Cups & Pills

SPX & DOW


NDX & RUT


At this point, NDX looks like the only one that has not reached its full potential - what with the huge cup and a tiny cup in the making.

All the other 3 are not looking so good in the long run. For now, cup should bring price to fib 261.8

Again, the above's purely for my own amusement. I have no idea what the broader market is doing, and I've totally stopped watching/reading/listening to news. Nothing in this world feels real. But since I've chosen the blue pill, I shan't complain. But I'm not listening to anymore BS.

Admirable Politics?

I am not American, and I don't like to talk about politics, the economy and general social ills. Because they are unnecessarily complicated, and generally inherently depressing. But I've reached the point that I need to unload some pent up indignation. After days of reading stories like this, I have been visualizing slapping the person I used to admire.

What baffles me is, why is he even reprimanding?? Those are not just a bunch of school kids that are acting up.

If he is not merely putting up an act, then he's simply incompetent. I believe his hands are tied. But hadn't he come into office with some sort of a game plan to take command?

First you have a puppet Bush. Now you have a softie, whose desire to be a folklore hero is even more unpalatable than his predecessor's thirst for oil.

Americans don't need a hero as a President. They need a Hitler, or a Saddam, to weed out the ills in their society.

They need someone like Jack Bauer in 24, a Jack Bristow in Alias, and a Bryan Mills in Taken.

A man's gotta do what a man's gotta do!!

When my Dad used to see something seriously wrong, he would always go,"If I were the government...I would......".

Right now, I really feel like saying:

If I were Obama, I would stop apologizing - stop talking altogether in fact - stop wanting to be a GOOD MAN ("Good" is the antonym of "Politics". So I take back my word that I thought America needed a "good" man as a president. As my brilliant brother, the Pilot had said, the only good man who chose to be a politician - and he did so only coz no one else would fight - is Gandhi), and JUST BE A JACK BAUER.

Actually Bryan Mills is even better. Cool headed guy who's always in control - hardly surprising given that he spends most of his time thinking and TAKING ACTIONS rather than talking. I love the way he goes for the neck, the key organs, and the repeated punches on the face til the crooks totally stop moving. He doesn't spare anyone who got in the way of his saving his daughter, a defenceless teenager who had gone on a tour with her crazy cousin coz she didn't know better, and was kidnapped (sounds familiar huh? Can you blame a young girl when even adults of today clearly show that they are not any wiser?). That's what you do to selfish, wicked people who harm the innocents. And I don't care about the reasons they are selfish. They could be doing everything for their family. But hey, all of us have got a family, but we don't go around destroying others' so we can live in huge mansions and holiday at the bahamas every summer!!

The people of America need a Bryan Mills.

Contest Winners & The Lonely Trader's Musing

Thank you all, for responding to my post calling for views on where market's likely to be heading.

Regret that I am only given 2 books to award participants. I would have really liked to give them to all who have taken part.

I'm giving the 1st book to Eddie as a form of encouragement. Hope he continues to blog, and that in due course, will be able to see that the market is better treated as a teacher and a friend.

The 2nd book I'm giving to The Lonely Trader. He has done the impossible thing of confusing me even further on the first read of his "mini-book" (quoting Eddie). If I can't understand something, it has gotta be good. :-)

Below is his musing (in blue), which I have read over and over, and enjoyed it more each time I went over it. It contains a multitude of issues he could only briefly touch on (I believe he would have written 500 pages if only he had the time), and serves as a starting point for anyone who's interested in exploring further those topics being discussed.

I like what he stated in his opening - that "What we think depends on our time horizons and our objectives". I personally couldn't have agreed more. Time/investment horizon and objectives are factors that have always underpinned the framing of my arguments on such topics as whether daytrading, swing trading, or longer term investing is THE way to work our money. To me, each is a good timeframe, depending on one's needs and the resources at his/her disposal (time, energy, CAPITAL) - with the latter constraining the person to a specific investment horizon.

So, here goes The Lonely Trader's write-up that won him the book "Hedge Fund Trading Secrets Revealed" by Robert Dorfman:

I have to make my characteristic caveats here. What we think depends on our time horizons and our objectives. There is also the meta-question of where we choose to get our information. I don’t try to get too cute about it, preferring to get a broad view from mainstream media, bank research, and market commentary from a diverse range of folks in the know (excluding all speculators!). I think a lot of people go wrong in not caring enough about where they get their information.

My views are an amalgamation of what I have read – opinions, research and analysis, etc. – from other sources. Very little of the substance of my opinions is from original analysis. (And by analysis, I don’t mean the simple stuff the so-called blogosphere “experts” do every day. We can do most of that for ourselves. I’m talking about deep analysis here – the kind very smart people get paid a lot of money for.) So, very few of my opinions are original. Forgive me for any plagiarism, please. This will read like a confused rehash of what everyone else is saying, but I want the free book so here goes.

I have changed my mind since October/November when I said I was a long term buyer above 7500. The title of that post was “Rothschild would be a buyer here.” I was a bit too enthusiastic…. I don’t believe there will be the kind of turnaround everyone is hoping for in the latter half of 2009. There may be a brief respite, but that’s about it. In terms of the Dow, the odds are very good that the November 2008 low will crack – and very convincingly. Oil and gold will remain under pressure. Gold will not get much further above its highs of 2008 in the medium term, even with risk aversion increasing. I think the most popular position is and will be leaving everything in USD through much of 2009. On the macroeconomic front, I think deflation is not over. All the dollar-printing going on will not be inflationary – yet. Nobody will be spending any of that money. Inventories will collect dust, or be sold off at fire-sale prices. It won’t be enough to cover the bills. Factories and offices will close. Labor will stand pat on its unrealistic demands. Prices will fall across the board. Housing prices still have a lot more room to fall, and this won’t stop until well after 2009. I think that when this whole thing hits bottom, the peak to trough decline will exceed 10%. Real unemployment, not the crap that BLS puts out, will exceed 15% before the end of 2010. This will be what most thinking people – and most working people for that matter – call a depression.

Globally, I think 2009 will be growth-negative. Even if the IMF is right about 0.5%, in real terms I think this is a big net-negative. I think we have only seen roughly a third of the write downs from banks. In the US specifically, it is possible we could see a nationalized banking system. More banks will fail. Big banks. (Some are already insolvent.) States like California already are insolvent, and could be bankrupt before 2010. The US government will face a credit downgrade soon. Treasury flows will dry up as foreign buyers of US debt are forced to support their own collapsing economies. There will be defaults in Euroland – Spain, Italy and Greece are the top three contenders in the MSM, but who knows how many more will succumb to debt spirals. One or more could declare bankruptcy and abandon the monetary regime this year. This doesn’t mean I think the monetary union will dissolve, but as the larger economies of France, Germany and the Scandinavias build proverbial firewalls around their financial systems, weaker countries will be left to burn. Admittedly I’ve gone back and forth on the fate of the euro. I still think dissolution for the common currency is possible, but I wouldn’t bet money on it. (And I’m not, as you know.) The UK is already in serious trouble. At the beginning of 2008, insuring $10K in debt for five years cost $8. It now costs about $135. By comparison, the same debt in the US, which started out at roughly the same price in 2008, costs about $75 today. By the end of the year, EURUSD could be at parity, or close to it. GBPUSD could be at parity as well. (If you live in London now, try to get the hell out of there by 2010. Get your money out of there now.) In Asia, the picture is no better. Exports have all but ground to a halt. China needs to maintain a growth rate of 8%, according to its leaders, just to keep everyone happy. China has a very long and unhappy history with grumpy rural poor. I think its economy will be lucky to hit 5% and this will likely push rural poor from grumpy to froggy. China may have to “get military on their @$$es.” Demographics in China are fascinating – and under the circumstances, frightening in their contradictions and disparities. Unprecedented debt-financed overcapacity isn’t helping. I’m sure most of us already have an idea of what is at stake for those unfortunate people. There will be sovereign defaults in “Other Asia”. (My term.) Corporate default risk has been flagged for more than a year by rating agencies, particularly in shipping, property and technology. In an area not particularly known for transparency and robust institutions, the first big default will come as a surprise to the market. The result will probably be a cascade of panic. The general problem in Asia will only grow worse and it will be understated until a major dislocation occurs. Responses will be ineffectual. Protectionism in China and Japan, a typical reaction when they perceive any threat to their market shares and revenue streams, will only sink them further into the hole. India isn’t immune either. For many of the same reasons. And the fact that Asia’s financial systems are relatively insulated from the credit crisis is of marginal benefit when global contagion is peaking – not financial contagion, but the most basic kind of economic contagion among interdependent economies.

I could go on and on, but I’m starting to get depressed. Trading wise, stay very short term unless you can scale your bets to keep risk low. Long term, keep bet sizes miniscule. When things start to get crazy again, even those miniscule bets will start to look too big if the instrument rolls over on the trade. As far as specific ideas, my favorites are puts on Alt-A, Prime and commercial real estate. (Shorting any underlying instruments will probably seem too risky.) If you are long gold, hedge your position. There is something very fishy about gold right now. Unless $900 holds, I expect a deeper correction soon before heading higher. Same with Silver. Copper will depend on China – and demand looks like it will pick up a bit. But I don’t think the move will be sustained. While I think it is reasonable to be long oil, don’t hold your breath for a return to $100 and beyond anytime soon. Commodities will be unpredictable. Demand shouldn’t pick up too much for most, but even if it does don’t expect prices to spike. (Recall China’s recent announcement of a doubling of soybean imports – the underlying price actually fell afterward.) I hear of commodities going both ways, with talk about breakouts and inflation and all that. I think we’re a long way from the kind of inflation many pundits are expecting.

Currencies will continue to present opportunities for speculators with money to burn. Stay away from illiquid currencies unless you have a specific methodology that is suited to trading them. Stay away from pure yield plays until some semblance of "order" returns to the markets. As far as the majors go, there are some opportunites shaping up. Be careful on the crosses. Be careful with the CAD. Shorting GBP rallies might be an idea I can get behind. Shorting the yen as well, especially in relation to the USD. AUD should be supported well by gold for the time being. Look for relative strength to improve over the short term. I’m still betting on the EURUSD and the NZDJPY, but you know my bet sizes and time horizons are unique – and uniquely suited to large adverse movements. So those trades don’t really reflect my fundamental views.

These themes should remain with us well into 2010, barring some kind of unforeseen dislocation, like a major war. (Another topic for another time.) I’ve only touched on Japan because I’m still building my case, but it will figure prominently in our woes to come. (Or, if we’re lucky, merely “whoas”.) I’m sure I’ve missed some important points and I’ve probably contradicted myself somewhere, but there it is.

I See Hope

Dow, S&P500, Nasdaq 100, Russell 2000 Daily

I TRIED, but I simply can't stay bearish.

I could be totally wrong, and my eyes could be playing tricks on me - all I could see from my charts is an UPWARD breakout from their respective diamond bottoms. Prices are at 2008 low, so the odds are really good that from where they are now, the indices could make their way back up to the beginning (represented by blue dotted lines on my charts) of that nearly-vertical plunge.

Bearish candle from yesterday faded Monday's gap in all the above charts, and with the exception of maybe RUT, all indices seem likely to continue to fall to where fib retracement level of 61.8% meets upsloping trendline on charts (represented by red horizontal line).

For Dow, that's only about 50 points below where it closed yesterday.

But the indices should bounce off support at fib 61.8 once they get there - at least that's what my charts are telling me. Volumes are not impressive, but that's not uncommon in the beginning of a rally. A breakout - if it happens - should be accompanied by increasing volume though, if we are to see prices reaching their potential...

While I'm sure that most of us actually DO want the market to at least stop its nosedive, I also know for a fact that many are probably finding it hard to believe that a market in this state is going to be able to stage any sort of decent rallies. US' mountainous debt and the global economic slump are 2 big nagging issues, and it doesn't seem like anyone is capable of saving the day for now.

But who knows, maybe our heroes are going to be the average Joes and the small businesses; maybe even companies that used to be fat but have learnt to operate lean and resourceful?

If there's anything that history has taught us, it is that we are an unpredictable species fully capable of making quantum leaps.

Classic example: while it was predicted that trains would get faster and train travel increasingly more comfortable (and accessible to the point that it stops right at your doorstep), the industry defied prediction, and started failing in the 50s - 70s.

Air travel took its place.

Where Are You Going, DOW?

DOW Weekly (Click to enlarge)

What I'm seeing:

- Trendline 1 and 2 NOT breached.

- Trendline 3 NOT breached yet (no closes below that line to date), but more on this below

- Trendline 4 breached in Aug 2001, but DOW resumed its uptrend after retracing slightly more than 50% in the 1st quarter of 2003

- Trendline 5 breached during last week of Sept this year.

BAD NEWS:
Given that what DOW has punched through is a weekly trendline (trendline 5), the likelihood that it's going to continue to fall is high (at least that's what I'm going to assume for now)

Using trendline 5 as the neckline to measure how far DOW will fall, the estimated target is around 5210 [ 9914 - (14,198 - 9494)].

By the time that DOW drops to that level, and closes below that, it would officially have breached trendline 1.... (I'm going to have to stop projecting beyond that before I fall off my chair....)

Consolation:
As DOW has broken out of an Uptrend line, volume after breakout will have to be trending up to support a substantial drop.

The way I see it is that volume is not exactly on an uptrend after breakout. So there's HOPE that things could get better afterall? (With the Fed's money printing machine starting to go in full force again, I'm keeping my hopes HIGH in the short-term...of course that would mean a depreciation of the USD is imminent...which means that I can now SHORT THE USD...which is exactly what I'm doing now anyway)

As it is now, DOW is seen to be testing the high (after breakout) of around 9800...

GOOD NEWS:
Although DOW has breached trendline 5, it's NOT breached trendline 3, and it's not known if we are looking at a trend reversal or merely a correction (to date, DOW has retraced about 50% from beginning of trendline 3) looking at the period spanning 1991 and the present.

In fact, anyone looking to short the market after DOW's breakout from trendline 5 would be wise to wait for DOW to:
a) first test the high (after breakout) of 9655 to 9800, and having tested that,
b) to fall below approx. 7445 (red solid line in chart above)

Personally, unless both conditions a) and b) have been fulfilled, I won't be comfortable taking short positions (except in scalping of course) from this point on, not with trendline 3 apparently providing some sort of support...

Now, the REALLY BAD NEWS:
Should DOW punch through trendline 3, and fulfill the conditions for a trend reversal (points (a) and (b) above shows how I would qualify a confirmed reversal), we'll find DOW all the way down at 1040 (which effectively brings us back to 1983, when DOW first took off from its base and went on a parabolic ascend without looking back even once).

I'm PRAYING for DOW to climb back up to hit at least 9800, and stay up there for a while...if it doesn't, the future's going to be pretty bleak for everyone on planet earth.

TF 11/ 21 - STOP PLUNGING, TF!!!

With D's company in the limelight - in a VERY BAD way - I think it's about time I do my part in calling the bottom.

Not going to put up any other charts - the DOW chart alone looks pretty creepy and telling of a market that's going to get severely punished for not having done all the healthy corrections on its way up after it left base in the 1980s.

TF


I'M REALLY HOPING the support at 394 holds today. If it doesn't, there's still HOPE for a double or triple bottom next week.

Ok, traders should never "hope".

Fine.

I was about to "PRAY" instead anyway.

LOL!

Counting Waves

SPX Daily

No matter how I look at this chart, I just couldn't count that death drop fall as wave 5 without having to break some sacred Elliot Wave rules (e.g. wave 4 not supposed to overlap wave 1, wave 1 must not be longer than wave 3, etc etc).

BUT I DO SO WANT THAT PLUNGE TO BE WAVE 5!!

So, what do I do?

I decided that the shaded area will be wave 1; that dreadful plunge, wave 3.

All EW rules observed.

Phew!

So what becomes of wave 5?

EW practitioners call it a "truncated fifth" (Given that wave 3 is visibly over-extended, what I'm looking at is a totally valid truncated fifth).

And what follows a bear market truncation is .... happy news: A RALLY!! (If you notice that HAMMER from yesterday, that's one reason to believe that bulls will be happy at least for today...and maybe for this entire week....)

I'm not even going to be bothered about confirming that there are 5 subwaves in that wave 5.

I'm just going to say that IT IS WAVE 5.

I mean, why can't I, when a pessimistic EW expert can always claim that that triangle where I've labeled wavee 3,4 and 5 is in fact a wave 4 made up of diagonal triangle, and that what follows is usually a continuation of the previous trend (ie. DOWN!!!)??

And THAT is exactly what they're calling that triangle at the base of a similar plunge on the daily EUR/USD chart!

The beauty of EW, in my opinion, is that you can interpret it in anyway you want and no one can really say that you're wrong, unless you break those ridiculous rules. It's arbitrary, and yet complicated enough so when you make an attempt to explain your reading to a layman, you stand a good chance of sounding REALLY SMART.

Ok, so I USED TO BE fascinated by Elliot Waves.

Truth be told, anything that baffles me has my attention until I can say for sure that the only reason that it had baffled me is that it's pure nonsense to begin with.

It was only recently that I realize that the one and only thing I BUY about the EW principle is this: that you can't use physics to explain the market, and that everything that happens within the market has NIL correlation with things happening beyond it. WE move the market. Events don't.

So out of the many tenets underpinning the Elliot Wave Principle, I find myself agreeing whole-heartedly with just one.

Just so that I can bore myself to sleep when I revisit my postings in the distant future, I'm just going to talk a little about the 2 EW tenets below, one of which is the one I buy, and the other ...well...not entirely...

Tenet 1) Social moods determines the development of events, not the other way round.

A much used example is that of the Enron Scandal.

While most of us, out of sheer forgetfulness, would attribute a bearish market to the unfolding of a string of events closely resembling and following the Enron saga, practitioners of EW principle will tell you that it is the bearish sentiment around the time that the news first broke that precipitated those scandals.

A detailed writeup on how they arrived at that conclusion is available on the EWI website. Get a free membership and download their "Independent Investor eBook".

A more recent example (NOT taken from EWI - though I'm sure they would already have written something on it on their newsletter): the repeated rescue efforts US has taken to save companies deemed too big to fall had seen their major indices making lower lows and nearing the 2002 low.

An EW expert will tell you that it's the REACTION of the market towards these bailouts that has precipitated a market meltdown. THIS I totally agree with.

When sentiments have gotten this bad, it's damn if you do, and damn if you don't for policy makers. I don't want to be in their place.

Tenet 2) Investors that take the contrarian path, one which is almost always against the nature of man, win.

The analogy used in one of the reports found in the Independent Investment ebook is that of someone NOT ducking when a stone is coming at him.

In the investment context, this is analogous to BUYING when everyone is looking to dump what they have.

This kind of activity is definitely not for the faint hearted - which supposedly (according to statistics) represents 90% of investors/traders.

The special breed that dare make such moves are prepared to take the consequences.

The faint-hearted will simply end up losing when they are the ones who are the most afraid to lose.

I have big issue with tenet 2).

I agree with it up to the point where it says that it takes remarkable emotional strength to stick to one's conviction (if that's what the writer is implying).

But I definitely think that to be able to go against the trend outright and make a killing - you need more than courage and foresight.

You need to have a very deep pocket to buy when people are selling, and then sit on your paper loss if your buying doesn't send the market back up immediately.

You either have to be already loaded, or the mettle to take an exceedingly high leverage or borrow from a loan shark to play the market this way. Should luck be on the side of the latter 2, wall street will have yet another rags-to-riches story to use to lure the ignorant into the market. For the one with deeper pockets than the average Joe to start with, if a major market meltdown doesn't kill him and the companies he buys, he's simply going to be an even richer man when the market rebounds.

If someone were to throw a stone at me, and it looks like there's a 70% chance it's going to hit me and a 100% chance that it'll kill me, I duck.

It doesn't take the Elliot Wave Principle to point out the obvious: that to make it in trading and investing, to be well-capitalized is a PRE-REQUISITE.

How and where you get the money is a separate issue altogether.

You MUST HAVE MONEY

Period

Moyo's Article: 800 Support To Hold On The S&P

This is an excellent piece!

I really have to give it to Moyo.

His determination to make each posting informative and educational makes me feel a little guilty for not doing the same with my blog.

That said, I'm most definitely going to continue writing whatever that comes to mind while I still can. That's what novices are entitled to doing. Hur hur...

I'm linking to Moyo's posting coz I share his sentiments. I'm on a head-on collision with some of the best traders of our time (some are on my blogroll), and as frustrating as it can get, I can't help but feel differently from them about how events are going to unfold.

I've been a bear ever since I first knew anything about trading. I have no idea what a bull market is like. I always find Dr Brett's non-psychology postings a struggle to read - all his NYSE lows highs, his charts and almost all the indicators he uses are Greek to me - the only thing that I can read is his tendency to benchmark against a bull market. And it is through that that I get a vague idea of the characteristics of bull markets. And although what I'm seeing today is nothing like that image in my mind, something tells me that I'm a bear that should really start to fatten up and get ready to hibernate.

Which probably explains my moodiness for the past few weeks!

I can no longer ask the market to PLUNGE.

That word has an uplifting effect on me.

I get it - I'm evil.

FX & TF 11/18

FX

Closed my positions from yesterday, coz it was apparent that the pairs weren't going in my direction (down). Got out with 10 bucks profit. Ha ha.

I'm getting really micro now, since my account is NANO.

EUR/USD Hourly


EUR/JPY Hourly


AUD/JPY Hourly


AUD/USD Hourly


All seem to want to go sideways for a while.

Waiting for confirmation to go in again.

The EUR pairs are now hovering along the floor of B1. Looks like a round bottom to me. We'll see.

TF

Displaying similar pattern seen in the FX charts above.

TF 30min


Going by the theory that the start of a robust uptrend is usually supported by unimpressive volume and a gradual upslope, it seems possible that TF has seen its bottom - provided that no one's game to play savior and fairy godmother anymore.

Am keeping my fingers crossed for now.

All Is Not Lost Yet

During a time when the wisest and most experienced traders are calling for 5000 for DOW, I feel compelled to present a different view - one that I used to think has very little bearing on my daily trading activities, and hence not worth documenting.

You see, despite my primarily bearish SHORT-TERM view of the market, I've always belonged in the camp that believes that Rome didn't actually fall. I think it simply morphed into a different society.

I'm not going to tell a grandfather story on how and why Rome was perceived to have fallen, there are many free resources out there that detailed that, and one needs to just google "how/why did Rome fall" to find heaps of write up on it.

What I want to do really is to look at some charts - our bread and butter - and then document my own observations about them, draw my own conclusions, and finally, to find some reasons to support my belief that life's going to go on...for now at least.

DOW Monthly

How I look at this is that DOW has retraced over 38.2% since 1900.

No big deal.

It retraced by that much before, in the late 1980s. And few made a fuss over its parabolic rise in the decade following that correction.

Fundamentally, what's unfolded in the states is nothing new. It's happened many times throughout the history of mankind, and I'm sure that during those times, people actually believed that the events unfolding before them were unprecedented. The only unprecedented event that I know about, and will kick a big fuss over, is the one that involves Eve taking a bite of the forbidden fruit. If not for her, I won't be eating today just to live. *&$#*$**$^@

SPX Monthly

Almost a twin to DOW, except for the double-top.

But we've seen double tops and mountains before.

And what happened after that?

S&P 500 shot through the roof.

RUT Monthly

This is an interesting one.

What we see in the area shaded green - take a close look, then look at the whole period spanning 1991 - 2008. Pay attention to the fib levels in the various colors and you'll notice that each of those retracements was 50%. Look at the lines 367.586 and 493.2621 and see what happened there.

If anything, I'd think that RUT is really boring and predictable.

NDX Monthly

Consolation?

The Nasdaq 100 is clearly still on an uptrend, despite the dot com catastrophe.

Well, ok, it was saved by a bigger evil, and it seems we're going to have to pay for it now.

But I doubt we will.

Human beings is such an adaptable species that even something like an ice age will still leave a few standing - enough to breed a whole new pack of wolves that will continue to rule earth.

On a more serious note, we aren't really doing as bad as most thought, and we definitely are not living in the worst of times.

While it makes sense for traders to do TA on charts plotting movement in POINTS, to get a clearer sense of how we are doing in relation to the past, I personally prefer looking at a LOG chart that plots PERCENTAGE change.

If we want to whine about the extent to which things have soured, we have to first look at the magnitude by which they've gotten so rosy in the first place.

Comparing a 1000 points drop now to a 100 points drop in the 80s is no different from comparing apples to oranges.

A log chart compares apple to apple, and an orange to another orange.

So, here goes our log charts for the indices:

DOW Monthly (Log)

Now, the drop we see in the shaded area - THAT is a depression.

Where we are now is simply a period where we are pausing to contemplate on how ridiculously and frivolously extravagant corporations and individuals have become.

But since nothing new really happens under the sun, after this phase of reflection, we'll be all ready to welcome a new era of decadence and profligate consumption.

SPX Monthly (Log)

Same shit.


RUT Monthly (Log)

Uptrend breached.

So?

We simply draw another trendline from the beginning of RUT to the current month.

And we're up again!

Just like before.

BORING.

NDX Monthly (Log)

With this, I don't even have to re-draw lines. NDX is clearly still floating above its uptrend line.

I feel for D's family, and for my friends who are living in the states when they question if they are ever going to see light at the end of the tunnel, if they are going to lose everything - their house, their jobs, their retirement funds, their investments. D works for THAT US bank, and I feel for him too.

But from the bottom of my heart, I don't believe this is doomsday.

When everyone's living like there's no tomorrow, THAT's the end of the world; when all are wondering what the future holds, it's a good start.

I'm Not American, But I'm SO SO Happy Obama Is President

Hallelujah.

The US finally has a smart, good man as her president.

Long due.

Trading Psychology: Cutting Loss

Spent the session going over D's mum [who left for home in LA earlier today :-( ]'s portfolio.

3 items on it - 1 is an energy stock, 2 are mutual funds.

The portfolio - with the energy stock making up 2/3 of it - has lost 58% to date.

While it certainly looks like one of the mutual fund (the other one is a goner) is the one that's worth holding since it's paying a monthly dividend, I am FOR selling it when there's still something left.

Maybe I'm prejudiced, I've NEVER believed in owning mutual funds. Mutual funds that are newly launched, well-packaged and publicized are the ones that go up in value while the rest basically die a slow painful death, in my opinion.

Today's the first day I got to see D's mum's portfolio, and I have to say that the relative who gave her the tip to buy the fund SHOULD BE SPANKED.

She bought the fund at $14. It's now $6. It plunged from $9 - $4 in less than 2 weeks, and that's just the first leg down.

A picture is worth a thousand words:

Weekly Chart


Daily Chart

I certainly don't care that the market might rally whoever the president of the United States is going to be after the big day tmrw - if there's a right time to cut loss, it was the day that the fund was bought.

We managed to sell every unit of the fund, all within 15 mins.

After we sold, the fund went up by $0.04.

I'm not regretting the decision. If anything, I'm happy that someone's bottom fishing. I'm happy that we could still sell such a chunk and someone's willing to buy.

I'm not showing the ticker coz I feel for those who are still holding. I do. But I can't NOT sell it. Trading is a zero sum game.

And I told D that there's no looking back.

To wait for the fund to go from where it is now back to $14 is fat hope at best. If anything, it's going to end up like the other fund, which is now sitting at literally zero.

By selling, D's mum has officially said goodbye to $50k. But at least she gets to keep the remaining $25k.

Holding the energy stock to see what it's going to do in the next few days and weeks.

It will take some time to break even, if it ever breaks out of its current range (am looking at 4 major resistances on daily chart).

But at least there's a chance. It's not going to do any worse than before, and it's not incurring any variable costs or having any cash flow problems. It's not going to take long to see if it will break below support -and when it does, the additional loss is negligible.

So we're giving it a chance.

What a day.

If by some divine intervention, the mutual fund that we just sold goes up to $14 in the next 12 months, I'd have been the most ungrateful creature on earth.

D's mum is a thousand times more motherly to me than my own mum. And I like her a million times more than I like my mum.

No.

Correction: I can't even use the word "like" to describe the feeling I have for my mum.

She's merely my obligation.

About "United States Is Among The Best Performers. Don’t You Feel Better Now?"

I don't usually attack journalists, column writers, newscasters, and other bloggers, but this one really pissed me off:

Floyd Norris.

Or maybe just his article.

His attempt to paint a rosy picture of the current market crisis is distasteful, to say the least.

The one line in his seemingly well-researched and impartial entry (which really is just a piece of hypocritical BS) that really presses my buttons is this :

You will note that the United States is among the best performers. Don’t you feel better now?

Sure knows how to rub it in!

I love my country, although I really can't stand the weather, and the generally cowardly, selfish people that populate this island. Hence it pains me to see well-educated young men and women joining the unknowing elderly and the less investment-savvy in the suing of what has generally been accepted as our national bank, after it sold them structural Lehman Brother mini bonds that of course have become worthless today.

It's not news that banks do cross-selling and up-selling of products, and most are aware of the risk involved in putting their money into instruments that promise the POTENTIAL of giving you something that's more attractive than the miserable interest offered by fixed deposit accounts.

Relationship managers and other banking personnels have been blamed for unethical selling. Based on my observation, with the exception of a few, most are just doing their job.

I have seen blogs suggesting that their commissions be recalled, and I think that's just atrocious.

The reason that RMs are getting a commission is because they are doing jobs that many people won't do - including me.

Seriously, I'll rather do lowly manual work than to have to SELL, or get out of bed at an ungodly 3am to get my private banker boss' biggest client SALMON SUSHI (Real life story retold by D, who is acquainted with the poor GIRL who crawled out of bed to get sushi).

I've been a relationship manager. I quit because I just couldn't sell anything other than DCIs (currency-related structured product).

I couldn't sell structured bonds, mutual funds and other highly complicated structured products.

The concept and ROI structure of any instrument that I can't reproduce in writing without having to refer to the promotional material and factsheets, I don't sell.

If I have to memorize scripts to get the benefit of a certain product across, I don't sell.

Whenever my clients asked me enough questions to convince me that they have no idea that the things I was up-selling weren't merely fixed deposit accounts with very attractive interest rates (if such FD exists, I'll take my money out of my milo tin now and dump them all there), I moved on to my other prospects.

I wasn't in the business of EDUCATING my clients on investment matters and such. I was a salesperson. I sell. I don't care what the sales experts out there are saying about EDUCATING customers on what one's selling. If your customers know nothing about the product you want to sell them, either bring your business elsewhere, or make sure you give them a test at the end of the crash course you just rammed down their throat, and you don't sell to them unless they pass the test with flying colors.

Having said the above, I have to say that many people DO know what they are buying. But they will still come after you when their investment drop 0.01% in a day. You can make them sign a zillion forms - which I thought in it itself would be enough warning that they are NOT buying candies - and tell them a zillion times that returns is not guaranteed, and they would still breathe down your neck when they are not raking in 20 - 40% profits in a month.

These are people who are afraid to take responsibility for their own finances. They rely on others to make difficult decisions for them. When things go wrong, at least they have someone else to blame. Some resort to hounding their relationship managers until the bank offers them some sort of "goodies" as compensation.

*&%$%&*(#$&(!

I personally know many relationship managers who are good, honest people who invested in the products that they sell themselves. Some of them simply don't have the luxury of selling only products that they understand, because they are pressured to meet the quota set for the sale of a certain "flavor of the month". 2 months of not meeting your quota will invite some serious humiliation that's broadcast via the ever so efficient electronic memo, and 2 more months of underperformance should get you fired.

I had the choice to leave the system, because I don't have a family to feed.

For my male colleagues, they have expensive wives and children to maintain. If they leave their high paying job to explore other less lucrative ventures, they could lose their family.

This is the beginning of a very difficult time ahead. People will get uglier, and family bonds will weaken. Sad, but true. Singaporeans are practical people.

Money is indeed the root of all evil.

And the greenback is the MOST EVIL!!!

But I'm still going to trade the US market of course. I can't see the link between what I'm posting here with my trading activity. I'm not philosophical when it comes to trading. I'm not even patriotic.

Well, the best I can do is to keep SHORTING the NQ.

Ha.

Are You Free, Americans?

Now, I wonder if the idea put forth in this article is what inspired the making of the film The Matrix....

An abstract from the article:

"The United States is bankrupt and has been since 1933. The government has no gold or silver as required by the Constitution. The only asset left is the people. So how does the U.S. finance its daily operations?

Solution, collateralize the people for credit. How? By registering them in international commerce, and selling bonds on them. The people become the surety on the bonds, or the "pledge". The asset bonded (surety) is the labor of the people which is payable as some undetermined future date. Thus, the people become the "utility" for the "transmission" of energy."

Read the full article if you're in the mood to be spooked.

Big Brother Theory & The US Economy

Those of us who are still perplexed by, if not simply appalled at, the current market situation might want to revisit such movies as The Matrix (or even something light-hearted like Wall-E), 1984, or series like Prison Break, 24, and all other conspiracy-related documentaries and movies to get a sense of what is really driving wall street, main street, and your very livelihood.

If you're big on reading long reports, check this out: http://centre.telemanage.ca/links.nsf/articles/E565B5C857585F8385256DF1001A8A77

My personal favorite is the Bible.

Lovesick

It's been more than a week now that I've stopped doing any kind of premarket analysis. The market sickens me - literally. People say it's not uncommon to feel a little out of sorts when you fall in love. Could it be that I'm in love with the crazy market???

I have been fighting aching muscles and bones, increasingly bad eyesight, and a crazily small appetite. Seabloke's 5-year old twins eat more than me! To make things worse, I'm throwing up whatever scraps I'm consuming. I have to lie down to not feel nauseous - which means I'll probably have to trade in bed if I want to trade tonight.

And I DO want to trade tonight. I'm missing out on all the actions in a market that has gone totally berserk!

I must have slept for more than 16 hours yesterday...and the only dream I had - a really really long one - was a chart with a head and shoulder and a darn brilliant strategy that I just can't remember now! %@#&*$!!!!!!!!!

Ok, this is as far as I can go on sitting...time to hit the bed again (this is not making any sense..I've been awake for barely 2 hours??).

I won't be surprise if DOW is up by 500 by the time I get up for market open (if I DO get up...I'm starting to feel a little nervous about shutting my eyes now...HOW COULD I GET A VIRAL ATTACK IF I DON'T SEE ANYONE EXCEPT D WHO'S TOTALLY HEALTHY??). Aferall, we have the FEDs out there saving the world, haven't we?

Did I ever mention that I sleep very little coz I think sleeping is a total waste of time, and mostly coz I'm afraid to sleep? Sleeping is like being temporarily DEAD. And depending on my mood, the first thing I say to myself every morning when I wake up is either "thank God, I'm alive", or "WHY AM I STILL ALIVE???!!" .

...........

Do We Need The Truth To Trade?

I spent my entire weekend buried in everything US: conspiracies, debts, boom and bust cycles, GDP, budget deficit, where the bulk of the money is spent, her grand infrastructures, her rise to power, who her creditors are, the price of oil since 1940s (yearly average, adjusted for inflation) and how DOW reacted to each episode of rise and fall in oil etc.

I must have watched at least a dozen documentaries on the conspiracy theory in the past, and over the weekend, I watched 2 more.

The rest of the time I spent watching movies on US gangsters, heroes, and ROBOTS.

So, what led me back on the "conspiracy" track?

Moyo's post.

But after 2 days of digging, I found myself right back at where I started: completely LOST.

Which got me thinking: why should I be bothered about the economy bit anyway? So what if the US govt owes over 9 trillion (53 trillion if you take into account the amount they probably will not be able to pay to the baby boomers....), and nobody wants to buy their notes and bills anymore?

In the absence of better alternatives than US equities, and for as long as US is able to negotiate and engineer her way out of all her mess, the market will continue its 200-year upward trend.

Don't ask me where the money comes from when the number of unemployed kept rising, and when people's homes kept getting seized coz they haven't the money to service their mortgage.

What I know is this: people are STILL BUYING, and COUNTRIES are buying!

To make my life easier, I'm just going to trade according to what I see. I don't want to be bothered by what's going on beneath the surface anymore, coz there's just too much going on down there, and I can never know everything. But just suppose that in the impossible scenario that I DO find out everything that I need to know, what's the point if no one else does?? I will still have to wait til I'm NOT swimming against the current, won't I?

Premarket Analysis 9/11

I'm going to start trading the ES today...I think...

8 more days to trade the ER2 and then it's moving to ICE. Might as well start getting used to something else.

Like I said before, I'm stumped by the S & P chart. The only thing I can visualize on the monthly chart is a really tall mountain (I don't actually see a whole mountain...juz the left side...the other side one can only imagine...). On the daily chart, I see a downtrend. S & P looks like it's going to go down sooner or later, depending on how long the mighty power wants and is able to defer the inevitable.

On the ES 30min, what caught my eyes is the rejection of 1200. After a day that ES fell through a key support and was supposed to plunge, the Fed decided to make history, and all the major indices gapped up! This really spooks me coz they actually succeeded in getting the market to do exactly what they had hoped to see. When you seize 2 financial giants, you would think that that's gotta send the market plunging (or am I the only one who thinks that that's really the worst thing that could happen to a bank?...). But no, the market rallied, just as the government wanted. Ok, the confusion's intentional. It's good to exercise the brain.

So there you go, the market is always right and always does the opposite of what we are programmed to believe.

The indices and futures are all in the red now.


But i'm expecting a bullish trending day for ES. An upward move of one ABC corrective wave after another on the 5min chart.

But before that, as it is happening now, ES (refer to chart below) is likely to continue to drop. Probably to 1221 or even 1219, before bouncing off these supports. This could happen before or after 9:30am EST.

ES 30min


I'm NOT going to be bothered about any news and econ data (initial claims, trade balance, import and export prices - all to be released at 8:30am EST) anymore. If they happen to be REALLY bad, it will probably just send ES into a slightly deeper correction before going up again.

This is my take based on what I see on my chart and what I'm feeling about the market. On any particular day, you can never truly identify the reasons that send the market up or down. What one can know at best about the market is a very general feeling of grim or hope, and trade accordingly.

So why was I bearish yesterday and bullish today? Can market sentiment change overnight? Most certainly. Just look at what happened during the early part of Monday's trading session and what happened the day that followed.

But the fact is, I DON'T know what today's market sentiment is. I said that AT BEST we'll know - I'm just not at my best today.

I'm bullish because the chart tells me that the market didn't want to fall to 1200, and will find every reason now to avoid getting anywhere near there. If ES doesn't fall below 1219 anytime today, THAT's a reason to be bullish.

If ES drops below 1219, I'll be lost.

No, I won't be.

I'll just scalp the 1-min chart. Play by ear. Besides, SELLING is my favorite play still.

Solfest's Posting on Peak Oil

I don't know if I've mentioned this: I'm a fan of the conspiracy theory and anything to do with OIL (I don't trade it coz I have no idea where and how to start...anyway, I started following oil for reasons that have nothing to do with trading...).

Here's the newest post by Solfest on the topic of peak oil that I find very interesting.

Magic Pill For An Indisposed, Oil-Based US Economy

This report amuses me:

.....while investors had been applauding the drop in oil prices since then, there was an assumption that lower commodities prices would hasten a recovery in the U.S. economy. Now, he said, investors are worried that the economy might be weakening even as oil falls.

"It's disinflation coupled with an accelerating downside in the economy. That's not what people were prepared for. I think people were expecting disinflation as an economic recovery was under way," Lee said. "The surge in unemployment today really underscores that fear."

So, the plunge of oil in the past 2 months was supposed to somehow miraculously save tens of thousands of people whose fates were probably decided - I don't know - maybe up to 4 to 6 months (if the world hasn't changed much since I came into this hidey-hole of mine a year ago, and if my memory serves me correctly, companies don't decide to do axing overnight, nor do they start re-hiring on sudden and drastic drop in oil ; and those that have shut down don't just suddenly somehow within 2 months decide that this is the best time for a comeback - especially in an environment where both banks and customers are not exactly going to be able to give them the best deal) before oil came down?

We would need a time machine to do that, won't we?

My limited knowledge in economics (macro?? micro....??) tells me that recovery in economy hinges largely, if not solely, on:

1) The collective spending power of local residents who are still GAINFULLY EMPLOYED, and who are still willing to spend even if they can AFFORD to,

2) A declining trade and budget deficit, and

3) The ability and willingness of the country and her people to SAVE

And point 1) above depends on how much discretionary income, or simply, SPARE cash, the general population has.

After having to fork out for taxes, INCREASINGLY COSTLY mortgages, increasingly costly basic necessities - thanks to inflation (and really, is OIL the only reason behind the cost of everything, including HOUSING, skyrocketing? Does inflation not have perhaps just a little to do with too much money that's NOT supposed to be there in the first place floating around for grabs, in a culture that is known for its insatiable appetite for material possession? Does it not have something to do with the fact that we are living in an era where the very idea of using money that you've NOT earned is not only no longer frowned upon, but actually encouraged, advocated, and - this is the most detrimental part - EMBRACED? Let's be honest, if you were a waiter working in a clean, decent restaurant, and one day you send a diner a bill that comes up to, let's say, $200, and he pays in CASH, wouldn't your first thoughts be along the line of: jeez, doesn't this dude earn enough to own a credit card?) - little wonder that at this time of the year, and with the prospect of the country's economy in such a questionable state, that money would be very prudently allocated and spent only on such necessities (applicable to first world countries only) as college fees, summer traveling and cooling of homes (which makes me wonder how demand of oil could have dropped and hence caused oil to drop......??).

On my point 2):
I am not even going to use the more direct "positive trade and budget balance" here, because to expect that to happen - particularly amidst a rising greenback in a global economic slowdown - in the near term would be akin to expecting oil to fall to $85 dollars per barrel after OPEC holds their meeting next week to see if they want to CUT SUPPLY.

On my point 3):
I've lost touch with (can I be blamed??) how and where banks get the bulk of their capital these days, but it used to be the nation's SAVINGS.

Well, today you have an endless list of sophisticated structured instruments that banks can churn out and market to the public who won't ever stop buying things that everyone else seems to be buying, and anything that promises low-risk, if not no-risk, and unimaginably (only coz it's crazy, ridiculous, and the method with which to derive the figure stumps even a college graduate) high returns, and the usual bonds and stocks they can readily issue to the unwary (I mean, it's a bank! If you can't trust a bank, can you trust your neighbors, your best friend, why, even your dog Lucky??) public.

I've digressed AGAIN.

Where was I?

Yes, SAVINGS.

Er......

What's there to say about savings?

Except that to the best of my knowledge, the country prefers to SPEND, and wants her people to do the same. Why, you've got to get your people out there spending to boost the economy don't you?? After all, didn't you give them a free-flow of cash to dispose of whenever and however they fancy, and the promise of even far better things to come?

I don't remember a whole lot about economics. I took them more than 10 years ago and the only things that have stuck are my funny (only coz he thinks he's funny) professor, and (this one's really clichéd), the words "SUPPLY" and "DEMAND".

So, I'm not going to continue to dwell on what makes or breaks a country's fortune.

What I care about is this: for as long as buying continues (for a variety of reasons but probably mainly instigated by a strong USD - which is strong only coz the others are WEAK...ok, I shan't confuse anyone anymore), and for as long as there are enough bulls out there who are full of hope one day, only to be dismayed days later at a seemingly unsustainable rally, I can still relish every minute of my happy bear sessions!