Overall I had an OK last week of trading. I shorted a great levels and rode the 1.1 day swings. I fell fortunate that I gained 2% on my portfolio last week with some very light risk. On the slope, I had a great time with a family who I call friends. As I headed into the weekend, I have been trying to make sense of last week’s action. And I remain in the same camp as last week, WE ARE STILL IN A DOWNTREND! That has not changed. Friday’s action was plain strange. I left the market in the morning slowly exiting some shorts, and trailing a stop on the SDS (S&P Ultrashort), ended up gaining 6% on Wednesday and on Friday.
When the ABK rumor came to pass the market rallied hard, and messed up a perfect week for me. That is ok, I think it will offer me a great opportunity to short the heck out of this market if we can get another gap up market.
I was readind Reggie Middleton on Seeking Alpha. He wrote a peach of a fundamental article on the situation. A Bank led Bank-Insurer bailout:
If the monolines were truly solvent as they vociferously profess, all of this hoopla is a farce and we should just let them be. The issue is that if that were the case, they would have taken Bill Ackman up on his proposed plan. He called their bluff. If they are insolvent, as I believe they actually are, the $2 billion being offered by the banks (not mentioned in this article) is not nearly enough.
Ambac, which was already downgraded by Fitch, lends its credit rating to $376.6 billion of municipal and international bonds and $176.6 billion of structured finance debt, according to its Web site.
So, Will a mere $2 billion, or even twice that – $4 billion make the difference between whether a company that insures more than a half a trillion US dollars of risk stays in business or not? Do you see how silly this reads?
So fundamentally, there we are. Interesting. What is causing me pause is the strong reaction to cover on that news. However, going into the weekend I understand the bears need to cover. Uncertainty about funny politics will happen in this election year. As far as the upcoming week’s action, the tell will be how the market reacts to the data, which all accts should be bad.
But here is where the rubber meets the road as far as I am concerned. The Chart.
136.75 is monday’s intersection of a secondary trendline and a lower high. It seems like a nice short entry location. However, the stops are tight. Secondary above this consolidation – 137.25. Primary above W4 high – 139.65. Above that I would consider 140.59 (61.8% retracement) would be a distinct possibility. It would also disappoint the greatest number of people expecting move (down to retest lows).
Now to see us move to 1400+ on the SPX would be pretty cool, although I would probably be stopped out of a few positions. All the market bulls will be getting high on themselves again, and the bear will come in and cut off their X&$#@s. Personally, I don’t mind this chopfest. It causes people to lose patience/money, and that offers opportunity. But when we actually breakout I will be ready to move. Up or down.
MONDAY:
this market is bugging me now. Not just because I am off .3% today. The reason I am feeling lost is that the ABK/MBI Insurers are being given their AAA credit ratings. Isn’t this the type of crap that got us into the subprime mess in the first place? I mean geez. The fundamentals are based off of lies, and the technicals are all goofed up. I am pulling out of many of my directional plays until some of this hanky panky subsides.
My daily trades;
SDS – Lost 3 times in the same day. I wasn’t home to get out at a positive, instead I get a few minutes before the ABK news takes place. Then the SDS drops a buck and stops me out. I try a few more plays before the close and I lost on each trade. Total loss was .2% of portfolio.
Exited
COF 3.75 (.60 profit)
AXP 45/30p 1.95 (.17 loss)
CAH .80 (.85 loss) – time and loss stops were hit
USB – Mar 30p (.25) exited last contracts from old trade.
WB – Apr 32.5/27.5p 1.40 (.10 loss) – swing trade didn’t work
I like volatile markets, just not irrational market. They are very annoying. When they don’t respond to technicals or fundamentals, I will just hold my sideways trades. Directional stuff is a pain in the butt.
If we get a Gap open on the S&P, I will short this sucker below the first 5 minute bar with a vengence.
Heck, I agree with Cramer:
This market’s driving everyone nuts. We’ve got these two companies, these two nothing monolines, that are holding the whole darned system hostage.
We have the government giving away $600 to everybody, which is a pathetic way to deal with a problem rooted in housing.
We have a market that needs oil to go higher even as the average Joe would think it needs to go lower. We have people slashing estimates every day for the brokers, but they don’t want to seem to go down when the futures rally even as they are pathetic without them.
We have takeovers for two of the worst companies out there: Take-Two (TTWO – commentary – Cramer’s Take – Rating) and Getty (GYI – commentary – Cramer’s Take – Rating), even as hundreds of other good ones get hammered everyday.
This is very cool, watch the entire video