Archive for ‘investing’

The song remains the same

By , 8 October, 2008, No Comment

The charts today, along with the story is very similar to the last two weeks. The market is in the process of deleveraging and jettisoning the assets they have to raise cash. Unfortunately, many of the assets that are integral to this process are of dubious or not value, especially the CDO and credit default swaps that accompanied them. So it has been raining cash in the markets for the last few weeks, and today was not different.

The Federal Reserve flailed at the problem today by lowering interest rates 50 basis points, but this was of little consequence to a market focused on unloaded debt, and assuaging the fear that has become integral in the market of late. So the market bobbed up and down and all around with some of the longest bars to date, and finally settled on -189 and change. So much for interest rates solving the problem.

The chart below is from yesterday and you need only substitute todays comments for yesterdays comments as the song has remained fairly constant in the current economic environment. I would expect some bounces up in the coming day, but that is just a guess on my part. Of course, the interest cut was bad news for the dollar and it was roundly pummelled throughout the course of the day.

The volatility today convinced me to stay on the sidelines until more manageable volatility prevails….using 3 point stops, or even 5 point stops, it is virtually impossible to stay in a trade.
So I watched today with grim fascination.

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An Ugly Day on Wall Street

By , 30 September, 2008, No Comment

Yesterday was one of those days you could throw out all that you knew about trading and just watch in amazement as 900 billion dollars evaporated into thin air. As you are all probably aware of by now, the market reacted violently to the house repudiation of the bailout bill and dropped an unprecedented amount. As you can see on these charts, some of the bars were 50 pts long, so I had to switch over to 1 min bars from 3 minute bars just to stay in the game. It was like riding a bucking bronco and I stayed very conservative and only took a few trades, and then only traded one contract, yesterday was a good day to lose a bundle or make a bundle if you were in an aggressive mood. Myself, I stayed conservative. I am sure there are others that would have done differently. As you can see, the market started down as the votes were being tabulated on the bailout bill, but I worried that a large block of yes votes may surface and the market would gap up, through my stops and cause a catastrophic loss. So I settled for a few scraps here and there and ended up +18 at 1 contract. Which isn’t all bad, but looking all that was on the table, it was not what could have been done, just the same, I was happy with my trading.

In a panic market like this, support and resistance were not reliable, nor were any oscillators, at least not with any consistency. It was trading off the cuff, which is not really my style. It was a day that the market romped out of control. I would look for more of this in the coming days as the bailout bill works it’s way to the Senate and then probably back to the House. It should provide some interesting financial pyrotechnics.

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Futures Trading Turbo Charged

By , 4 September, 2008, No Comment

ESU8 9-4-08

The market got a major stomach ache today as the jobs data and a mixed bag of earnings news sent the S & P tumbling. I started short and kept adding 1 contract up until about 10 am and rode the index down. It’s not a technique I use a lot, but wave after wave of selling just pummeled the market all day. It is rare to see such a chart… as the direction seldom, if ever changed….I just added positions on the rare up moves and always had a fantastic cushion. I ended up with 10 contracts at days end and finally cashed my chips in……I’ll just say it was a fantastic day to trade, and patience paid off.

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some random monday morning thoughts

By , 25 August, 2008, No Comment

This central theme of this blog is to share with others the methodology, or at least my methodology, of trading futures contracts. To that end, I endeavor to try to keep on that very topic. However, current economic conditions are so skewed as to make the random comment here and there necessary.

We are a odd group of people, Americans. We will spend ourselves into unheard of debt, allow the government to do the same, and then panic as things begin to disintegrate. We are now in the process of unwinding one of the largest bubbles in our countries history, and the general population seems blissfully unaware of the dire situation we are in.

Of course, the last bubble burst in 2000 with the dot.com implosion. The Nasdaq has yet to reach anywhere near the highs of those times and it has been nearly eight years since that implosion. But really, who cares if Pets.com, or any other ill conceived IPO didn’t make the grade. Our current dilemma does not involve dot.coms or other such peripheral issues. No, we are now talking about the granddaddy of investment, real estate. And the future does not hold a bright and rosy outcome. Not in the short term anyway.

The level of foreclosures and potential foreclosures is at an alarming rate and the Fed and the Department of Treasury have scrambled to salvage several large institutions to prevent a market meltdown. But there are bigger fish in the pond, as it were, and Fannie Mae and Freddie Mac prices have fallen to levels that appear to make them insolvent. There are a variety of reasons for this event, the least of which is horrible overall company management. Without some infusion of capital these institutions are doomed.

The Washington-type talking heads are blithering away with all sorts of potential solutions for our maladies, and some range from just letting the institutions wither, to a complete bailout for the entire system….which would probably run into the trillions, if that of any consequence to you. Our current government is not particularly fiscally responsible, quite the contrary, and finds itself in a precarious position as it relates to MI money supply and inflation or quite possibly stagflation, as it were.

I want to emphasize that as scalping futures traders we do not particularly care about the direction of the market but are happiest when it is moving with definite speed in a fractal pattern, and the large the fractal legs, or generators the better. So cheer up, we are in good shape for likes of us and plan to prosper in the coming times.

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Bulls and bears, and other nonsense

By , 5 August, 2008, No Comment
There is a tendency to believe, even among investment professionals, the once the market starts to go up the “good times” have arrived and the market is going to go up forever. Conversely, the is also a tendency to believe, even among investment professionals, that once the market starts to go down, or correct, “the sky is falling” and the market will continue fall ad infinity. Like members of a devoted political parties the “up” crowd, or “bulls” feel comfortable when the market is going up and they are in control. I think it is also important to note that since or economy is almost universally expanding because our population is increasing, which in turn causes of GDP to increase. But our markets tend to over expand, and the over expansion is followed by corresponding contraction…and this contraction is when the “sky is falling crowd.” the “bears” have their day in the sun. Many investors tend to be either bulls or bears, and strongly identify with the market either going up or the market going down.

Of course, a trader doesn’t affiliate himself with any “political investing party.” Bulls, bears….these are wonderful basketball and football teams but are of little consequence for a trader. We are happy to go long or short at the appropriate times without conscience or investing preference. Like most traders chaotic investment philosophy goes to where the money is…long or short and where the money is.

I started out as a stock and bond man….but concentrate entirely on index futures contracts now. Of course, my trainers and the media in general portrayed the futures and options markets as “voo-doo” markets and not to be taken seriously. No, I was trained to believe that the only investing occurred on the NYSE and NASDAQ. (and the NASDAQ was barely respectable back then) I did trade some TED Spreads (Treasury-Eurodollar) but nothing like the scalping style I employ now.

The reason for my conversion is much the same as the reasons other traders….we have nano-second access to any market through home computers, and as home computers have proliferated so has the number of firms that cater to home traders or small office traders. While I hate to admit it, my investing career has taken me all the way back to Quotron.

My early investing career was very much influenced by the writings of Benjamin Graham, and Graham and Dodds writings were very much the gold standard by which other authors were judged. Value investing, as was Grahams preference, along with detailed study of balance sheets and cash flow statements were the rage, along with neighborhood investment clubs. The world has certainly changed.

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