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Hey Plash, the top in the market looks like it's going to be the ellusive 1200ish on the SPX. That was the 61.8% retracement level from the 2007 high to the 666 low last year. It's also the upside projected target off the inverse H&S pattern. However, I'm not so sure we see a moon shot to 1200 because everyone is expecting it. Now, look at this chart of Nasdaq...
This goes back to the 1990's. Now, look at that rising wedge setup we have here. Plus, as I pointed out yesterday, the 4 year Prez cycle comes in next year....
Notice this kiss of death setup?
The reason I got into TZA was because I don't like options here. Too much going on to kill them. TZA is like buying an option without the time decay. Same thing for SQQQ. But I beleive we'll surely see at least $11 short term and possibly $14 within the year. If the best excuse you can make (as many on CNBC daily do) is that the market should keep going up because of liquidity, then doesn't that reasoning by itself argue for the market being a scam?
The inside talk is that the market is being pushed up because of the desperate need by union's (specifically CALPERS) pension funds underwater. Many municiple pensions are all going to be unable to pay the retirement benefits promised if the market doesn't do a 180 back up to over 15k again soon. But the valuations don't at all justify it. So, any move higher from here will simply be a bogus push for reasons that aren't free market supported. And that always leads to bad things.
Now the next problem the market has is these pesky cycles coming. We first have the 40 week coming in around Sep to Oct, then the monster 3rd year prez cycle low coming in next year sometime. When you consider that you first have the fed stopping buying mortgages this month, then all this left wing garbage coming out of Washington, watch out.
Kudlow had a great point about what might be making all the numbers look good now and through the end of the year -- many wealthy people are going to get hit with the Bush tax cut rollbacks next year. Remember, those expire the end of this year and no way is Obama and queen Pelosi going to renew them. So, wealthy people are moving their incomes into this year and will adjust their future incomes lower to get under the $250k limit. Considering that most wealthy people own their biz's, it's pretty easy to do.
Now, when all these idiots who are screaming for health reform get the bills for it, what exactly do you think they're going to do? For those that don't understand it, if this thing passes, then everyone will be required to buy health insurance. If you don't, or your employer won't cover you anymore, then you'll be fined by the IRS $2500 a year as a penalty. If you are a biz owner now and offer it, most likely that cost is between 11% and 15% of your payroll. But the government will only fine you 8% of your payroll if you drop it. Well, duh. What do you think they'll do? Drop the 14% expense and pay the 8% fine and tell your employees to go out and get it themselves. They'll probably pay some of the difference between the 8% fine and 11% to 15% old expense as a raise in salary, but most will still be forced to go out and get it themselves.
But how many can afford it? How many even know that they are about to be forced to do this? You have to report this on your tax return every year -- the policy # and exact dates of the year you were covered. Those parts of the year you didn't have it, you'll be fined. And again, it's the IRS who'll be enforcing this.
Considering we need consumers consuming, this might take a bid dent out of that consuming. Plus the added 4% payroll tax and jump in rates in general from the base rate of 10% to now next year 15%, watch out below.
Just wait until people start to understand this stuff. There's already a near riot in Mass. over their Romneycare, which is basically the same thing, but just on a state level.
It's almost fun to watch, if it wasn't so sad. People are hurting out there and elected this clown for prez in the idea
Nice reversal setup today. Looks like a pullback coming which could be bigger than most expect. If I'm correct, and this is a 5th wave top, we're going to see a large 50% ABC pullback which could take the SPX to at least 900 to 940. After that, who knows.
My take is that the TZA will rise to at least a double for us near $14 to $15. Now if the market does what I think it could do as all this imbalance corrects itself (10year breaking over 4%, oil running north of $90, stocks pulling back on liquidity removal of Fed) then $20 could happen within a year. The Russell doing a 50% pullback here most likely will take it to about 540 or 550.
For those longer term investors, here's a pretty good way to time major tops and bottoms I've used over the last ten years. I learned this from the guy who runs OptionsInvestor.com back in 2000.
Pull up a Point and Figure chart of one of two indexes - either the Nasdaq 100 (NDX) or the DOW (INDU)on Stockcharts.com. Then change the symbol to either $BPNDX or $BPINDU.
What those are, are the 'Bullish Percent Index' charts. Basically they tell you what % of all the stocks in either index are on Point and Figure buy signals. A buy signal for an individual stock on a Point and Figure chart is made when you're currently in a sell signal and then you first get a rising row of 'X's, a pullback into a new row of "O"s, and then another new leg up in a new row of "X's" that then rises at least (1) point higher than the last "X" row high. A sell signal is the opposite.
So, the idea here is that when a majority of the stocks that make up either the DOW or NDX are on say, sell signals, that is warning you that it's getting WAY overdone. If a majority of them are on buy signals, then it's warning you it's also WAY overdone.
Basically, when you're above 90% (90 of the Nasdaq 100 (QQQQ) stocks are all on buy signals) it's time to expect a major turn south. If they are below I would use and do use 15%, then it's time to get long.
Look where we are now on the $NDX
Every stock eventually comes back as long as they stay in biz. For traders, it's a game of chicken.
Well, clearly the best traders who aren't in the know, just full time traders, are baffled as the valuation is not good now. However, I understand that when you come out of recessions, you typically want to be long the market. But the problem with that historically is that valuations in bear markets are such that for example the combined PE of the SPX is between 7 and 12. We're currently at 18 and if you're looking at GAAP it's actually 20. So, we're way overvalued now and with 10% unemployment. Go figure.
http://www.decisionpoint.com/TAC/SWENLIN.html
The assumption is that the SPX combined earnings come in around $60. But that's a big assumption. The new Lehman Brothers stuff coming out kind of tells a story that there is the very real risk that we see another bank/credit problem pop up.
So, it's clear the market is trading on technicals, not fundamentals. Anyone you hear on TV say the fundamentals are good is either lying in an attempt to pump the market further, or doesn't understand what they are saying. Like realtors, it's always a good time to buy. If the market is going up, you better buy before it gets away from you. If it's going down, you better take advantage of these deals.
But you must take notice of what a majority of hedge funds are now starting to do. Buy levered inverse (short) ETFs.
http://www.tickerspy.com/newswire/?p=1692
Wow. In all my years trading, I can't remember a time when the market sucked as much as it does now. The pros don't buy this rally, thus the volume is dead. The public surely isn't buying it, thus the volume. So who the hell is pushing it up? These things don't end good.
I think the market is making a perfect 4th wave here and about to move up one more (last?) time in a final 5th. Now 5ths don't have to complete higher highs. They can form a 'zigzag' failed attempt. With all the things going on in the market and economy I can't imagine a big move up other than a short squeeze.
Now this elliotwave pattern is probably the reason behind the lack of conviction in selling and shorting because many know and are afraid of this technical setup. But the time is a'comn'.
The timing of the uptick rule replacement is curious because it's as if 'they' know what's about to happen and are trying to blunt or mitigate it someway. I agree with Cramer in that during the last selloff in 08 the selling was compounded by the lack of limits on shorting which allowed these guys to pile on on the short side. So, the uptick rule will have a definite effect on limiting that stuff and potentially stop the market from making a bigger move down than would otherwise happen.
But this assumes that there won't be a massive amount of 'real' selling.
One day up a hundred, the next down 160. What to do? You see, this is how the big money gets out of positions. They create the illusion everything is just fine. They have in-house analysts talk up their stock positions on CNBC. They then sell big one day, hold the line the next, even buy the next. But in the end, they are selling out to you and I. It's called distribution. And we have the mother of it now.
Watch 1000 to 1040 on the SPX. If the SPX falls to that level, most likely it should produce a big big bounce. But that then most likely will lead to a new leg down if broken. A break below SPX 1000 could most likely assure a possible drop below 666 eventually within the next two years.
I find it funny the SEC is now putting back the rules on shorting (uptick rule). Why? Probably because even they know what's coming.
Listen guys, the market is at a major - and I mean major - crossroads here. I still think this is most likely a 4th wave pullback that the market typically does between Feb and March. Actually Jan and March. The market typically makes a short term low in March, and then rallies into June-ish.
So, I think we have another leg up still. But it could be a top of bigtime magnitude.
Remember that the only reason the market ran off the March lows was because the Fed basically said they were going to do whatever it took to push it along with everything else up. But they have said that starting next month they are out of the mortgage biz. That means the market in general is most likely going to have to prove itself on its own. But the volume shows that there is no public participation so it's basically traders trading between each other and that is becoming a shallow game. Just watch Fast Money each night and you'll know what I'm talking about.
So, until there is a clear bottom having been put in, and I mean at least another drop to SPX 800 or lower, only then will true investors feel safe getting back in. NO one is buying this.
Now I could be dead wrong and the market just falls apart here. But I wouldn't want to be short in any way yet.
Just be careful. There will be clear trades coming our way. Just not yet. There is a bigtime move coming - either on the upside or downside. I think it's down, but we'll have to see. But I think it's going to be a very bumpy drop. Up, down, up, down. Not just a cascade like last year.
HWLX might be a good VERY SHORT TERM trade for those interested. Buy .40
I have an overbought target on the Q's of anything over $47 to be a great put entry.
Because I'm not sure they will. For you though, it's probably a good bet if you're nimble. I just want a more 'sure thing' for a setup. At $50, I think that will be a huge 'sure thing'.
This is the reason why I bailed on the TZA trade. I know everyone thinks the market should be going down now. I do to. However, as I pointed out in an email a few weeks ago, the Russell specifically looks like it has one more leg up because its chart is the most clear in terms of elliotwave. So, this should setup a classic 5th of a 5th wave rally to end this 'junk rally' off the March low.
The target on the SPX from day one was always around 1200 to 1250. That's the fibo target from the 666 low to the 1500 high. With the low volume and clear high valuation in the SPX, there is no fundamental case to be made for the market trading up here. Thus, it's a technical market only. If you remember my reasoning for SYNA, the fundamentals were always behind us.
So, per my email the other day, I would either start buying the SQQQ now in small blocks to average in, or just wait until about $65 to $70 for a big entry - which is what I'll do in the account.
There is a presidential cycle that says there is a big rally in the 2nd year of a 1st term pres to the 3rd year, then a big 3rd year selloff. But things are so screwy right now, I just don't know what to think. All tech stocks are WAY overvalued - including AAPL, MSFT, ORCL, RIMM, etc. The glamour boys. Oh, did I forget AMZN?
The chip stocks have no biz trading where they are trading in this kind of an economy. So, what gives? The second the Fed starts to even try to tighten, the bond market should go nuts. If you start to see the 10 year blow through 4%, then you know things are starting to get ugly. That's really when you want to begin taking large short plays.
REGN I think is now in a short squeeze. I think many were looking at it like I was with the historical seasonality falling off the cliff into April. The company makes no money, so fundamentally isn't worth where it's trading. So, now it's making I think a last leg here in a final push of this leg before it falls. But for our options, yeah, for Feb, we're probably screwed. That's why I only went in with 5% on the Febs. But for April we still might make it.
Now, with these new triple Q's ETF from Proshares, I want to use them more often. Look at this weekly chart of the Q's. You can clearly see a now 5th wave starting to emerge which could take it to $50 before a good selloff in the market begins. The plan will be to go in big on the SQQQ
Well, you guys see Christie in NJ order via executive power an immediate across the board spending freeze? Nice
Yeah, clearly a technical trading play going on. You add in that hammer Friday and many jumped in on that today. But I think this is just the beginning of the bigger move.
It's so funny to hear many talking about how rosy biz is. Chambers of CSCO back in 2000 was talking up biz all the way down until he couldn't anymore. Then the market bottomed. So, don't listen to these guys.
I think you're going to see SYNA back in the teens again. Anything under $18 should be back up the truck time. I'm waiting for that. If we get it, then yes, we'll go "all in".
Okay, here's a trade to watch for a big setup. SOHU EVERY year jams bigtime from late March to July. WATCH FOR ENTRY if you can see the stock get to around $40 or lower. I think that could be a biggy. (3 to 5 bagger)
My gut feeling is that the market is going to do one more leg up here. Then that's all she wrote for awhile. Some big commodity hedge fund got blown up last week and that's why so many of these types of stocks got hammered. So, we could have just seen a quick washout of weak hands. But any move up from here is just trading games to sucker shorts.
You see, the reason the market went straight up from March to now was because when the Fed went "all in" with their stimulus which was March 7th I think last year, that was the sign from Bill Gross of Pimco that it was time to step in front of the fed. Many large pension funds such as CALPERS have so much money, they can't just pick a few stocks to buy. They have to buy EVERY stock, just allocate the amounts differently. That's why you see even garbage stocks run up because it's a huge pool of money being invested in a basket of stocks that might or might not qualify for anyone's money, but that money can't go into just a few stocks.
But now, that game is up. The fed now is in 'how the hell do we get out of this mess' mode. No longer a reason to be a buyer. So, the large funds and firms should probably be trying to get out first, too.
Hey Plash, I thought you'd given up on trading. As for REGN, look at all the plays we did last year. Many were losers. Actually, I think most lost. It's not how many losers you have, it's how much you make on the winners.
There was a guy on CNBC the other day who explained something that I thought captured exactly what I have been saying for months now. I just knew I wasn't the only one noticing this stuff.
Remember SYNA? Now the historical seasonality for it was to go down in July as it did off earnings, then slowly climb basically striaght up through Dec. What happened? It all but flatlined for 5 months. And to the friggn day of Dec op-ex, only then did it start to take off. It was clear that the selling of the Dec $25 or $27.50 puts were the reason for it not going up eventhough seasonally and fundamentally it was worth well north of $30. Even today.
Now, take REGN. Same thing. Seasonally it goes down from Dec to April. Down down down. It is worth nothing because it loses a ton of money. So, it has history screaming sell. It has valuation screaming sell. But it just goes up (until today). Why? This is where people are starting to take note that there clearly is a big trading game going on where firms are shorting in the money puts or calls for $$ and then holding or playing with the stocks in order to profit off those shorted options. Then when op-ex comes and goes, they let the stock do whatever it's going to do.
The guy on CNBC was explaining that many small (less than $100k accounts) traders have lost so much money in the last few years, many no longer meet the reg-t daytrading account rules that say you have to have $25k to trade. So, to offset that problem, they have been buying big into options to maximize there potential gains to try and get their money back. Of course that's a loser's game as we all know. But the trading firms know this and know why people buy or short stocks. So, they take a small float stocks (this won't work with large cap stocks) that have a following of some sort based on volume and options action and basically make what 'should' happen 'not' happen.
I think that in REGN's case, clearly the run from $25 to $28 was short covering as people kept trying to short it and then get squeezed as it never gave up.
But today something happened. Down $3 in one day with the mother of all outside day reversals screams of leaving a sinking ship. Now, history should play out. We have on the Feb's two weeks. The fact that it's float is only 40 mill and we're only about $2.50 out of being even, I think we have a really good chance of seeing that thing make us money. How funny would that be. It's just how options trade.
I never felt 'so' sure about this trade to go in heavy like I did with SYNA. That's why I only put now $1600, or 10%, in the trade. We'll make that up if this goes to zero easily this year when we get a clear setup in the market.
Prechter is looking like a genius so far. I know many thought we was crazy with the 'short gold and long the dollar' comment. Huh? Well, he's laughing all the way to the bank.
The question now will be, will the DOW fall below 6000? Remember the 3rd year Prez cycle. 2011 should be the worst year in the market of Obama's entire presidency. This current decline is a big rolling top. REGN had a knife spike today which is what you see many times that ends major legs that extend too much. At best REGN is worth its 2 year trading level, around $17 or so. I think we see $20 to $21 by Feb op-ex. That will gain us a nice profit on both the Feb and March strikes.
Just sit tight.
I think we're going up one more time. My next trade is going to be AXP. I want to see it run up again with the DOW and then I think the entire market is going to fall with the financials leading.
You should all see this video:
http://www.businessinsider.com/prechter-everyone-is-bullish-now-so-2010-will-be-a-year-of-horrible-market-declines-2009-11
I have been following Prechter for years and although he's missed dates or timings of reversals, when he's right, boy he's right. He nailed 2008. No one believed his call for DOW 5000ish. Well, it went to 6400 and based on everyone not buying even a breakdown below 8000, I'll call it a pretty good call on his part.
Well, now he's calling for a monster decline in 2010. I tell you guys, if he's right, you better have money saved up because the pro's don't buy the first decline, they buy the second one. And this second one will truly be a buy of a lifetime.
All these healthcare/pharma/biotech stocks ran on the Mass senate race. Basically the idea is that health reform is now dead and these companies won't be targets anymore. But if you look at the charts, what happened on Friday happened on big volume and if today was just a trader's game, then it will quickly be reversed because what got the sellers out on Friday as evidence by the volume suggests we're just beginning a larger cyclical selloff. One day wonders are trader games, not cyclical movement things. Don't worry.
Hey cycler, I have a rule that I buy 5% of the account value in each pic unless there's something special about it. SYNA was an example of that because it was such a fundamentally sound and extremely undervalued stock when we got into it, I felt it was worth going into it more by averaging down as it fell. I turned out to be right and my only mistake on it was not holding the trade A FRIGn' WEEK LONGER!! AHHH!
But most trades will only be with 5%. This year as I said in an email last week will be very interesting and very hard to guage becuase everything 'should' be going down. Instead, it's all going up. I always said that 1200 or so is a perfect fibonacci SPX target and we're all but there now. If you watch CNBC daily, you migh have caught Bob Pisani yesterday explain how no one is really going long in a big way and shorts are apparently not shorting either. I think it's because if you look at the chart of specifically the Russell, it's looking like it has one more leg up in a 5th wave to come. That's why I don't want to buy TZA or TNA puts here. Apparently everyone is in 'chicken' mode where everyone is waiting to see what will happen because no one believes this.
Considering the conditions, the market should be at DOW 8000 or less, not almost 11k.
Now remember the cycles - 3rd year 1st term presidential cycle (2011) is always an ugly year. This could be especially true this time considering the environment.
We'll see!
Our REGN trade looking good!
For those who are new, you have to click on the link above that says 'show ibox' to see all the trades.
Seasonality.
I can't believe what I'm seeing with SYNA. I just knew this was going to happen. However, the Stochastics had been a really good indicator for the top/bottom picking in it and I thought at $29ish we were looking for a top. I had to take the money off the table. We made good money and personally I made about $70k on it. I had 375 of those calls and now looking at them trading at $8, I just left $100k on the table had I just waited a friggn' week!
AAAAHHHHHHH!!!!!!
Welcome to trading. Shoulda, coulda, woulda.
No, I don't know who that is. I play Modern Warfare 2 and online Halo 2 (PC, not XBOX). My Halo 2 online gametag is 'Xscaler'. (reminicent of MRVL). I'm addicted though to Call of Duty Modern Warfare 2 on Playstation. I had to buy my wife and kids a Wii for Christmas so they would stop bitching at me for playing video games too much. Now I fight with them for the TV because they are always playing the Wii.
There's nothing like playing MW2 in full surround.
Good to have you here Farooq. And also to Mighty Shadow, I can't respond to your email because I don't pay for this anymore. So, hope you get this and know I'm not flaking on you. Thanks for the email.
Now let's make some money next year!
Could the first trade for 2010 be a SYNA short? Looks that way. According to Best Choice, 100% of the time over the last 7 years from Jan 24 to Feb 10, it falls an average of 11.32%. A couple more on the list too. Will advise in email.
Right now just playing SYNA. It hasn't worked out as I expected, but looks like it's about to make a move back to where it should be. I don't want to over-trade because this market is just too strange. Normal patterns aren't playing out as they should and betting against it has been dangerous. So, play what works.
Right now I think the market is in a 'blow off' mode whereby many who are absolutely convinced it should fall are getting crushed and thus adding to the fuel making it go higher. That will end and badly. However, for now, you have to be where the action is and it seems it's tech.
SYNA as of today is now $2.4 mill short of being debt free as they have paid off 95% of their convertable. That means any hedge short using that note as collateral is now naked. Being that there clearly hasn't been any selling in the stock, I'm willing to bet we are on the verge of a major move. $27 is a bigtime resistance as I've pointed out on the Yahoo SYNA board going back to June and the near $41 high. If we break this, watch out. It should set off a short squeeze.
When I saw STEC run from $10 then straight up to over $40, I knew something was up. Now being in the SSD biz seems a bit crowded. Apparently many must of thought they'd be a new Sandisk. But when you see a stock fall or gap down like that, there typically are many that get caught in that. What happens is their stops get gapped through and don't get hit. Then they are stuck trying to figure out what to do. They hope that they get a bounce. But in STEC's case, it never really happened. So, those that got caught in the gap are forced to sell lower which just pushes it down more.
That's what happens with a low float stock. SYNA is similar except what is good is that it held the low $20s which shows either all the sellers were forced out or larger buyers have been supporting it. Unlike STEC, SYNA has a growing biz and consistent earnings. The same float, but better more reliable numbers. SYNA's selloff was due I think to the uncertainty of the CEO leaving back in July along with a flat guide back then in the face of an apparent growing biz. So the thought was that SYNA must be losing marketshare.
Well, I think they've all but proven that 'thought' dead wrong. So, the stock is apparently correcting itself. We should see SYNA back in the $30s soon. It's clearly a $35+ stock just on valuation. STEC, well, a different story. At $15 it was still trading at 30 times. SYNA right now at $25 is only trading at 12 times. That's a PE of under 12 with a stock growing at 25%.
Be careful with STEC. Notice how it's fallen over $20 BEFORE this happened. That tells you that some in the know were very much aware of this a long time ago.
You misunderstand why I bought SYNA. BC just showed it as over-sold on their log chart and I looked at it via the seasonality which in BC's defense wasn't a buy until Oct which is basically saying a buy into and through earnings.
I looked at it further and saw the fundamentals as being my main reason for jumping in back in Aug. It's a $32 stock that under any conceivable variable can be justified and most likely much higher. But the problem has been this crazy roller coaster with money managers and small caps. Small caps always lead the market and are always the first to get the big investments on a recovery. SYNA is probably in the top 10 fundamentally in the Russell. So, a move back into the Russell will propell SYNA.
If you look at a chart of the Russell and SYNA, you'll see that SYNA always moves ahead of the Russell, which is what you'd expect.
If you look at a chart of the last month of the Russell, clearly 'they' were dumping into FY year end last week to raise money.
Now, FY is over for larger firms as of Oct 31st, and you're seeing a move back into small caps in this expected last push into the 1st quarter next year. After that, it's a gamble.
But I have no doubt that SYNA will be back in the $30s shortly. I understand your point about mixing tech with fundamentals and not using one against the other and then changing to fit your bias. But my intro in SYNA never was solely one over the other. It was both, mainly valuation and the fact that that tiny float, now even smaller and getting even smaller due to that note payoff makes a move back into the $30s very easy.
In a week it ran from $20.80 to $27. All wave counts have been satisfied now. So, it should be clear sailing for us.
Don't ever really look to short positions as a reason to buy a stock. Many times there are reasons for it that are just nothing more than market making and I think in SYNA's case, that convertable note's investors shorting the stock to hedge against their risk. Remember that at the time they did this the company was losing money. It wasn't until I think 2006 did they get put on the map with AAPL using them for iPods. Then they exploded on the scene.
However, right now as evidence by the massive collapse in the Russell 2000 you have all these small caps getting money pulled away from them for sector rotation/FY 2009 institutional investor year end. What you'll see (hopefully) is next week begins the beginning of an entire change in market dynamics. The market isn't done going up.
This announcement of this desire to payoff that debt they have which in essence will make them debt free is a big deal. Last week there was no appetite for anything because everyone knew these large investors had to dump. But now that their year end is over, there shouldn't be anymore large selling and thus everyone will try and pile in to beat or chase them into calander year end. It's going to be interesting to see how this plays out.
As much as it sucks, don't worry about it. SYNA will take care of itself. What's going on with the stock price is a market mechanical thing, not fundamental. Trust me when I tell you to not worry about it.
We'll be just fine when this thing turns.
Wow, BC software comes through. Covered the short BRCM for $2.20 and SYNA looking damn good AH.