Saturday, November 21, 2009

Unemployment Graphical Geographical Video

Chart of Charts 112109 -- Slam Down Bearish

5 and 20 day moving average crossovers say bearish.   The market has had it's way with the 10 day for months, so it's bullish call is questionable.

Puts are going to get incredibly expensive soon....if you want them, get them now. 

Black Swans do not drift in, they are delivered by a cruise missile in the middle of the night, holidays, or on the weekend.

You cannot "Conquer the Crash" in a weekend, you need to be planning and acting for months.  If you haven't started it may be too late, but still--- START!

Friday, November 20, 2009

Repost -- Heck, this blog is supposed to be original material but this is TOO GOOD !

Very strange ticks in the USD futures

There are strange things a-brewin'

This USD futures charts may be some strange abberation, or it may signal something else...perhaps someone caught far outside there margin limits, and forced to liquidate into no liquidity. 

I would greatly appreciate any theories on this.

"They" say there could be some big problem with Ukraine, I mean beyond the mysterious rumours of a very sever swine flu, borders being closed, etc.   Maybe that is also triggering a financial crisis, debt default.

Don't get complacent.   Gold is holding its own, silver is dropping at least in the short term.

Thursday, November 19, 2009

Ted Spread

I look at this every few days.   I caught it back in Sept making its first change in downtrend.

Interest rates went negative...if you want to hold Treasuries you have to pay for the honor.

This is ominous.   You don't have to get gonzo bearish, but don't get complacent.

Wednesday, November 18, 2009

30 Year Gap Study and some Political Commentary

This chart says it all....even a puppy can figure this stuff out.

PTQMF an interesting Panama Gold story

Charts tell a story, and stories tell a story.

What is your guess on what happened here?

Options Discussion

Comment below is from a blogger--and my commentary at the bottom.

After getting sick of losing money on winning trades by buying puts, I did a little research and have already talked to vision_invisible about this earlier. My most recent example of this type of trade was with CAT. I went short on it on the 9th, playing the double top setup. Since then, it has fallen as far as 58, but has bounced up since. The January 45 puts that I bought have done nothing but lose value... CAT is about .40 lower than when I initiated my short position, but I am down about 30-40% on my puts...nice. However, if I went short some calls, I would be up 30% now. Here is a rather large chart showing CAT, CAT put and CAT call values for example:
Great charts, they prove a valuable point. One thought though....going short calls is "selling calls". When selling calls, unless you have a mitigating risk strategy, you have unlimited risk. Say you wake up and find out that Buffet is buying CAT....and suddenly your entire account is worth about $.12. That can happen.

A big part of those moves that are shown in your chart are attributable to VIX, which plummeted in the last 10 days. So those movements are not "normal".....just saying. I didn't sell a single option until I had about 7000 hours experience in the market.

Tuesday, November 17, 2009

Monday, November 16, 2009

Theories about Theories

Since this blog is about Charts and Theories, and since I have Charts of Charts, I might as well have

Theories about Theories.

Strolling the blogosphere, I see that a proponderance of bloggers and commentors are talking theories about how to trade, but very little about actual trades....hmmmm, everyone is being whipsawed...the perfect ending to an HBB run money grab and combo confidence builder.

Everyone is talking about how a "trading plan" can somehow replace the need to "be right".   This market is tricky, it always is, but this is particularly tricky.  After all, this game is for all the money in the world, maybe even money that hasnt even been created or earned yet.

And thus, on this note, I pronounce this the top, giving another push to 1120 or 1125 a chance.  Well, TOP, we knew thee least for a longer time than expected.   See you in 7 to 8 years.....

Nikkei futures looking spooky, Awwooooo, Werewolves of Toe-kay-oo (sung to a combination of Warren Zevon and Deep Purple).

Chart of Charts 111609

Nov 16 Charts Mini-Boatload, XLF

Posting without commentary (kind of)

XLF lead the charge out of March it seems swatted down.

Banks have been ripping the public off with exorbitant late fees and similar charges, besides questionable trading methods or knowledge.   But there is a good chance the hammer is going to come down on them from governmental action based on constituent backlash.   Their profits will go to zero or worse.   You heard it here.

Closing positions and will re-open when market is ready to drop.

There will be plenty of time to re-enter short positions after a confirmed top has been put in. 

As such we will be doing the most important thing a trader can do....taking a loss, and getting ready to reposition when the market is ready.

Sunday, November 15, 2009

Stock Traders Daily -- TBT Basis for trade VIDEO

Tom Kee does some good coaching and analyzing.  He does truly come up with original material.

Check it out

Short EUR -- Upon proven weakness only

Money Flows -- Follow the Money Flows

These charts should be self-explanatory. 

One question I can't answer though....if the mutual fund money flows have been strong and consistently going out of US Equities, then what is the driver for the US Equities going up 50%?

Ideas: (maybe I will make a poll out of this, heck, maybe I will phone a friend :-))

1) Zero Interest money from the US Gov....given to banks, who then ramp up the indices to build confidence?
2) Dropping of the US dollar, Inverse correlation for whatever reason
3) Investor like Buffet see buying future profit streams (a "Fundamental" view of stock pricing is that you are really buying the net present value of future profit streams), as a "hard asset".

4) The large brokerages, which are now banks so they can side step inconvenient laws, are pumping non-mutual fund money into the US equity indices, using say, your State's retirement reserves, which also allows them to hand out $38 BILLION in bonuses for all the fine work they have been doing.

Mr TopStep and TopNotch (Tim)

Options Expiry Week

Thursday and Friday left us with a Nuetral position in term of bullish and bearish charts.  This is very interesting going into Opex week.   It means there could be some major fireworks in the early part of the week.  

Just a reminder, for those climbing the wall of worry, or those waiting for an impending crash, Expiry week shows the big fireworks in the first 3 days, and of that, mostly Monday and Tuesday. 

The pros are already positioned by Wednesday.   The retail is still holding those out of the money puts and calls, and "hoping" for a big move at the end of the week.   They have already lost enough money that this last minute "hail Mary" approach seems the only "logical approach".  It is a losing approach.  That is why it is nice to be an option seller, however, you need a real strategy or you expose your account to unlimited risk (Bad---all bad).

I looked at selling calls and puts against positions that I held in UNG (1000 long), UUP (1000 long), and ROST (1000 short).   This is what is called Covered Calls (CC), or the opposite is Protective Puts (PP).   It is a decent way to make money on options premiums.  It requires alot of capital though, holding all those stock positions sure eats up your buying power. 

However, if you are in positions that you believe in medium term, why not earn some extra money buy selling options.

Other bloggers would prefer to sell Butterflys, Credit Spreads, Calendar Spreads, and the Infamous Iron Condor among others.   They state that these can accomplish the same purposes as CC or PP, but with alot less capital.  In almost all cases, the risk is limited (as opposed to unlimited), and so is the reward. 

The complex options can also be modified as the trade progresses to lock in a certain amount of profit, or to further limit the potential losses.  These are not rocket science, but it involves a different way of thinking.   There are some excellent written and graphical guides written by Fujisan who now writes on the Slope of Hope pretty often.   I copy this and print them in color, damn the toner costs, it is worth it.

Another blogger, who recently started her own blog is Anna.  She presents many example of "live" options trades, usually complex.  She like to trade through earnings reports.  She is very helpful too, with specific examples for current events, and she will usually answer questions.
All joking aside, there is something these ladies have, call it female intuition, or just being damn good options traders, but their track records are really good.      

Another point--regardless of how complex you make your options position, if you are not right on direction you will lose money.  Let me clarify that a little, and expand the definition of "direction" to include time.
If you are a seller, you can benefit from Theta Burn (time value of options).  In this case, you could actually be wrong on direction of the stock price, and still overall make money on the Theta Burn.  But you cannot magically manipulate a bad trade going against you by adding some complexity to your trade---it doesn't work like that, there is no free lunch.   You can adjust a losing trade, but there is no silver bullet to turn a bad trade into a good one.

Finally, there is Vega, volatility.  VIX is a measure of overall market volatility.  This can quickly affect option pricing.  Every stock has its own Vega.  If you have bought puts, for example, and there is a big move down...the Vega will increase and the value of your puts will increase far more rapidly than just the amount attributable to the stock price move itself.   So that is good if you own puts, but bad if you have sold puts, since it will cost you alot more to buy them back and get out a trade going against you.

The links above are a permanent part of the links on my blog which is here.  The best way, for me at least, to learn the complex trades is to grab an idea from someone else, review it, analyze the profit and loss and risk profiles using TOS, do a quick check on my Options Workbook book, and then place some small trades.

There are a ton of great blogs out there.  These are awesome tools that were just not available even a decade ago.  I have more links on my blog, and lack of mention here is certainly no attempt to slight the many great blogs out there, just mentioning a few of my favorites.