Friday, November 30, 2007


Thank you Mr. Bernanke for giving the bulls hope for another interest rate cut despite the first two interest rate cuts having no positive effect on the stock market. If the bulls are foolish enough to believe that a third interest rate cut will be good for stocks then let them. This gap up open is a great opportunity to add to QID and FXP positions and perhaps some SDS DXD TWM SRS. If the market is too strong going into the December 11th Fed meeting I doubt rates will be cut. So either way the market is bound to pullback. The market is currently lower than it was before the previous two rate cuts so how can we expect this cut to have any effect ? I cannot go long here and will cut back some of my long exposure further. Either we will see a retest of the recent lows or we will get a second leg down. Either way, I believe I am well positioned.

Thursday, November 29, 2007


Having taken time off the past week to contemplate the market the action of the past few sessions appears to be the making of a dead cat bounce. I didn't see anything on Monday or Tuesday which suggested a market bottom. A large stake in Citibank C by Abu Dhabi and a speech by Fed Governor Kohn suggesting further rate cuts appear to be the impetus for the current market surge. I don't know how long this bounce will last though I cannot rule out a return to an uptrend. Here are some the the things I have done and what I am looking at :

  • Purchased FXP China double inverse ETF between $70-71 .
  • Purchase QID ETF under $38 .
  • Carefully watching Dow 13500 , Nasdaq 2700, S&P 1490 . Closes above these levels may suggest a return to the uptrend and I will close out short positions and the above mentioned ETFs.
  • Keeping an eye on FXY ( Yen currency ETF). A break below $90 may signal return to bull market. Carry trade is a major factor in market breakdown.

Wednesday, November 21, 2007


Dow 12800 is the bulls final stand. A break of 12800 and all hell breaks lose. Right now I am waiting for a break of 12800 to buy DDM SDS QID . I did add some QLD today in anticipation of a rally into the close. I will sell QLD is the market breaks its current lows.

So far the market appears to have made it lows for the day. But I could be wrong and I probably am wrong. With this type of volatility anything can happen. Anything. Traders are emotional and rumors could send this market flying in any direction. Just look what happened to CFC yesterday.

I continue to hold 40% cash and plan on putting it to use once a clearer trend is established. I know a lot of people are expecting a bounce from these oversold conditions. But the market could easily crater another 1000 points lower. Too many people expecting a bounce is a sure way for the market to do the opposite. On the other hand valuations are still attractive and foreign buyers flush with cash may prop up these markets .

Tuesday, November 20, 2007


Looks like we are having a turkey rally ahead of Thanksgiving. Do I think this rally will last ? I am not sure. There is still a lot of weakness in the markets particularly in the financials which are not participating in todays rally. Without the financials the bull market is doomed. I would not go long in this market if I don't see a recovery in financials. We may get a little rally in the retail sector and names like TGT COST BBY WMT M AEO APO ANF may all have a nice run going into the holidays.

Monday, November 19, 2007


Financials need to recover in order for the bull market to continue. Without the financials, this market is lost. Sure the markets have risen without the financials the last few months but, we've reached a stage where the underperformance by financials is taking its toll on the markets. Look at the way big names like C BSC CFC WM BAC WFC MS MER LEH have performed over the last 6 months. If they continue this downward spiral we are going to be in a serious bear market. Technology cannot carry as any longer.

If the markets do recover I think beaten down former momentum names will outperform . Names like CROX UA ZUMZ VDSI RVBD BCSI NILE LDK NCTY DRYS are on my list.

I am also making a China list of stocks. Names that I like are CTRP SINA NTES SOHU NINE CNTF COGO LFT CFSG CPSL AOB SDTH CSUN STP XFML FMCN STV .


In recent weeks, regulators have quietly ordered China's commercial banks to
freeze lending through the end of the year, according to bankers in several
cities. The bankers say that to comply, they are canceling loans and credit
lines with businesses and individuals.
read here

If this is true then all I can say is that the Chinese government is trying to crash their stock market and thus bring about a global stock market crash since China is the engine that is fueling global growth.

Lets break this Chinese edict. In essence the Chinese authorities are telling banks to stop lending . Businesses requiring lines of credit and capital injections via bank loans are going to be left out in the cold. A credit freeze is going to rein in household spending and thus hurt business profits. Even though this lending freeze is temporary, the effects could be long lasting.

"If loan growth were to stop, that would seriously disrupt investment plans and would introduce a high degree of uncertainty regarding financing," says Stephen Green, an economist at Standard Chartered Bank in Shanghai.

Friday, November 16, 2007


The markets have been in rally mode the past hour or so after looking rather precarious.

The news today
  • FedEx sees slower growth ahead as freight demand weakens.
  • US Industrial output declines as auto and appliance sales decline.
  • The Fed says further interest rate cuts are unlikely.

The two most important news items though would be the Abu Dhabi government taking a 8.1% stake in AMD and the rejection by the Saudis ,of Iranian and Venezuelan demands to discuss pricing oil in currencies other than the US Dollar.

The stake in AMD by the Abu Dhabi governments investment arm shows that the US equity markets have a floor built into them by foreign governments especially Middle Eastern ones flush with cash. Keep in mid that Middle East oil producers like Saudi Arabia, Kuwait, and the UAE ( Abu Dhabi, Dubai etc) are benefitting heavily from high oil prices. Between them they produce over 10 million barrels of oil a day. They need about $25-30 a barrel for their governments to balance the budget. With the price of oil over $90 these guys are flush with cash. Take their yearly oil production ( 10 million barrels/day X 365 ) and multiply it by their surplus $60($90-$30 ) and you have over $200 billion dollars a year in money that is available for investment. As of the end of 2006, these Middle Eastern oil producers had estimates reserves of over $500 billion. A lot of that money is being put to use by investing it in foreign countries including the US. They need a place to invest that money and the US equity markets are by far the safest place to invest them and the returns are far better than Treasuries. If the US markets drop any further you will have continues buying by Middle Eastern oil producing countries.

Thursday, November 15, 2007


A few spikes in the final 30 minutes of trading was all that seperated this market from falling into the abyss. This could have been a 300 point down day. Down 120 on the Dow doesn't look bad.

The problem is all these shoes dropping - housing, subrime, commercial paper market, Level 3 accounting, mark to market etc etc. All these shoes flying all over the place. With all these people losing their shoes you would think it would be a good bet going long CROX huh ?


Tomorrow is the last stand of the bulls. Another shoe drops and this bull market will be laid to rest. Another shoe drops........

The 'Another shoe drops' story today was ofcourse Wells Fargo CEO John Stumpf (try repeating that fast) saying this housing crisis was the worst since the Great Depression. Try telling us something we dont already know. Add this to JC Penney missing Q3 estimates and lowering guidance.

Obviously I did nothing today. Nothing at all. Barely glanced at my monitors. Hell with the market. I have better things to do with my time like play golf though unfortunately its a little cold and overcast to play golf in Phoenix today. So I spent the day playing chess . Chess is a lot like trading trying to think 10 steps ahead and all the things that could potentially happen.

When times are tough, the market turns to Bernanke for their daily dosage of crack ..uhmm I mean liquidity.


Think oil prices can't go higher ? Think again.

In 1900, the US started to industrialize. We were using one barrel of oil
per person per year. By 1970, we were using 27 barrels per person. In 1950,
Japan started to industrialize, they were using 1 barrel per person. By 1970,
they were using 17. In 1965, South Korea started to industrialize. They were
using one barrel per person per year. By 2000 they were using 17. Today, China
uses 1.3 barrel per person per year and India uses .7. China currently has 168
power plants under construction. Copper probably won’t go down much.

Read the rest of the article

Good stuff. Oil prices will probably pull back here. But long term unless a
substitute is found oil prices will continue the upward trend. China and India
and the rest of the world is growing way too fast. Commodities in general will continue trending upwards for another 7-10 years at the very least. I don't think one can go wrong holding commodity funds or ETFs long term. GLD SLV DBA DBC UNG USO are all great long term holds.


Its November 15th and that means hedge fund redemption day ( 45 days from end of quarter).

How will this effect the market ? August 15th was the previous redemption day and the markets moved decisively lower culminating in a bottom on the 16th. Is this a possible scenario or will we slice the August lows like a warm knife through butter ? Just a thought to keep in mind as this trading day unfolds. I would in particular look for moves lower in the momentum type names like AAPL GOOG SPWR CMG RIMM AMZN BIDU FSLR and all the other big gainers of the last 3 months if this case were to unfold.

The Yen is up against the Dollar this morning suggesting a move lower in the markets. The CPI consumer price index rose 0.3% with the increase in gas prices being a major factor. Jobless benefits were also up. Futures point to a lower open across the board.

I believe today and tomorrow are going to be very telling days for US equities and global equities for that matter. A break of Mondays lows and perhaps even those of August suggests a bear market is upon us. I would be very cautious by keeping plenty of cash at hand and staying as hedged as possible.

Wednesday, November 14, 2007


Market summary in one line : The Bears came back at 3:30pm and shot the Bulls.

Tomorrow is going to be some more pain for the bulls. The bottom is not in yet. All this talk of a Thanksgiving Rally is premature. Alot of traders who are bullish may not afford Turkey come Thanksgiving. Hell they may not even have a roof on their head.

Weakness in the semis are a real problem . Take a look at this chart and see how the SOX is in a downtrend . Until the SOX bottoms and starts making lower lows I don't see this market turning up. Financials and homebuilders are dead money. Semis are weakening. Momentum and tech is being sold. How is the market expected to go up ?

Here enjoy some Britney.


Trading has been pretty volatile today. The Nasdaq in particular has been switching between red and green every 2 minutes almost like a traffic light. I see no reason to go long or short today. I am currently less than 60% long with 40% in cash. I am adding some QID today for protection. I am contemplating SRS though I missed a good chance in early morning trading at below $94.

I sold have my ETFC position between $4.70 and $5.40 yesterday. I am holding the rest looking for prices above $7. If not I will sell if the price falls below $5. Nonetheless this has been a very profitable trade taking advantage of panic.

Oil, gold and silver are all up today along with other metals and commodities in general. I had lightened up on some GLD and SLV on Monday. The Dollar is weakening against major currencies once again.

The China double inverse index FXP is down over 7% today. A good buying opportunity or proof that these double inverse indices come out at the worst possible time, case in point QID DDM SDS in July of 2006 near the market bottom.

Tuesday, November 13, 2007


Sell the rally. It won't have legs to go all the way. I don't see a bottom here. I think we test August lows at the very least.

ETFC has done well for me this morning. Analyst from BMO came out with a note stating bankruptcy was 'highly unlikely'.

Financials are doing well today with big gains in GS C MER BSC ( Which is below its August lows) LEH . A bounce in financials was expected anytime and its happening here.

Better than expected earnings from Walmart and a declining Yen were two catalysts for todays bullish start. Lets see if the Dow holds 13000. One could make the case for going long here with a stop at yesterdays lows. Either way I prefer to see a huge plunge and recovery before going long. The Dow will face resistance at its 200 day moving average at 13223. If going short a stop at 13250 may be wise. The S&P and nasdaq can also be shorted with stops at the 50 or 200 day MA. I'm sitting tight here with close to 40% in cash. I'm leaning more towards shorting.

Monday, November 12, 2007


This is starting to look, feel and smell like a bear market. The financials have been in a bear market for quite some time and today ETFC is being axed. Nevertheless , I am going long E-Trade as I believe the selling is overdone and things are no where near as bad as some people would make you believe. If things were really as bad you would see the insiders dumping and that is not the case.

I sold 60% of my HANS today above $48 with hopes of buying lower $40-$44. Added more SLV under $146 and a little GLD at $79ish. I cut back on some other positions as I approach 30% cash with hopes of deploying it once a clearer trend become apparent though it seems that trend will be to the downside after a bounce. If we can't rally in November we are in a bear market.

Sunday, November 11, 2007


Is this a bear market or a normal correction ? This is a question that appears to be on a lot of investors minds as Monday approaches. Some things on my mind ;

  • How long can a bull market continue without the all important financials ?
  • Are further sub prime losses priced in ?
  • If the answer to the above question is yes than we should see a bottom soon
  • If not look out below !
  • What happens to the metals in a bear market ?
  • How many investors are going to use FXP has a China hedge ?
  • Are we in a secular bear market ?
  • CROX is going to bounce hard one of these days.
  • Load up time for NIHD . Heavy insider buying.
  • Are you a 'Hood Figga ?'

Thursday, November 08, 2007


A crazy rollercoaster of a day. Who needs Six Flags when you have the stock market ? Who needs Vegas when you have the stock market ? Seriously this was a crazy ride. Maybe we bottomed though I don't think so. I think we rally till next Tuesday. Then the bears take over. The tape was painted after 3pm and it was obvious to all. The FED needed to avoid another sell off into the close. Give the market a little confidence ahead of the weekend. If we had another 300 point sell off today which carried into tomorrow, can you imagine what Monday would look like ? Black Monday anyone ?

I went gambling today rolling the dice on HANS doubling my position under $39 and I ended up catching a lucky break. I sold some into the close of $43.50. I took some shots at CROX and C too and bought turned out good. DIVX and NYX bought had really good days and SLV wasn't too shabby either.

I think I am turning to trading mode. No buy and hold. Just some quick trades in and out. I can't risk buying and holding in a market this volatle. Makes more sense to go long or short for a few hours.


Ben Bernanke has a new solar power helicopter. Bernankes old chopper ran out of gas yesterday hence the 360 point plunge.


I've been selling a lot today. Up to 15% cash currently. Bought some HANS under $39. If this drop continues I might have to put 10% of the portfolio into HANS ( currently 4%). I may look to buy more DIVX since its showing ridiculous strength. All in all I am getting rid of all non core positions. That means all ugly mofos like JADE LLNW MPEL BRLC etc etc. UGLY !

In other news this market blows. Seriously this is horrible. I think we deserve a huge crash. I'll sell everything and go long QID SDS DXD SRS and make back all my losses. In between I'll trade and pick bottoms AND go long QLD SSO DDM . Off note, I'm off 6% this week. Maybe more.


Looks like we will be seeing another day of pain if you are bullish unless you are long FSLR . In that case life is good. More pain for HANS as a 3 cent earning miss ( 46c v 49c) has the stock down over 15% in pre market trading. CSCO is getting murdered in the pre market though I believe anything under $30 is a great long term buy. The problem in a market like this were liquidity is being ejected out the system is that stocks can fall by ridiculous amounts.

The plan today is to sell lesser positions while adding to core ones that have fallen. I think picking up HANS below $50 will be a steal. I did sell half my position a week ago at $62-66 and I am thinking of buying back here.

I don't really expect much from the market. It appears the bulls have run for the exits. The bears are in full control here. If we breach 13200 on the Dow look out below. Even though I believe there is a lot of bearishness out there and this should be bullish for the market added to the fact we are in November which is historically a bullish month. But the fact we have had 3 300+ point declines in the last 3 weeks tells me something is wrong. I don't think there is anything bad about going to cash and waiting this out.

Wednesday, November 07, 2007


Down 7 figures today. Feels really good huh ? I got a butt kicking in INAP HANS DFS C and pretty much everything save Silver and Gold and the Euro. Maybe we are in a bear market now. Who knows ? AAPL RIMM GOOG FSLR SPWR CMG are still bullish. Financial and housing are being taken to the cleaners. High flying tech stocks are being murdered along with other high flyers like CROX UA FTK NTRI etc.

I might have to go 50% in cash and wait for further hits to the market before loading up on SSO QLD DDM . Or maybe I'll just buy a load of SRS DXD QID SDS and wait it out. Its starting to feel like this bull market is dead. 5 trading days of November gone and we are down over 5%. Perhaps Bernanke had to turn of the printing presses with the declining Dollar. I suppose nobody wants to invest in the US with the USD falling so rapidly. Makes more sense to keep your money in Europe with a strengthing Euro or Asia. My current problem is I'm too heavily invested. Sitting on 5% cash which is not good enough. I got bullish starting November because of the bullish nature of this month historically. Could things have changed ? Could November be the month the bear market started ? We should know by next week. If we don't get a strong rally soon I would think a bear is here. Next stop 13000 on the Dow and lower.

Monday, November 05, 2007


I smell a strong Rally coming. Stocks have been taking to the cleaners the past few days. Momentum stocks are being targeted in a 'seek and destroy' operation. CROX VDSI ALGN NIHD BCSI UA AMZN FTK LVS are some of the names that have been run over the last few weeks.

NTES BOOM LLNW INAP are some of my holdings that have something going today. Sort of. Everything else is being taken to the cleaners.

I am buying some CROX ( $42.35) here as a trade and a gamble. Maybe we will get some lucky bounce to $50. Either way its a pure gamble on an oversold stock.

I though November was a month that was always bullish. So far its been more bearish that September. This subprime nonsense is killing the market. I think things are not as bad as people are making it to be. Seems to be an overreaction. Then again, things could continue to get worse.
I should really stay put and see how things play out but I want to make money and I think staying long is the smartest choice of action vs getting short and seeing a huge short covering rally. I still believe 15000 is on the cards for the Dow by year end. There is too much negative opinion in the air. All this negativity means there are a lot of short players out there who could fuel a rally. I want to see a strong bounce in financials.

Thursday, November 01, 2007

First day of November recap

November is the strongest months for stocks. Boy did this month get of to a great start ..... if you read charts upside down or if you are a bear. 2.6%, 2.6% , 2.4% the respective percentage declines on the Dow, S&P and Nasdaq. Financials got obliterated with banks down over 5% . Citi C was to blame with analyst downgrades on rumors that further asset right downs, would leave the global financial giant short on capital.

While I write this Asian markets are plunging and fear and panic gripes the globe. I see this as yet another buying opportunity unless we cut through the loans we made a couple of weeks back in which case we may see the Dow back to 13000 or lower. I am preparing to cut more positions and raise cash in this inevitability.

I did buy some C today because I believe this stock is too damn cheap. Anything below $40 is too cheap and I got some gifts under $38.50. I expect a double within 24 months.

I added some more to my NTES position because this Chinese online gaming stock bucked the overall trend and was up an amazing 7.7% in a terrible tape. SNDK MU BOOM INAP also looked strong until later on in the day. Once 3:30 came along the plunge was in earnest. Nothing stopping the bears.

The less I talk about my other positions the better though I am thankful I sold out of LVS and COGT in light of this evenings massacres in both these issues.

While I don't like the looks of the market , we may get a rally on the back of strong employment numbers tomorrow. I would however be reluctant to buy a higher open preferring insead to buy SRS QID SDS DXD as protection . A weak open will be bought atleast on my part.

I did buy more SLV today on that dip below $140 . I see silver prices with a lot more upside.