Last Night’s Call: Long The SP Near The Low, Right On Target - Again
May 28, 2008 10:05 PM
Somewhat of an odd day as I thought the lows would hold on both XLF and the SP. I was almost certain the SP low would hold today and the trade was long near the low - just as I said yesterday - but the weakness in financials limited the gains in the market. I am not sure what to make of it other than financials are weaker than I had thought. Goldman traded almost exactly as I said, but most others did not hold obviously or XLF would have went higher before lower. Financials are an avoid here and were an avoid, IMO, once yesterday’s low cleared. The SP saved them from melting down today or we would have seen them far lower.
Anyhow, the market did EXACTLY what I said last night. LONG near the low - period. If you had taken that SP trade, it was about a 1% gain from the low. Not bad.
If You Want To Post Comments, We Will Not Spam You
May 28, 2008 12:56 AM
Please post comments as you see fit. We will not spam anyone. I delete spam every single day from this site and HATE it. If you have a stock or market question, post it, and I will look at it, if I get a chance. The only reason it even askes for your email is to try and stop all the idiots out there spamming.
We Have To Hold Today’s SP Low, XLF Should Be Biggest Gainer If It Holds
May 27, 2008 10:50 PM
I believe we HAVE to hold today’s low going forward or the market will get into a panic mode and we will fall all the way to 1350. Look to be long off today’s low. If we clear it I smell huge trouble. Financials reversed today and if we are going up, the best percentage gain should be long that sector. Therefore, look to be long XLF but know your exit point. I still believe there are tons of bad debts not disclosed and the market is wrong longer term - but this trading not worrying about “long term prospects”.
Today’s action was VERY important for the market. We are very, very close to melting down. That is why I believe we have to hold today’s low. I was reading a trading site i have subscribed to for years a bit ago, and his commentary ws the same - we are close to a meltdown if we do not reverse. So we are on the same page here. Again, for a trade, look to be long financials. Buy XLF, buy Goldman, buy whatever. BUT if we clear lows…run for cover as this thing is bye, bye Miss America Pie…not buy, buy…
The Trade Long Off The Low Was Easy, Sorry I Wasn’t Around For Guidance
May 27, 2008 10:23 PM
The market made a reversal off the low today almost exactly where it needed to hold that I had mentioned before. I normally only watch the futures the first half of the day, then proceed to other things, and the first half did not play out like i wanted. I wanted an early low, then reverse, it made an early high with no reversal, then reversed off the low. The problem has been oil. The last 2 days the market has been doing things it “shouldn’t” do because of oil movement. Like today, oil spiked $1.50 early off the low and the SP dropped 7 plus points on the futures in a heartbeat with no warning. That makes it difficult to trade.
I did call the oil spike lower however. The high is going to be difficult to clear I believe, outside of news. In theory, the high should NOT clear without a new low first. Therefore, if oil cannot take out the highs tomorrow after inventory, it is going lower and should provide some stabilization in the markets.
Market Recap: Oil Clears $130.50 Spikes Lower, Stocks Rebound
May 27, 2008 9:38 PM
Well, the market played out almost exactly as i was hoping - almost. The easier trade would have been a lower open and then an early rejection. We opened higher and then spiked even higher and made it very, very difficult to trade early on. I was gone when it finally made the low above my “critcal zone” for the market - the 1370.50 area.
I should have known the market would continue to rise later once oil cleared $130.50 as once that happened oil was going “lower before higher” outside of any dramatic news - period. I made this call on Thursday night about oil. Bingo right on target.
Going forward we HAVE to hold today’s low. If we clear it, I think the market is in big. big trouble. Loook to be long above today’s low, but if it clears I would strongly consider exiting.
Morning Call: Oil Clears $130.50 And Falls Off Record Highs
May 27, 2008 9:47 AM
This could be difficult to trade as it never made a new low, so I am very skeptical, at best, longer term. Oil should stay lower now that it has cleared my number of $130.50. Without news, that high should hold at least until week end, if not longer. Be careful at 1381.50 until it clears…Use today’s low as a guide to hold…
We also have Consumer Confidence at 10:00 EST. That is likely to be very ugly…
What comedy on CNBC “the traders are scratching their head why oil is falling”. Uhh, no they aren’t unless they started trading yesterday. As I said, “if oil clear $130.50, pressure should be applied”.
Trading Class 101: Understanding Gaps - A Very Important Lesson
May 26, 2008 12:20 PM
Probably the most difficult thing in trading to understand is “gaps”. When the market or a stock makes a huge gap move from the previous day, where is the trade? If a stock gaps lower, should you sell and get out or buy more? This is not as simple as it may seem at first glance. The answer is - it depends on the reaction to the gap.
Let’s glance at GE on the huge gap lower on 04/11/2008. The closing finish that day was weak relative to the open. What does that suggest? It was extemely likely it was going lower. How low? I had no idea that day, but I knew the gap was not to be bought and was almost certainly going lower than $31.81 (and it did). What if GE had closed that day at $33.05 instead of $32.05? Then the trade was likely long once $33.05 cleared and the gap was likely to “fill”.
Now let’s look at a gap to the upside. BMC recently gaped higher on 05/16. What was the reaction that day? Was there a resounding rejection in price? No. Therefore, the trade is stay long. The only reason BMC has not moved significantly higher since is the market has plunged. Otherwise, it would be far higher. Period.
Also, look at the 04/18 gap higher on GOOG. Was the gap higher bought, or was it sold? it was very clearly bought. What is the likely direction for the stock? Higher. If you were short that stock prior to earnings (gambling) there, you would be in HUGE trouble and you would have to cover it.
You could easily spend $25,000 in a trading course and not get this seemingly small piece of information of which I have just given to you for free. That may sound like a very bold statement, but it is a fact. Watch the gaps, watch the reaction to the gap, and you will gain an understanding of where it is headed.
This is important whether trading or long term investing as you HAVE to know if you are in trouble on a stock, or not. Big gaps do not always mean what people assume. It depends on the “reaction”.
Buffett: Recession Will Last Far Longer And Be Far Deeper Than People Believe
May 26, 2008 11:41 AM
I have mentioned more times than I can count that I believe this recession is likely to be severe or at the very least will be very, very long. The reason I have mentioned is this is a fundamental issue of consumers not having the cash flow to either service existing debt or the real income growth to increase spending going forward. I firmly believe the only way for an economy to prosper long term is for real incomes to rise. This theory has proved correct for 70 years and unfortunately will prove correct to the downside.
This weekend, Buffett reiterated that he believes people are wrong and that recession will be more severe than most people realize and last far longer. Sounds very similar to what I have been saying for over 6 months.
The more relevant issue is, will the market follow suit? This is a far more difficult question. There are two possibilities as I see it. We will either have a severe and obvious recession and the market will go far, far lower and the direction will be exceptionally clear. Or the economy will continue to get “bullfrogged” and the markets will rise and fall sharply on even the slightest news as hope springs eternal, but will always prove to be false hope.
What I mean by being “bullfrogged” is an analogy to what has happened to our economy for the last 10 plus years, perhaps longer. If you drop a bullfrog in boiling water, it will scream and attempt to get out. But if you place it in water and slowly turn up the heat, it will die and never make a sound or notice what is happening. This is exactly what China has been doing to us for 10 plus years - slowly eroding our economy - but not fast enough for people to take notice and make noise. We are slowly but surely being “bullfrogged”. This process has resulted in real earnings declining and will cause issues for many, many years unless we correct the problem, and soon.
Not Yet A Believer In Numbers? Then How Did I Call The Top Of The SP The Same Day It Happened….
May 25, 2008 12:04 AM
The call is not on this site, so I cannot prove it as it was before the site was started. But the night after the SP made it’s high, I sent an email to probably 20 or so co-workers and friends and warned that “the reaction and rejection of the high was the most forceful that I have seen since the Bubble. I believe that this is ominous and could have lasting effects and this could be a long term top. Do not be long on anything until further notice” or something very similar to that. Did i email many of these on other market falls? No. This appeared to me to be far different.
Why did I take the time and trouble to email everyone that night? Because I saw a very strong rejection in price that was reflected in the numbers. I looked back 10 plus years in charts and believed it was the strongest rejection since the Bubble and did not have any matches other than that and it appeared to be a big problem. While news “could” have pushed the markets higher, it was obvious to me that we had possibly reached an area that people were more than willing to sell.
Coincidently, I also called the top on APPL and told a friend of mine who trades AAPL to “short AAPL here at $200″. What did he do? He bought 2,000 shares against my STRONG advice after it fell to $190. It plunged 40% and finally has recovered and he got out even. I need to borrow his rabbit’s foot as he was extremely fortunate.
Point being, outside of strong news to change the dynamics of supply and demand, a trained eye can see what is going on and is reflected in the charts. That will always be the case. Always.
Next Week: If We Open Lower, Look To Be Long
May 24, 2008 2:05 PM
If we open below Friday’s low on Tuesday, look for an early reversal to be long. If we do get an early reversal I believe we will have a very strong rally. If we open up, it will make the trade far more difficult. Oil needs to clear 130.50 to the downside I believe to apply pressure there, and that should give the market a reason to buy and buy big. A lower open reversal would be a gift to be long and I suspect they may not make it that easy - but just giving a heads up if that happens.
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