Tuesday, July 24, 2012
Friday, May 18, 2012
A lot of talk right now of "the IPO" and how the market is reacting but one thing I am not seeing much of is the World Leaders plotting at Camp David via the 38th G8 Summit ; approximately 20 miles from my dwelling. I imagine the leaders from their respective country are talking about how great they raped the markets in the beginning of the year to leave the common folk feeding on scraps right now. But now they realize things are going down hill and the economy never really recovered but it sure did look like it. Yes the market may digest news 6 months ahead of time as the case is often quoted, but who really knows. So now they are thinking of ways on how we can all help each other out and the man in corner of the room in the shadow just taking things in while cigar smoke is billowing out in dollar signs is The Beard.
So what comes out of the G8 Summit, who knows. But things would be setting up nicely if we have some miraculous news or intervention over the weekend news from any of the countries economies that would cause this market to skyrocket on Monday and leave people that are shorting or still short to run for cover. News is definitely dire here and institutions do not seem to be buying but are just waiting for any reason to buy. Technically things really don't seem too bad in my opinion as we're coming back to the bottom of the February - July 2011 range. The charts do look appealing for longer term holdings and for some managers to start accumulating. Yes we could see more downside but you can't be in this game to pick bottoms.
This is all speculation of course but the recent action in Gold and Silver is a supporting factor of maybe some news to come and news over the weekend is always a great throw it in your face to market bears. But with all this we could also get the BOHICA Pattern Trade too and more misery to the bulls.
Looking at the recent price action I can only be reminded of August 2011 and when we saw liquidation at its finest. When institutions have to sell, they sell. Looking at the chart you can see that technical support levels, Fibonacci Retracements, moving averages, etc. are ignored. With todays price action and close at lows, I am now looking for what I call the BOHICA setup followed w/confirmation. As @chessNwine states in his blog posts and daily market recaps, these candle patterns need confirmation. So the BOHICA pattern confirms...just to the downside. While there may be another name for this as I did not do much research, I prefer this name because it can be no fun as violent price action is the result.
The Setup:1) Capitulation looking move with a large range candle opening near the high and closing near the lows
2) A Hammer Candle preferably near a support level, causing the aggressive to front run and load up (Bend Over)
3) Another capitulation looking move w/candle similar to the 1st candle closing below the hammer's low (Here It Comes Again)
The Results:Complete violence that tears at the psychology of the aggressive trader that tries to front run any move only to get severely thrashed around with violent up days and violent down days.
Will we ever see this again, I don't know but when we have action similar to that of recent, always keep in mind that patterns can repeat themselves and the prudent trader will wait for confirmation to increase his exposure.
I hate talking about politics and I'm that guy that is always left out of the conversation as I have no clue what's going on with elections or anything. Maybe its not the best attitude but I truly believe that my vote doesn't matter. I am skeptical of the whole process and they will all do what they want to do regardless of the people's thoughts. I voted once in 2008, waited in line for 40 minutes, and choose all of the candidates that I never saw a commercial for...none of them won. I could go on and on about my why I don't like politics, but I hate politics and don't even like reading about it.
Anyway, I will say I am directly affected by the Obama Administration and the recent implementation of HARP II or HARP 2.0
Basically the biggest change and how I qualified over the first HARP program was that is there no limit on the loan-to-value ratio as there was in the previous HARP. Yes I am that much underwater on my mortgage and it sucks, but this isn't an investment to me but its a place to permanently live.
So I hate to talk politics as this was a political decision that was granted by the government, but this directly affects the ecoonmy. I won't give stats or extreme details as I am economically dumb but know just the basics. My simplest and easiest to understand reason is that by refinancing I am knocking down about 3.75% off my interest for about $700-800 off of my mortgage payment. The economy now has $700-800 more dollars going into it instead of the banks pocket based just off of that interest reduction (raw number minus all the detailed percentages).
How much money comes from tax payers or bailouts or how is the program supported? Short answer is I don't know. This is one reason why I don't talk politics, because is nothing seems believable anyway. All I see is a direct example of the program implemented and I wish many more people take advantage. I hate bailouts and never wanted any of them to happen. All I know is that I bought a house even when the market was coming down, had to go with a Fannie Mae loan, but I paid my mortgage every month and could continue to do so. But if you could save even $300 a month would you? The program is there and in my opinion you may as well take advantage of anything you can because than likely you or your generations will get screwed down the line anyway.
By the way I'll be cash flowing this into $FB....officially my only Facebook post.
What can I say, I think I am an addict. It is hard to sit at the computer and not be tempted to trade something. This is a bad habit of mine that I am finding hard to cure. It's like taking a recovering alcoholic to the local watering hole and setting a Shirley Temple in front of them while you're drinking and enjoying the finest craft beers this fine country offers.
I came into Wednesday with no positions as I closed them all on Tuesday as found in my recent post titled "The Markets and Whiskey are More Correlated Than You Think". I closed them due to the uneasy feeling of the current environment. I feared the market in both ways as a rip would kill my short delta positions and carnage would kill my long delta positions, either way I expected volatility either way and didn't want to screw up my mind with wild swings in my P/L. Well Wednesday didn't disappoint as the familiar morning run followed by selling ensued. But instead of sitting there watching, I felt like I had to do something...and I did.
I put the following positions on:
SPX - May 1310/1305 Bull Put Spread
/ZB - June 147/148 Bear Call Spread
RUT - June 740/780/820 Iron Butterfly
/ZB - June 147/148 Bear Call Spread
RUT - June 740/780/820 Iron Butterfly
So where do I sit now, I'm down on the /ZB and SPX option trades and positive on the RUT Iron Butterfly, but losses are exceeding gains. Around 1:30 EST I sat at my desk wondering why the hell did I have to get into these. While they compromise a small position of my holdings and I'm waiting for the turn to bull up, I still didn't need to get into these and I could go into tomorrow with peace of mind.
Even with the futures trading nicely right now (+7.75 in the /ES) I still go into tomorrow with some uneasiness with the SPX trade that expires Friday morning. The market is series of unknowns that the trader controls with risk management. I need to learn to just stay out sometimes no matter how good setups are and take a break, as one has to remember your health is ultimately affected as well.