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Okay, regarding my emailed pick for tomorrow, here's why I'm putting a ton of money into this...
If you've followed the market at all in terms of CNBC or Bloomberg, you know that a big discussion centers around interest rates and specifically bond prices/yeilds. The theory is that the Fed is making banks buy bonds using their money (fed's) they've bailed them out with using the banks as intermediaries between the Fed and the marketplace.
Okay, fine. But, what has happened? Everyone has PILED into treasuries as a 'safe haven' from the volitiliy of stocks. Bonds typically trade in 20 to 25 year cyclical trends. I remember a discussion on CNBC between Bill Gross and a guy from Cantor Fitzgerald talking about when the 'bond bubble' will burst. The idea being that one day we'll have to incentivize those overseas - China and Middle East countries - to keep buying or at least hold our notes to maintain stability in the market. But what's happened? Interest rates as defined by the 10 year note has traded at a high in 1980 of around 15% to now 2.6%. See? 30 year cycle move down. What's the talk of the day? Gold. Why? Because of the threat of possible inflation caused by too much money chasing too few goods thanks to the Fed printing all this money to 'inflate' the economy. As the economy soon starts to pick up, prices will follow very quickly. Housing and stocks.
But where's all that money? It's sitting in - you guessed it, bonds. That's why the interest rates are so low. As demand for bonds increases, the rates you get paid (interest) goes down. Supply in demand. But there's a problem right now. If you buy a 10 year note right now, you will only get paid 2.6% for that investment. But the value of the bond is sitting at a 30 YEAR HIGH! So, you could lose 40% to 50% of your investment while only getting paid a measily 2.6%. Huh? Who the hell is going to do that? Well, someone has, hence the price.
But Rick Santelli will tell you (from CNBC) that bonds trade very technically. This last leg from June to now was most likley a final leg in a final wave count to end that 30 year bull market. At 2.6%, that's a hell of a risk to take.
So, how the hell do we make money off this? Short bonds? Well, kinda. Here's how. Thanks to the world of Direxion of the famous TNA and TXA trades we've done, we now have the triple bear 10year ETF, TYO.
The furthest out options we can buy is Feb 2011. The stock closed today (thursday) at $42.75. If you compare the two charts, you can clearly see at what points we need the 10 year yeild to rise to to get our objective of at least a 100% (double) gain. So, by buying the Feb 2011 $40 call at now probably $5.50 or so (less hopefully), a simple move on the 10 year to around 3% gets us a double and $50+ on the stock.
Personally, I see it as a sure thing over the next 6 months, the time we have until expiration. Just look at the charts...
THIS CHART IS OF THE 10 YEAR NOTE. THE NUMBERS ON THE SIDE ARE THE INTEREST RATE. SO "29" = "2.9%"
NOW, THIS IS OF THE TYO EFT. COMPARE THE TWO AND SEE HOW EASY IT SHOULD BE TO GET TO $50 WITH A SIMPLE MOVE ON THE 10 YEAR ABOVE TO 3%.
NOW WHAT'S EVEN MORE INTERESTING IS THIS WEEKLY CHART OF TYO. JUST LOOK AT THE HAMMERS BEING FORMED.
Everyone is shorting too much. They all just got killed. Read this ---
Interesting, and I somewhat agree...
http://etfdailynews.com/blog/2010/08/16/dont-fight-the-fed-or-you%E2%80%99re-going-to-lose-your-shirt-tip-tyo-gld-gdx/
Yeah, shorts getting destroyed on that one. A pure short squeeze. What to do? I'd say sit with it because the market could fall pretty hard, pretty fast. Looks like we're going to run up to the falling channel upper line on the SPX and then maybe roll over. Too many people were too short expecting this head and shoulders to play out. Wrong.
But this doesn't change anything long term. So, this rally could be the perfect setup for a large bet short trade. That's how I'm looking at it. This is why I didn't do any new trades. You normally don't get breakdowns with indicators as oversold as they were.
$RUT looking like it's confirmed its breakdown and is now making a small bear flag move up. The next stop looks to be putting TNA around $28. At $28, I think I'd be a BIG buyer of call options. Let's see what happens!
You clearly understand the power of 'rolling' a verticle spread. Use each side to take advantage of specific high/lows. Personally I think even with Friday's seemingly reversal, it's broken its rising wedge and is on the way to a gap fill attempt at any moment. Just like the other day, you'll wake up one morning and it will be down $10 again. I'm looking however to exit thing possibly in the $4s on the account's position.
Very interesting article by McClellen.
http://www.decisionpoint.com/TAC/MCCLELLAN.html
First of all, think about it. We trade these strictly as short term trading tools instead of options in some cases. So, their point is exactly how we use them. However, remember that 90% of all people you see on TV or read on money websites want you LONG the market. The reason is because they can only make money using your money. They don't want you shorting the market. When you buy these, you're essentially adding to the short side (selling) the market which contradicts them.
Well, that guy has a few things wrong. First off, the PE of the SPX is not 20, it's around 12. And most people are not even close to being too bullish, most are bearish. How do you explain the fact that there's been $44 bill in fund withdrawls over the last six months? Also, gridlock is always a good thing for the market.
I think that writer needed to come up with ten bullet points and didn't think it through.
You see that wedge? I think 'they' pinned the $300s for Aug to kill those puts. Now let's see what happens.
I think it's time to cover the short side of this PCLN trade. Ride the long.
Man I'm telling you, the market is on the verge of a move here, and a big one. Which way? I think it could actually go either way. Too many shorting.
PCLN is just today breaking that wedge. $270 around the corner and a possible big pop for this spread. Long only the $280s could set up for a triple or more. Possibly $20 on them.
PCLN making big wedge. When it fails, watch out below.
Be careful on GOOG. GOOG EVERY year between early Sep and Nov goes up, big.
Best Choice has GOOG setting up nicely going into next month. Beginning sometime early Sep, if it trades down to $470 or so,I might consider a trade LONG as a SHORT on the Jan 11 $550 Puts.
PCLN sure has many shorts scratching their heads. But it's typical of short squeezes on stocks with low floats to do this. What I didn't want to miss was the potential instant gap fill, or at least attempt. However, this current stretch up to $300 most likely was 'it' and the gap fill attempt could be beginning now. The speed at which this stock could fall is going to be impressive. Trust me when I tell you that even if PCLN is worth $320, the pros aren't buying it here after a $60 gap. No way. We have 5 weeks until op-ex and the very nature of the trade means it's a stop loss by itself. I don't think this will end up a loser.
Here's the way I see it based on all the things I've read over the weekend...
SPX falls to complete its current configuration to about 1050ish to 1060, another 20 points or so. Then, rally hard and quick back up to 1100-ish - all this possibly by week's end.
However, that is just a larger setup for the 'biggy' in terms of leg down. So, hold TZA, sell it if you get the SPX trading to 1060, then buy a small amount of TNA for a SMALL trade of $5 or more as the SPX runs back to retest 1088 or 1100, THEN bail on that and ride TZA again, but this time if it all plays out that way, buy the TZA CALLS.
You know what I'm wondering? Look at the chart of the SPX and look at the last two days. Possible island bottom? A gap open on Monday over 1090 or so would set it up. Op-Ex week is next week and I'm wondering how many puts were sold that need to be dropped to zero.
You know what's interesting? When the Q's get down to about $43ish, that possibly sets up a right inverse shoulder for a EOY rally over $50.
Interesting....
F'ing score on BRCM for the account! Personally, on the BRCM and SYNA trades, I am going to end up having nearly a $40k week.
Trust what you see, not what you think or feel.
No,it's overbought with over70% of the 500 stocks trading over their 50s.
Fish, and everyone else, WATCH THIS CHART CLOSELY!
This clearly gives you top/oversold signals almost to perfection. After all, what is 'overbought' or 'oversold'? Just extremes on an indicator? No,what extreme means in market terms is when too many stocks have too much interest or not enough. Since price is king, not an indicator reading, the more stocks of the SPX are trading as a whole over their 50day MAs or under as a whole, the more likely you are setting up an entire index reversal the other way. Since most stocks will have over 70% of their moves trade in the direction of the entire index (due to program trading), you only want to bet against the market direction when you get over 80% or under 20% of the entire SPX 500 stocks trading under/over their 50s.
Yup. I'm putting out a trade on PCLN. Look at that chart. Monster island.
BUY the Sep $280/$270 put spread (buy 280 and sell 270) for a limit of $3.80. I just got filled at $3.75 for 10. ($3750)
The DOW target is going to be that left shoulder high of 10,730 to 750. That should also time with the SPX running to 1150ish +/-. If so, then that 'should' be the reversal point and a confirming potential setup for a monster head and shoulders turn into a fall to the 800 to 900 on the SPX in Oct.
Be careful shorting here. Looks like a bear trap.
Yup, everyday. Aren't you glad I turned you on to him? Good show.
Yeah, I see your point how MRVL usually does good the rest of the year, but I have a problem with the $SOX stocks right now. There might be a big chip glut building that could decimate the entire sector. Be careful.
The reason you're seeing BRCM fall after earnings besides seasonality is because they said in their CC that they are having a problem getting the silicone wafers to build their chips. Now at first impression you'd think that's a good thing because it shows how strong biz is at all these chip companies,right? Well, not so fast. What it might be telling you is that if biz starts to slow, there is going to be a TON of chips sitting out there unsold.
Those guys don't care what it comes out like. They deal with order flow. If they are heavily short, it's most likely due to having to sell stock to people in a major upswing (to make a market). So, this last rally most likely put them mostly on the short side. Yes, they will get their money back. Once the market calms down, they'll get it back in spades. But the GDP report only spooks traders if it's out of the ordinary. But I expect these guys already have the plan in action as to what they're going to do.
I think TNA at $42.50ish is the number to watch. If it breaks below that, then something bigger is going on. I think we re-test it sometime in the next few days and then rally hard into the $50s possibly, THEN roll over on a H&S break. Remember, the key number now is simply SPX 1150. Because it's such an obvious target and potential right shoulder swing high, most will consider the market smooth sailing upward before worrying about any reason to sell. So any and all selloffs should be considered buying opps unless you start seeing it break 1090.
If 1100 holds tomorow, BUY TNA long for a short term trade.
When BRCM closes under $37, which I think it does this week sometime, it's $34 city.
If all the stock could do after hours on earnings was drift up to $38, then I think that tells the story of a stock priced in. And actually, what appears to be possibly setting up is a head and shoulders. We could get a move down to $36, the neckline, and then a rally back to the high $37s, and THEN the big move down.
The entire market is setting up that way. If the SPX runs to 1150, the Jan high, and then turns, that's your bet the market is THEN on its way to triple digits. The neck is 1040 with the head at 1220. That's a possible target of 860 or so. I think most thought the June 22 high was the right shoulder. They were wrong and subsequently thought the trade below 1040 was the break. Nope. Hence the short squeeze now.
The way I'm seeing it is a pullback here in TNA to $43ish(TZA to $33 to $34), then a rally in the market to SPX 1150ish to over-extend the summation indexes, THEN the big move down into Oct, just like Nenner suggested. It's almost playing out perfectly. If it does set up that way, I'd be a BIG buyer of Oct TZA $30 calls for a possible 10 bagger.
I think this rally is part of a small wave count wave 2, per my chart showing the larger picture the other day. TNA 'should' run to $50 to $52 on this by next month sometime, however first a pullback.
I bought some TZA at $34 the other day as an 'intro' position, but figured the ultimate low is probably in the low $20s.
Now for BRCM, watch what happens. Just watch. That's why the Aug put spread. Today's almost outside day key reversal will show its ugly head over the next few days.
This entire move up in the market has been exascerbated by the short squeeze caused by EVERYONE thinking the market was about to fall off the cliff. Too many doing the same thing. That's how you get a $10 move in TNA in what? 3 days?
Trust me, there is no 'new' bull market starting.
I can't find anything on that, but I found this Motley Fool article interesting:
http://www.fool.com/investing/general/2010/07/19/buy-sell-or-hold-broadcom.aspx
Yeah, possible island setup
Here's what's happening, 'they' are playing with the over-imbalances. Too many short - buy it up. Too many long, sell it off.
It's that simple. Low volume allows this game to be played by the big boys.
If AAPL fills that gap to $249 on a closing basis, the market is dead. But I'm really liking my BRCM short play more and more. Just look at that weekly rising wedge.
Interesting cycle read:
http://blogs.decisionpoint.com/chart_spotlight/2010/07/4year-cycle-ambiguity.html#more
I don't think so. AAPL is in trouble. Over the weekend I was with family in Cour'de lane Idaho (or however you spell it) and my wife's dad was telling me how AAPL is in serious trouble in terms of growth. This iphone 4 antenna problem is just the beginning. He works for Capital Group (mutual fund company that runs American Funds) as a IT specialist. They were doing a presentation like a power point thing. The guy who was doing it passed around a memory card for everyone to download from. The guy sitting next to him had an iPad. Well, enough said? Won't work.
AAPL won't allow Flash to run on the phone or pad and won't allow external hookups or memory cards. Well, guess what? HP's new tablet does. All these new Droid phones do all that stuff. People are getting sick of AAPL's BS when it comes to control and now they have serious competition. When they report tomorrow, how much you want to bet those iPad sales are falling off becuase of those reasons? If the iPad falls, and all these problems with the new phone really stick, that stock will get cut in half. Overnight. Their $30 bill in cash or whatever it is will mean nothing if their growth dries up. Look at MSFT.
Now, TXN reported a big problem tonight for Semi stocks. If that stock opens up tomorrow where it's trading tonight ($24.20), it's a monster gap down for it and a major break of a major support level. That spells doom for these stocks. BRCM, our little put play, will be on its way to a double.
$36 looks like trouble for us. But when, not if it breaks, I think low $30s easy. Now seasonally BRCM sells off every July earnings. That's the 27th. So if the market rallies to break this 60 min falling wedge, we get a last weak rally here and then the earnings selloff.
You know, Bernie has a great way of explaining things as I've followed him for over twelve years. But when it comes to making money, he has a horrible track record. But that was a good article.
If I'm right about BRCM here, it could put us over $20k
Wow, this doesn't look very good for the market going forward...
http://www.businessinsider.com/you-cant-fully-appreciate-how-badly-our-stock-market-is-doing-until-you-look-at-these-charts-2010-7
And if that bugs, check this one out:
An August peak on the SPX between 1100 and 1155?
http://finance.yahoo.com/tech-ticker/article/520577/Get-Out-While-You-Can!-Dow-Headed-to-5000%2C-Charles-Nenner-Says