June 29 – Prepping for Monday

The bulls won’t go out without a fight this week, but will the undertow take him down?


What to do, what to do. I have been thinking, reading, and listening to quite a bit of trader commentary. All and all it is very negative. There were a few podcasters say it that there are lots of people calling bottoms, but I don’t see it.
I will be building this blog throughout the day. It will include charts and commentary.
At this moment the market feels like gambling. And people are fools to gamble in a gambling game. Will it go up??? Will it go down?? Both? and when? I prefer not to be a gambler here. I have a few conservative play the house type positions, but even those are a bit sketchy. The worst June since 1930. I played it very well for the first 1200 pts of the DOW drop, but 1800? Only the most bearish of sorts made money, and even a few uber-bears that I follow are somewhat perplexed here. I leaked some money last week. I am about even for June (after commission), And I am down about 4% from my accts high watermark. That is ok, but I would like to find some panic situations to take advantage, but I am not finding many.
This is a great post from Rev Shark on Real Money. He is also the author of TRADE LIKE A SHARK

I am shaking my head in disgust watching Dick Bove of Ladenberg on CNBC discussing his premature call to buy financials. According to Mr. Bove, you have to be willing to “lose” money in order to get some of these great values. Of course you would have lost about half of your capital if you rushed to buy Citigroup (C – commentary – Cramer’s Take) like he suggested along with many other “pros” a few months ago.
This is the sort of advice that is prevalent on Wall Street. It might make sense for big, slow-moving institutions, but for most individual investors there is absolutely no reason to rush in and start bottom fishing downtrending markets, sectors or stocks.
I believe that for most investors it is far better that they buy late rather than early. Most investors grossly underestimate how long trends will last. They keep trying to pick the lows and lose a lot of money in the process. A better approach is to forgo the great sport of catching the absolute low and simply buy only after stocks have broken downtrends and shown some strength. If a real rally is at hand, they will go much further. If it is just a technical bounce, then take your stop and a quick loss, and you’ll still be in better shape than many of the serial bottom-fishers.
Just keep one very simply concept in mind. You don’t need to buy weakness in order to produce good returns. The pros on Wall Street will keep urging you to do so. Ignore them.

A trader named Peter Costa on CNBC said, “What people need to remember is if they have the stock in the portfolio it is only a paper loss. They have not realized it. Be patient.”
I say, “Bullpuckie”. What an IDIOT. I was listening to a guy talking about the Cisco position he has owned since 1997. He was asking the podcaster, what should I do? Ok, let me get this straight. He started buying @ 8. He bought more @ 25, bought more @ 50. The stock when to 82.50, and then he rode it down to it’s current price at 23.30. And he didn’t sell? He feels like he is down about 10 on his ave purchase price. This is STUPID. If you have ever done this, you know it is stupid. Don’t be stupid. At least he could have created a married put position from 75. He was saying, I don’t want to take the loss. It is only a paper loss. Personally I would have bought it at 8, sold it at 15. Bought it at 17.5, sold it at 25. Bought it at 35 sold it at 55. Bought at 57.5 sold at 70. Bought at 75, and exited at 70. That would have been buy breakouts, and selling breakdowns. Yes I will miss some homeruns, but I wouldn’t be down 75% from the top.
Market outlook:
To me, the common view is that we test the SPX lows this week. My contrarian view is this: If we were to pop here that would surprise people. The shorts have fired lots of bullets lately. The charts have broken down, and that is a win for the Bear’s. It seems like they have the bulls on the run and they don’t necessarily need to chase. Let the market drift up, have the bulls buy a little gain some confidence and then… WHAM!! right in the kisser a knock down blow to the SPX lows..
There will be a line in the sand there and I would a expect a buyable bounce. But will it last? I don’t know. I wouldn’t be surprised if after a war around the lows we keep going down. The damage oil does to the economy will have to be evaluated. I will be a buyer at the previous lows in the SPX, but I just don’t know how long I will hold.
USO vs XLE
We have achieved a separation between the two. For those who say it is supply and demand which is driving up the cost of oil, that is doubtfully the case. Got to this link to gain further insight against the arguement Demand inspired oil inflation. This chart references it. Oil IS in a speculative bubble. It and steel are the only sectors that are working. Even when oil drops, it seems to me that it will take time to put cheaper oil into the supply chain. That wont bring down the prices quickly, so demand will continue to hurt.
Lower demand will hurt the XLE. The below chart shows the separation between the USO (US oil fund) and the XLE. Less buying on this wave up.
USO%20XLE%206.30.gif
Some of the listening I have been doing are these podcasts: available on iTunes
Winning on Wall Street (good technical)
The Disciplined Investor (Oil and the Enron Loophole)
ShadowTrader (weekly video)
I am considering entries via bull put spreads on PBR.
Shorting MA via calendars
Reviewing calendars in:
URI
MET
AVP
ADM
SWY
STX
KLAC
SAP
NFLX
CTXS
If we do get a significant bounce, I would look to lighten/unload my SPY 131 and 134 calendars. And 71c, 73c, and 75c calendars. Fortunately my IWM positions are light at this point. I am not sure why the IWM is a relatively strong index. It really doesn’t make any sense. It would seem small, mid-caps should be getting slammed, but they are not relative to the big caps (DOW). They are relatively strong, and I will use that on a bounce. I just plan on exiting when I get a nice opportunity.
MONDAY Morning:
Oil pops, AGAIN. Over $143
The market popped up slightly this morning, and then faded. We are not seeing any great selloff, but the market is just treacherous right now. The bias is still to the downside, and any buying is met with selling. The last day of the quarter may have Institutions trimming losers and buying into winners. Beware of the gainers today.
In the morning session I made a few moves: Oil spiked to 143, and has fallen to $140 @ 10am MST.
DDS – Exited 3 units of the 15p calendar for .09-.11. This deep in the money, I didn’t want to be assigned on this dog.
USB – bought 2 unit of Aug/Sept 30p for .45, .42, and .40. I am just nibbling here. I sold 4 of my 5 units of the July/Sept for .95. I wanted to play with different timeframes on this trade.
IWM – Sold july/Aug 73c into the rally for. 82.
DDM – Bought 2 units of this Ultra Dow @ 61.53 and 61.41. Bought this as the DIA was breaking above 114.09. I bought it, then it pulled back.. hmm. I have my stops set. If oil breaks below 140, I think this will run a bit. I am not a long term believer in this market, but I do think we could get a bounce. So I am playing it. I would love to have a directional winner for a change. UPDATE – No joy. I took myself out @ 61.09. It dropped, and then rallied, then dropped hard to 60.55 to close.
SPY – exited 3 July/Sept 128p for 2.93. It does benefit from a down move in the market, but I continue to get smaller in this market. This thing can move on a dime. And I just don’t like it.
We sold off sharply into the close. What a frickin mess this thing is. Trapping any bulls every time. Learn my lesson, sell strength? I was trying to short MA, but Volatility is high,and I wasn’t getting my credit spread filled. I am down .3% on the day. Another joke of a trading day. At least I am out of DDS.

2 thoughts on “June 29 – Prepping for Monday”

  1. A quick question!
    I bought PKX @ $135 it is now trading up $6.00 @ $131.60 so I am down
    $3.40
    I believe that a sale of the August (47 days to expiration) 140 PKXHH
    (5.90- 6.40) OR 145 PKXHY (3.80-4.20)calls would be a prudent play.
    PKX is a very volatile stock with ATR5 @ 4.66
    My thinking is in effect I will be selling PKX @ 140 + 6 = $146 OR 145
    + 4 = $149.00 by holding until expiration. In event that stock starts to
    fall I can cover options an if stock continues to rise I hope I get
    assigned.
    Do you believe that my thinking is logical ?
    Thank you in advance,
    JOSEPH ANTHONY

  2. A quick question!
    I bought PKX @ $135 it is now trading up $6.00 @ $131.60 so I am down
    $3.40
    I believe that a sale of the August (47 days to expiration) 140 PKXHH
    (5.90- 6.40) OR 145 PKXHY (3.80-4.20)calls would be a prudent play.
    PKX is a very volatile stock with ATR5 @ 4.66
    My thinking is in effect I will be selling PKX @ 140 + 6 = $146 OR 145
    + 4 = $149.00 by holding until expiration. In event that stock starts to
    fall I can cover options an if stock continues to rise I hope I get
    assigned.
    Do you believe that my thinking is logical ?
    Thank you in advance,
    JOSEPH ANTHONY

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