Friday, May 18, 2012

Who's That Man In the Corner

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.

The New 3-Bar BOHICA Setup w/Confirmation

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.

No Mr. Biden This Is The "Big Deal"

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). 

My house that I refinanced

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.

An Addiction I Am Trying To Control

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

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.

Tuesday, May 15, 2012

ManCakes - Screw the Term Cupcake..This Is A ManCake

So today a good female friend of mine went online and found this concoction for a cupcake:

Yes this is a cupcake compromising mostly of Bacon & Maple Syrup...or what I like to call a ManCake.  The only other thing that I could think of to make this more of a ManCake was to add Jerky of any meat or game.  Perhaps venison come later in the year?

She made this and presented me with some and needless to say, out-of-this-fucking-world!  I loved it and was sad to see there is only 2 dozen as I will be eating these continuously hedging with vigorous exercise...but its worth it.

All I can say is, if you have a significant other or live in solitude but have somewhat of baking skills, make this ManCake and you will not be disappointed...that is if you're a man.  Deliciousness awaits!

The Markets and Whiskey are More Correlated Than You Think

So given the title of the blog post, what do they have in common?  From my experience if they are taken fast one is to end up in disorder and confusion.  Patience is the key to both the market and drinking whiskey.  For example, if you play the market fast constantly being in it and not willing to reduce some risk, I am quite certain you will end up with a blown account.  I know this from experience as I have blown up three separate accounts before getting my act together and looking at risk instead of constantly reading technical analysis and options strategy books.  Please if you are beginning trading, focus first on risk.  Another experience that relates is with whiskey.  When I was younger I was all about the shots and reaching that messed up state at a rapid rate, only to wake up the next morning miserable and wondering what the hell happened.  Nowadays when I drink my whiskey I enjoy the finer stuff (favorites including Jameson 12 year & Jack Daniels Single Barrel) and just sit back relax and sip on the finer stuff in life.
So how does this all relate to trading?  Recently the market has me concerned.  Going into today I had mostly exposure to the long side that utilized a small portion of my account.  But today’s action action had me a bit worried as  shorts did not run and buyers did not really step in.  This morning watching the futures, the market looked great but when the action/volume came in, it told me to step aside as the bears are still awake and ready to kill any rally attempt.  When the market looks like this I believe that a trader should not look at support unless they are willing to average in, instead wait for conformation to either side and step aside and let the others get chopped.  I am not saying don’t trade, but if you do, trade small with expectation of lower prices and utilizing those stops or averaging down for longer term holdings.  Case in point is a post by @ , and from there “After sitting on my hands for a few days, I decided to try a few longs. I was quickly stopped out of $WYNN after trying to catch a falling knife, but got a great add on my $YELP shares. ”
Below is aq snapshot of my positions at end of day.
From the screenshot and going into today I was long deltas in: BIDU, PCLN, & UA and short deltas in CRM, with long day trade in AAPL.  The table refelcts the results:

SymbolDate InDate OutPrice InPrice Out% Gain/Loss on Risk
This table is meant to show that I did have some positions on but for reasons of today’s actions in the market I started to get a little worried and reduce some risk and say thanks for the gains so far and go into tomorrow with a clear mind or not trade at all and let things work out for themselves.  There is no need to be a hero and try to guess the bottom as this proved to kill some poeple that saw that hammer back in August 2011:
As you can see this hammer looked awesome as it undercut the previous days lows and saw buying coming (the tail) after what appeared to be a capitulation day.  Needless to say we can see what happened next as commodities got liquidated, much like todays action.
So from this all I can say is be careful and don’t load up. Take it easy and exercise that patience and let market play out and wait for some evidence of buyers to show up.  As quoted from @ “We are in a short-term downtrend within the context of a bull market correction, until proven otherwise. Aggressive traders have by and large been chopped to pieces in this environment. You simply must protect your capital and confidence here so that you can be properly positioned to benefit from the next trending period in the market.”….and I couldn’t agree more.
Like a fine whiskey, don’t take shots and end up puking and waking up the next day wondering what the hell happened.  Sit back enjoy yourself and watch things prove themselves, sip on that whiskey and enjoy the fine points of the oak and wood-char and relax and be patient!

An Interesting Trade Indicator & Learn To Think For Yourself

I have an email account setup with Hotmail that is specifically setup to receive emails from promotions, trade services, etc….pretty much a spam account.  I suggest that some new traders setup an account like this when they are asked to register an email account when they receive a solicitation from a third party or when they are asked to enter an email for further information from a company or service.
I have an account setup like this an in late February and early March I received a plethora of emails from services like this stating how they have been killing the returns and market, based mostly in options.  While I am mostly an options trader and “respect” the leverage I have also read many articles on how options have wiped traders out, and I really believe it as many newer traders read the books/articles on these percentage gains and begin with the risk management principle.  One video I recently watched from a blog post by @ was titled :
A specific point in the video was at the 1 min 32 sec mark, titled “When to Continue, When to Quit”, I really believe this is important for traders as I know from the past.  When you find that groove/zone, there is nothing like it, everything is firing on all cylinders and the money is flowing.  But when you are out of that groove (and I know) I went for the revenge trade or just to trade and my poor performance reflected.
So what am I getting at?  I have been trading since mid-2006 & have subscribed to many services and setup that spam account.  From experience I have realized when that Inbox becomes flooded, it’s time to reduce some risk (not be completely out) but realize some returns are getting to be good and to step aside and exercise patience.
Below is a picture of the SPX showing the run and when my Inbox became flooded as well as my personal thoughts about services.

The PPT, ETF’s, & What Works in June

Front running the month of June, I wanted to look for ETF’s that average over 500k shares daily trading volume and were seasonally strong during June.  I chose ETF’s as these can represent money flow into safety or risk via bonds or specific sectors/industries that represent growth or defense.  Turning to The PPT Screener , the following ETF’s were revealed as seasonally strong in June with a high probability of a positive return:
DXD       ProShares UltraShort Dow30
RWM     ProShares Short Russell2000
SDS        ProShares UltraShort S&P500
SH           ProShares Short S&P500
SKF         ProShares UltraShort Financials
SMN      ProShares UltraShort Basic Materials
SRS         ProShares UltraShort Real Estate
TWM     ProShares UltraShort Russell2000
Below is a snapshot of the following symbols.  Keep in mind that these are all bearish and some levered ETF’s screened within The PPT for the historically best performing ETF’s for the month of June.
Looking at the patterns and without external factors of knowing the symbols or current economic conditions, the reader can determine themselves if the charts look bearish or bullish going into June.
(the link above links to the FINVIZ website)