may be best shorts.  GDX may also be a good short as deflation will kick in after Tech earnings.  GDX daily chart looks terrible.  IWM, GDX, individual miners?

July 8 Update

1. Equities are in a LT downtrend. IT trend is also down.  ST downtrend.  VST uptrend up to 885 or so, may be 890.  BIDU shows massive negative daily RSI divergence.

2. Lower highs on the daily Qs.  H&S on all other indices.  Negative RSI divergence from previous low.

3. Qs daily RSI (14) has a buy signal today.  Qs still have RS relative to SPX and strong, up trending OBV.  SPX no buy signal on daily (14) RSI.

4.GOOG earnings 7/16; BIDU earnings July 20; Apple July 21.

5. AAPL and GOOG were strong all day today.

6. TLT should go up to 100 at least (38.2 percent retrace of fall from 120 to 87.5).  Short TLT via LT Puts at that level.

7. Near-term scenario is confusing, but we should get a nice bounce here.  TLT is already at 96.50 and had a high of 96.8 today.  I think this should go down to 94 or so.  Which means SP could come up to 890-900.

   

8. We may fuck around until earnings and fall dramatically after GOOG, AAPL, BIDU earnings, like Jan 2008.  

9. Semis getting lots of upgrades because of smart phone market.  LT picture no longer so bearish.  Administration is smart.  Soros is bullish.  666 - 950 - 866 - 900 ( HS negated - Goog, Aapl 7/22) - 820 - 1000 (September)?

  

We go up today and nice chance to buy Puts.  Sell QQQQ July Puts on fall tomorrow?

9. Most likely scenario is a lower high on the Qs ($35.50?) and a high around 885-890 on SPX.

10. Futures already at ES 883 (+10).  Alcoa earnings were not terrible.  Implies SPX 885.  Sell the open?

11. Joe says get bearish now, but real bearish around July 22.  The last Joe top was actually close to a bottom (July 7).  Implies that next bottom (July 22) might be a top?  Up until July 22?

12. Buy longer dated Puts  (Sept, Oct) on strength and forget about it.  Add on more strength or weakness.  

13. Puts on IWM, Qs are most liquid.  You can get more leverage by buying Puts on CROX, TQNT, etc., but not as liquid. 

14. Bonds will go down to 94-95 then up to 100 at least.  Deflation will win until November.  Short TBT at TLT on $94-95?

ST Equities

1. SPX drops to 885 or so.

2. Buy TQNT/BZH/TOL leaps.

New Trends

Treasuries, Gold etc.

QE is in progress.  The Fed (even the hawks) have no fear of inflation.  As long as capacity utilization is so low, producers have no pricing power, that is true.

However, if the government continues to take on more debt and monetize it, the $ will head downward.  There are counter forces -- the Euro is worse, the $ is still the reserve currency, but ... the government may actually be trying to devalue the dollar.

The $ will head downward because no one wants to earn such low rates to hold a currency that is being printed more and more.  

But what is the alternative?  You have to use the $ for trade.

Other nations are moving away from the $.  How?  Nothing is working so far.  If global markets crash, the $ will once again be king.  Bonds have fallen from $120 to $87.5 in six months.  Everyone is talking about it.  Bonds will now rise to at least $95 and possibly to $100.  Long bonds (short TBT) at $90 is a nice ST trade.   

- Shorting the Russell may also be a good trade.

Shorting the bonds at $95-100 may be a very good long-term trade.  Or long LT interest rates.  

See, the Fed is buying 10 year paper, but people fear QE will devalue the dollar, so others are selling the dollar.

- Very short term: TLT will touch 92.45 (6/17), then bounce to 90.5 (June 17-18).

- Then TLT will rise to $95 - 97.5 as equities bottom.   Long TLT at $90 may be a safe counter-trend trade.  (Or short TBT, rather).

- Then, as equities rise again, TLT will bounce down to $85-86 (late July).

- Then, when equities collapse later this year, August - November, TLT will rise to $95-100.

- Finally, TLT will drop to $60.  Gold will rise to $1300 at least.

- Trade of the decade: Short TLT at $92.3 (June 17 ST), around $95 (June .  Short again 

Equities

SPX will fall to 880 (June 20), rise to 970 or so (end July), then test new lows (late 2009).