The Speculator - "rock solid / market wise"

ALERT

2006-03-27T12:04:00.000-05:00

unfortunately I am currently busy coaching my children during the tournament season and blogging has to be put on the back burner for the time being.

QQQQ - update

2006-03-16T15:01:00.000-05:00

covered short position @ 41.40 for 0.50 point profit /// position flat.

$/Euro

2006-03-16T14:41:00.000-05:00

initiated a short @ 1.2180 /// will add above 1.2240 --- 1st. target 1.2040 and if correct next level @ 1.1980.

QQQQ - update

2006-03-16T10:23:00.000-05:00

sold short @ 41.90 /// technical set-up.

Dow Futures /YMM06

2006-03-16T10:17:00.000-05:00

added to short position @ 11,330 and 11,351 /// average short @ 11,330.

sentiment

2006-03-16T07:37:00.000-05:00

The release of the Beige Book sent Wall Street programs on buy mode lifting the S&P 500 to new highs. As I wrote last week that 1294 would mean a new breakout -
the lower end of my target was reached yesterday around 1315 for the S&P -- I did buy some portfolio insurance in the form of short Dow futures and I sold april A-T-M calls in some stocks that had a nice 3 day rally like IBM,AAPL. Due to option exercises etc... I expect that my market exposure will drop to around 60/65% net long by monday. As I have explained numerous times here before how to look at trading during option expiration week I will just say this that a correction towards 1300/1303 would be considered normal and quite constructive BUT I would be very careful in establishing new longs beyond 1320 which is my target/ starting point for reducing my equity exposure to below 30%. Again I have to empahasize that I do not see higher prices beyond April and therefore hope that up to this date my performance numbers are beyond +12% which is my min. annual target.

Dow Futures /YMM06

2006-03-15T14:57:00.000-05:00

initiated a short position @ 11,290 /// will add every 20/30 points above.

Analyst expectations for GOOG

2006-03-14T18:44:00.000-05:00

In recent months as shares of Google have declined to $340 from a high of $475 on January 11th, analysts covering the stock have held tight with their price targets. Currently, the average GOOG price target of the 25 analysts that issue them is $489 per share (this does not include the $2000/share recommendation from Caris & Co. on January 6th). If the stock continues to slide or remain in its current trading range of $335 -385 , it seems that these price targets will begin to fall, most likely causing more short-term declines in the stock. While readers already know that I am not a big promoter of analyst recommendations, investors should realize that stocks do move on the news, so they should be aware of the current divergence in GOOG.

sentiment

2006-03-14T16:15:00.000-05:00

looking at todays performance tells me that we are in for a minor pull-back over the next couple of days until XXX - option expiration is behind us. If we continue to rally tomorrow morning I will establish some shorts with Dow Futures (YMM06) Look at the VIX chart (Volatility) - I guess I need not say a whole lot as the VIX has crashed and the SPY has soared. A picture is worth one thousand words in this case. Buyer beware as most of the time when the VIX gets to these levels, the SPY goes back down. In addition looking at the option strikes there is a lot of overhead resistance which I think we can leave behind us next week. For now I took profits on the long QQQQ position and not looking at the market the whole day actually helped me not to sell too soon this time.This adjustment reduces my equity exposure from 90% to 80%net long. For GOOG my strategy is to sell 1/2 of the position around 355.00 (for a 10.00 point profit) and let the other 1/2 run to maybe 375.00 but remember this is a volatile stock and my long position took first a 10.00 point hit before we seem to have turned around. GOOG is one of the few stocks next to AAPL where I do not use stops.

QQQQ - update

2006-03-14T16:10:00.000-05:00

sold ETF @ 41.40 for 1.00 point profit /// position flat.

ALERT

2006-03-13T08:03:00.000-05:00

unfortunately I will not be able to post very much this week since I am busy again coaching at a tournament.

sentiment

2006-03-10T16:32:00.000-05:00

Bascically the market was not buying the bear story anymore today and I increased my equity exposure this morning to 90% net long. The data from Money Flow statistics shows that it is flowing into stocks and has been the result of a shift out of money markets, indicating that fund managers are reducing their cash percentages and getting long stocks, most likely rightly or wrongly in anticipation of the Fed being done. The weakness over the past week, then is likely the result of rethinking on when the Fed will be done.I remind that there's not been any new economic data in recent weeks that's indicated we're any more exposed to inflation risk than we have been for the past say six months. So the sudden shift toward a more negative sentiment seems to me to be off base and unwarranted, nothing more than the usual gyration from one irrationality to the next.The number of bearish comments from blog readers has increased recently paralleling the overreactive media's lack of independent thinking. As much as I always look on both sides of the argument and always find reasons to be bearish I have to conclude after todays action that everything is in place for another 200 point rally or squeeze or short covering or whatever you label it but this market had every reason and chance to sell-off in the last 4 weeks and we are still only a couple percentage points away from all-time highs . Again 1315/20 was my target last week and nothing has changed for nex tweek -- 1294.00 and above means another breakout for the S&P's (june). Reading some other good "contrary indicators" like" BillCara" and "The Kirk Report" again it shows how many "investors" are sitting on the sideline or keep drumming the bearish argument - without being short I might add !

QQQQ - update

2006-03-10T15:23:00.000-05:00

initiated a buy @ 40.40 /// obvious chart support -- will keep position over the weekend.

S&P 500

2006-03-10T15:09:00.000-05:00

Dow Futures / YMM06

2006-03-10T14:52:00.000-05:00

covered short position @ 11,120 for 39 points profit /// position flat.

Economy

2006-03-10T14:46:00.000-05:00

There has been a lot of talk in the last few days that the unexpected strength in the economy will prompt the need for additional interest rate hikes by the FRB. Hearing comments like these cause us to wonder what information some people are looking at.
The accompanying chart is what I term an economic indicator A/D line, where I tally up all the reports that are stronger than expected and subtract the weaker than expected reports. For example, if on a given day two reports come out stronger than expected and one comes out weaker than expected, the net for the day is "+1".
Since the start of the year, this indicator has been rolling over to the downside causing me to wonder how one can conclude that the economy is surprising to the upside.

Money Flows

2006-03-10T14:40:00.000-05:00

always good to know where the money goes to...............

Dow Futures / YMM06

2006-03-10T12:46:00.000-05:00

added to shorts @ 11,170 /// average short @ 11,159 .

QQQQ - update

2006-03-10T11:07:00.000-05:00

sold position @ 40.74 for 0.35 point profit /// position flat.

Dow Futures /YMM06

2006-03-10T10:45:00.000-05:00

sold short @ 11,140 /// will add above 11,160 --- technical set-up. (June contract now)

AAPL update

2006-03-10T10:12:00.000-05:00

initiated a buy @ 62.75 /// plus short some 70P 3/06

NEM update

2006-03-10T09:47:00.000-05:00

added to long position @ 46.75 /// average long @ 49.00.

YHOO

2006-03-10T09:46:00.000-05:00

added to long position @ 29.80 /// average long position @ 32.20.

BIDU

2006-03-10T09:45:00.000-05:00

added to long position @ 46.10 /// average long @ 49.65.

GOOG update

2006-03-10T09:44:00.000-05:00

added to long position @ 336.00 /// average long @ 345.00.

QQQQ - update

2006-03-10T09:42:00.000-05:00

added to long position @ 40.22 /// average long @ 40.39.

No surprises

2006-03-10T09:00:00.000-05:00

The February employment data brought few surprises, and S&P futures suggest a near flat to higher open.
Payrolls were up a strong 243,000 in February. January was revised to a 170,000 gain from an originally reported 193,000 increase. The net change overall is slightly ahead of expectations of a 200,000 to 210,000 increase in payrolls. Hourly earnings were up 0.3%. This was as expected. It follows two 0.4% increases that had raised some inflation concerns and another 0.4% increase might have hit bonds and stocks. Higher wages create some cost-push inflationary pressures, but unit labor costs are fairly well contained due to underlying productivity growth. The 10-year note yield is steady this morning at 4.72%. The market may soon start to focus on the March 28 Fed meeting. Earnings warnings season is also approaching. I would expect the market to rally this morning and squeeze some weak shorts out but I am not so sure if we can sustain this early rally into the close --- still too much uncertainty out there to get this market out of the recent trading range but nothing has changed from my outlook outlined here earlier.

Patiently...............

2006-03-10T08:22:00.000-05:00

Markets were waiting for nonfarm payrolls data to shape direction, with a strong figure likely to spark worries over how high U.S. interest rates will climb.Economists surveyed by MarketWatch are forecasting an average gain of 206,000 in payrolls and expect the unemployment rate to remain at 4.7%. Aside from the now typical range-bound chop the battle over the 50-day moving averages continued in the S&P and Nasdaq. Both crossed and closed below that important line. Still, they're both within their long-established trading ranges. What's more interesting to me is the continuing deterioration of former leading stocks (AAPL and GOOG, which closed under its 200 DMA for the first time) and new breakdowns of current leaders (OXPS, AMD). It almost like a slow motion, rotation crash taking place.

QQQQ - update

2006-03-09T13:23:00.000-05:00

initiated a long position @ 40.60 /// will add below 40.40.

Trading & Gambling

2006-03-09T13:17:00.000-05:00

Often times when I tell people that I am a trader, they will say something like "Oh, that's gambling" implying that all gamblers ultimately lose money. So is trading gambling? The answer is an unequivocal Yes. But a more probing question should then be - " Who are the consistent winners in gambling?"
In gambling the consistent winners over the long term are the casinos. So is it possible in trading to operate like a casino and be a consistent winner? To understand how casinos win consistently, you first have to understand the concept of Expectancy which is defined as follows:
Expectancy = (Probability of a win X Actual Gain) minus (Probability of a loss X Actual Loss).
Let's take the game of Roulette where there are 36 numbers for you to bet on. If you bet $1 on any particular number and win, the casino will pay you $2. If you lose, you lose your $1. The variables are as follows:
Probability of a win = 1/36, Actual Gain = $2 (the casino pays you $2 if you win)Probability of a loss = 35/36 Actual Loss = $1 (you lose your $1 if you bet the wrong number)
Plug the numbers into the above formula for Expectancy and you get minus 0.92. This means in the game of roulette, the expectancy is "negative" to the gambler. If you play a game with negative expectancy you will eventually lose all your money. Another way to think of expectancy is whoever has positive expectancy in a game has the "edge". In the case of roulette, the casino has positive expectancy and has the "edge" over the gamblers. Ever wonder why casinos give gamblers free meals, free hotel rooms, and airtickets? Apart from attracting gamblers, they want gamblers to stay as long as possible because when gamblers play a game with negative expectancy, it's a mathematical certainty that they will "eventually" lose all their money if they play long enough. How else do you think Stanley Ho and Steve Wynn made their billions? So in trading, how do you structure yourself to think and act like a casino? The following are suggestions based on my own experience:
1. Every game in the casino has clearly defined rules on how it is played. So in trading, you must have clearly defined rules governing entry, stop loss, exit, and position sizing - a trading methodology. You simply do not make bets in trading based on your whims. And over many trades your trading methodology must have "positive" expectancy (there is a way to measure this).
2. You have to size your bets appropriately so that no series of losing trades will take you out of the game. The casino doesn't bet the house on a single bet. Rather it has enough working capital to weather the "inevitable" losing streak. The same in trading.
3. The casino take every single bet from gamblers and doesn't try to choose and pick its bets. While the casino may lose on individual bets but over many bets, the odds of positive expectancy plays out to the casino favor, i.e. they make a net overall profit. Likewise, in trading you have got to take every single trade signal of your trading methodology and not attempt to pick your trades (it simply cannot be done). Most losing traders spend their entire life trying to predict markets and avoid losses. I can tell you this simply cannot be done.
4. Be totally disciplined and consistent. The casino stick to the rules and doesn't change the way it plays the game irrespective of whether they just just have 10 winning bets in a row. In contrast, most traders start to get carried away when they have a series of winning trades. They start to bet bigger and deviate from their rules and they eventually blowout (think Long Term Capital Management). There are old traders and there are bold traders but there are very few old and bold traders.It takes 3-5 years (and sometimes longer) to acquire the above "basic" trading skills. During this period you make no money and frequently lose money. That's why 95% of people who attempt trading don't make it. But the payoff is well worth it for those with the determination to go through it.
So to sum it up, trading is gambling. But in trading, just like in gambling, you can be a consistent winner by being the house.

IBM

2006-03-09T12:48:00.000-05:00

GOOG update

2006-03-09T12:29:00.000-05:00

added to long position @ 347.00 ///

Three Bulls..................

2006-03-09T10:51:00.000-05:00

sentiment

2006-03-09T09:45:00.000-05:00

Gains in foreign markets are contributing positive bias as investors mull the trade gap, jobless claims, and the monster employment index. Notable premarket movers include CWTR, HANS, NHWK, SUNW, JNJ, CTIC, IMAX, JDSU, SFCC, MRVC, AVNX, INTX, SHRP, VSGN, BGO, HEB, NYX, & RAD. In preparation for tomorrow's jobs report, I suspect that the buy-the-dippers will set their stops at yesterday's lows and see how far they can push their luck. I plan to join them depending on what I see at the opening hour, although as usual, I'm planning to tip-toe carefully. My current equity exposure is net 60% long.

Dow futures/YMH6

2006-03-08T16:37:00.000-05:00

covered short position in After Hours @ 11,006 for 20 points profit /// position flat. Placed some overnight limits to buy below 11,000.

Dow futures/YMH6

2006-03-08T15:09:00.000-05:00

sold short @ 11,026 /// technical set-up.

QQQQ - update

2006-03-08T15:07:00.000-05:00

sold position @ 41.05 for 0.41 point profit /// position flat.

IBM

2006-03-08T13:10:00.000-05:00

keep an eye on it --- the "Elephants" are back...........interesting technical picture. If I am right and we will see 1310 on the S&P over the next 3 month than IBM should rally at least to the 85/87 area.

QQQQ - update

2006-03-08T11:56:00.000-05:00

added to long position @ 40.54 /// average long @ 40.64 --- will add around 40.34.

GOOG update

2006-03-08T11:15:00.000-05:00

initiated a buy @ 352.80 /// will add below 350.00. --- We clearly had a big volume spike on bad news at the open. That dropped the market to 353 and change. This is the biggest volume bar on the decline from 387 which has shown greatly reduced volume compared with the previous advance.I am still bullish LT on the stock but "buy" only on down-days like today.

Inverted Yield Curve

2006-03-08T10:44:00.000-05:00

Will the negative economic and market implications associated with an inverted yield curve ever materialize now that everyone is looking for it?

NEM update

2006-03-08T09:47:00.000-05:00

added to long position @ 48.45 /// average long @ 50.90 ---- short 50C and 55C exp. 3/06

"comfort zone"

2006-03-08T09:12:00.000-05:00

Looking at the price action over just the last 3 days it is obvious that we are getting ready for a bigger move -- looking at the VIX, P/C ratio and the option picture --- prices/ volatility has been creeping higher. As I have expressed before I am still ST bullish and expect the 1270 area in the S&P to hold nevertheless I would not be surprised if we see a severe 1/2 day sell-off as well. Why ? Because many times when you trade around obvious support levels and unless prices reject these levels immediately and spike higher you get these ST "panic" liquidation days where traders dumb their long positions initiated around those support areas after 3/4 days of unsuccessful waiting to sell at higher levels.

SILVER

2006-03-08T09:04:00.000-05:00

interesting trade idea ==> take a look..........

PXT update

2006-03-08T08:46:00.000-05:00

I will add to my longs today around $3.00-----------BUYINS.NET, www.buyins.net, announced today that these select companies have been added to the NASDAQ, AMEX and NYSE naked short threshold lists: PXRE Group Ltd. (PXT)....................... . (PXT) an insurance holding company, provides reinsurance products and services worldwide. It primarily offers property catastrophe reinsurance and retrocessional coverage. The property catastrophe reinsurance covers claims arising from various catastrophes, such as hurricanes, windstorms, hailstorms, earthquakes, volcanic eruptions, fires, industrial explosions, freezes, riots, floods, and other man-made or natural disasters. The company also offers property-per-risk, marine and aerospace reinsurance, and retrocessional products. The property-per-risk excess-of-loss reinsurance protects its clients against a loss arising from a single risk or location. The marine reinsurance portfolio provides retrocessional coverage primarily against insured market losses in the offshore energy, protection and indemnity, and pollution segments. The aerospace reinsurance includes coverage for hull, aircraft liability, and aircraft products, as well as satellite launch and in-orbit coverage. The company primarily serves other insurance and reinsurance companies. PXRE Group is headquartered in Pembroke, Bermuda. With 38.24 million shares outstanding and 3.96 million shares declared short as of February 2006, there is a failure to deliver in shares of PXT.

GOOG

2006-03-08T08:41:00.000-05:00

Goldman Sachs lowered its price target to $490 from $500 on Google, citing the risk of slower affiliate growth.
The revised coverage follows Google's admission late Tuesday that it inadvertently let out ad sales guidance for the year in an SEC filing. That guidance was below the Street's current view. Goldman put GOOG 2006 net revenue at $6.8 billion compared to an earlier forecast of $6.9 billion. The note mentioned the company's series of "gaffes" in recent weeks, saying these weren't specifically behind its revised guidance, but did add to uncertainties.

OIL- sentiment and my prediction

2006-03-08T07:58:00.000-05:00

OPEC is right to be concerned about a supply driven price collapse. Denial of the truth is the only thing holding up prices where they are, but then again the power of denial is strong. This morning Crude oil futures in London lost a little ground on speculation the Organization of Petroleum Exporting Countries will keep production levels at near 25-year-highs. Once again, (OPEC) probably won't have the mid-$50s price level it needs to pull off a formal quota reduction, this month's meeting will again underscore the group's irrelevance as a manager of today's market.The price of oil is hanging on to $60 a barrel as inventories continuously increase supposedly on geopolitical concerns. If you take away the phony supply/demand story that got us to $60 in the first place and reset prices back to $30 a barrel that would be a historically fair price for a barrel of oil without the geopolitics, which really aren't any worse than they ever were. So what are today's prices compared to $30 a barrel? Double. Step back and consider what it has historically taken to double prices. The two wars in Iraq weren't enough to hardly budge prices compared to what they've moved in the last two years without any tangible supply disruptions. Katrina didn't do it. We were already at these levels before Katrina came along. Real events seldom move prices significantly.The fear of the unknown, otherwise known as ignorance, moves prices. What should Iran trying to make a nuclear weapon have to do with the price of a barrel of oil for delivery near term? It shouldn’t have anything to do with it. Realistically, Iran isn't likely to impact the supply of oil in the world markets that's scheduled to be delivered in the next few months. Intuitively, we know that's true. But we willingly deny the truth. The Bottom line here is that prices should decline towards $50 -52.00 from today to mid june when the Hurricane season starts to get serious and we will become "weather experts" again. This is the time frame I probably will stay bullish/constructive on stocks with a target of 1315 - 1320 on the S&P 500 . If we have not reached these levels by mid june or earlier I seriously would recommend to stay away from being invested in stocks for the rest of the year and my bearish scenario could take the S&P as low as 1190.

Dow Futures /YMH06

2006-03-08T07:48:00.000-05:00

sold other 1/2 of position on overnight limit @ 11,000 for 65 points profit /// position flat. Considering this mornings levels this was pretty lucky since the high was 11,004. This mornings headlines look pretty grimm but nevertheless I will be on the buy side to take advantage of this early weakness.

QQQQ

2006-03-07T12:55:00.000-05:00

initiated a buy @ 40.74 /// will add below 40.57 --- technical set-up.

Diversification anyone ???

2006-03-07T12:41:00.000-05:00

If there's any consensus in the business of managing money, diversification probably comes closest to the ideal of strategic agreement and accord. Diversification, after all, is your only friend in the long run. Timing the market and choosing securities is far more exciting, but who among us thinks such high arts can be sustained?The alternative, of course, is the time-tested antidote of diversification, which is the only effective defense against the great unknown, otherwise known as tomorrow. Since no one really knows what's coming, prudence dictates the embrace of diversification, at least for us mere mortals who have no chance at becoming the next George Soros or Warren Buffett. To be sure, not all diversification is enlightened. Owning three tech-stock funds, for example, doesn't come close to informed diversification. Yes, it's true that there's no shortage of debate about what constitutes a prudent level of diversification. But there are some ground rules, starting with the fact that investors should have exposure to the various asset classes. I am defining asset classes as those groups that exhibit relatively unique characteristics that distinguish them from other groups. Price correlation is one way to measure such characteristics. Bonds and stocks, to cite the obvious example, post a sufficiently low correlation with each other over time so as to warrant embracing them as separate and distinct asset classes. What that means is that there's a good chance that when one's losing money, the other will be holding its own, if not posting gains. In fact, history shows just that. Owning bonds in 2000-2002, for instance, offered valuable ballast when the stock market was suffering.But how do you protect a portfolio when bonds are under attack? Traditionally, stocks can help, although the record shows that stocks and bonds have been known to tank together at times--this limited form of diversification fades just when you need it most. Meanwhile, cash is an asset class in its own right, and always holds its value, at least in nominal terms, which makes it an essential candidate for diversification. But holding too much cash opens one to the inflation threat over time. The true solution is embracing a broader array of asset classes. That's not been easy for individual investors in the past, but as mutual funds and exchange traded funds bring formerly exotic asset classes to the masses, quite often in cost-efficient index-fund packages, the opportunity for greater diversification is here. The question then becomes: is more diversification better? In search of an answer, or at least some perspective, I crunched the numbers on 10 asset classes (courtesy of Morningstar and Dow Jones) for the decade through the end of 2005 and compared three diversification strategies:
1) an equal mix of U.S. stocks, U.S. bonds and cash2) an equal mix of 10 asset classes3) a traditional pension-fund-inspired 60% U.S. stocks/40% U.S. bonds mix
The asset classes for the three strategies are based on returns from the following indices, most of which are available via index funds or an actively managed fund that serves as a proxy:
1. U.S. Stocks (Russell 3000)2. U.S. bonds--Treasuries, corporates, mortgaged backed (Lehman Brothers Aggregate)3. Cash (3 Month T-bill)4. Emerging markets debt (Citigroup ESBI-Cap Brady, in dollars)5. Foreign government bonds, developed countries (Citigroup Non-$ World Govt, in dollars)6. U.S. high yield debt (CSFB High Yield)7. Foreign developed markets stocks (MSCI EAFE, in dollars)8. Foreign emerging markets stocks (MSCI EM, in dollars)9. Real estate investment trusts (Wilshire REIT)10. Commodities (DJ-AIG Index)
Starting on December 31, 1995, I rebalanced once a year, every December 31, back to the relevant weight as per each strategy, running the test for 10 years through December 31, 2005. The results were encouraging, and perhaps a bit surprising. Overall, an equal mix of the 10 asset classes delivered a 9.1% average annual total return over the 10 years, well above the stocks/bonds/cash return of 6.9%, and slightly higher than the 8.9% of 60% stocks/40% bonds.
Much of the superior performance in the 10-asset-class strategy's stellar returns in 2003-2005, as the chart below illustrates. To be sure, sometimes owning everything disappoints. But over time, the sample suggests that it pays to take an expanded approach to diversification, if the short-term results won't win you any applause at the next cocktail party. What's more, the equal mix of 10 asset classes is mindless, the byproduct of automatic rebalancing at the end of each year. But owning 10 asset classes opens the door for enhancing results a bit, at least for those with the ambition and skills to customize a portfolio. Consider junk bonds. When the spread of high-yield debt is relatively small relative to Treasury yields, there's a strong case for pulling back on the junk bond weight, and vice versa.
Whether you're tweaking or mindlessly rebalancing, there's a case to be made that investors should own some of each of these asset classes. Why? For the simple reason that you don't know what's coming, and so diversification truly is your only friend.

Dow future /YMH06

2006-03-07T11:25:00.000-05:00

sold half of position @ 10,990 for 55 points profit /// trade worked out well so far and hopefully we will see another squeeze towards 11,130. On the flipside I would not be surprised to see a re-test of yesterdays lows first. Nevertheless we should be trading above 11,000 either today or tomorrow.

sentiment

2006-03-07T09:03:00.000-05:00

I was tempted to sell yesterday the YMH06 futures position after it approached 10,970 but I still believe that there is more to the upside than what we have witnessed so far -- still I am not bullish for the rest of the year -- it frightens me to think where crude oil prices will go when the next 2/3 hurricanes hit us here in Florida during the july-october period. But for now I stay positive on the market and have accumulated a 50% net long equity exposure. Nothing has changed long term, as the macroeconomic analysis continues to suggest that an eventual slowing of the economy is more than likely. Housing sales are softening, the yield curve is inverted, and the consumer is slowly tiring. Inflation, at both the retail and wholesale level -- core and non-core alike, -- is still rearing its ugly head.
Resolving the dispute is a relatively simple matter of carefully considering timelines and expectations. Technicians tend to respond to shorter term market moves (like this week’s!), while Economists ply their trade over much longer time frames. I find that combining these two dissimilar disciplines allows me to develop a view towards both the immediate and distant futures.

Frustration building ?????

2006-03-07T08:57:00.000-05:00

It's the active, intraday traders who seem most distressed. Judging from my email inbox and the traders I know personally, 2006--for all its auspicious January start--has not been a kind year so far. Even traders who have been quite successful in years past seem to be frustrated. The market, from their perspective, seems to be going nowhere--even though they can see that it has managed to stay near bull market highs.I decided to do a little statistical investigation to explore the traders' angst. I went back to March, 2003--the start of the bull move--and looked at how the S&P 500 has moved overnight (between the prior day's close and the current day's open) and how it has moved during the day session (from open to close). Here's what I found:
From 2004-2006, the average price change from close to open (overnight change) has been .035%, compared with .039% in 2003. The standard deviation of overnight price change from 2004-2006 has been .29%, compared with .51% in 2003. The market has thus retained a positive bias overnight--no doubt thanks to strength in Europe and Asia--but the average size of the overnight move has decreased significantly.
From 2004-2006, the average price change from open to close (day session change) has been -.005%, compared with .092% in 2003. The standard deviation of day session price change from 2004-2006 has been .40%, compared with .72% in 2003. Thus, day traders during the majority of the bull market--the last 2+ years--have seen no directional bias to the market. They have also seen far less total market movement compared with 2003.
In short, there *has* been no bull market for day traders in the S&P 500 market. Whatever movement there has been in the index is fully attributable to overnight action. The day market has been flat, and the average range has declined from 1.40% in 2003 to .95% from 2004-2006. Indeed, the average range has declined every year from 2003-2006, standing now at .82%.

Pre-mkt. movers

2006-03-07T08:51:00.000-05:00

ATHR, NHWK, CHCI, LNUX, HL, URI, GG, DYN, CBST, NGPS, KONG, AAPL, OVTI, GEMS, QLTI, VPHM, PALM, OLGC, SIRI, and GTE.

EURO/$

2006-03-07T08:42:00.000-05:00

covered half of short position @ 1.1900 for 180 pips profit /// move stop from 1.2080 to 1.2000 --- next target would be 1.1830/50.

charts of interest

2006-03-07T08:30:00.000-05:00

Dow future /YMH06

2006-03-06T14:39:00.000-05:00

initiated a buy @ 10.935 /// will add below 10.920 --- technical set-up. As much as it was advertised over the last 5 days that rates will have an effect on equities at some point this seems to me a good starting point to be a contrarian. Yes I can see bond yiels rising another 0.25% from here but I wouldn't be surprised if stocks find a bottom over the next 2 days from where we can rally to 1300 in the S&P's and 11,150 for the Dow.

Psychology

2006-03-06T14:12:00.000-05:00

You know you are a Permabull when...
- each time the market declines you declare it a "healthy pullback"- sideways moves are actually just the market "taking a breather" or a "pause"- missing earnings estimates is ok as long as management confirms next quarter's guidance- bad guidance is ok as long as last quarter's earnings beat estimates- you criticize any analyst that downgrades your stock from "Strong Buy" to "Buy"- you applaud poor economic results as good for the market because this time they will cause the Fed to stop raising rates- any negative market commentary is evidence of a huge "wall of worry" that the market needs to go higher- you plead that a 10% decline is a "great buying opportunity"- you blame any market decline on short sellers who just don't understand- oil declines to $60 and you expect that will cause the market to head higher- oil increases towards $70 and you point out how the market has been able to absorb higher oil prices- you quote the cliches "history repeats itself" for positive things and "it's different this time" for negative ones- an inverted yield curve doesn't concern you at all.

sentiment

2006-03-06T09:49:00.000-05:00

looking at Treasury yields the market probably will trade cautiously sideways to down but I would look for a place to buy here rather than sell or even short .As usual, investors will be talking about what Warren Buffett had to say about the market over the weekend. In essence, Buffett cautioned investors that the portfolio's returns may be modest over the next several years because current valuations aren't cheap. As for the overall stock market, Buffett suggested that more modest returns are to come citing increased frictional costs (costs related to trading, advice, and money management) that eat away at performance. Berkshire Hathaway added Wal-Mart (WMT) and Anheuser-Busch (BUD) to its portfolio and increased its holdings in Wells Fargo (WFC). Also new to the company's list of top holdings are Ameriprise Financial and Procter & Gamble (PG). Overall, last week's market performance was slightly bullish considering the rise in long-term rates, weaker housing data and increase in oil prices. The advance/decline line fell slightly, most sectors rose and volume was above average on the week. Measures of investor anxiety were mostly higher. The AAII % Bulls fell to 40.94% and is now below average levels, which is a positive. The average 30-year mortgage rate fell to 6.24% which is only 103 basis points above all-time lows set in June 2003. The benchmark 10-year T-note yield rose 11 basis points on the week as most economic data points were positive. However, the yield is still 25 basis points lower than it was in 2004 and 209 basis points below levels at the peak of the bubble in 2000.

EURO/$

2006-03-06T08:44:00.000-05:00

sold short @ 1.2080 /// will add above 1.2125 --- technical set-up, looking for 1.1950 as 1st. target.

ALERT

2006-03-01T07:47:00.000-05:00

no posts for the rest of the week --- I am busy coaching at a tournament.................
I will be back next monday.

seasonals

2006-02-28T15:41:00.000-05:00

Explanations vary, but one that makes intuitive sense is that small investors, who have often favor such shares, need to raise cash to pay their taxes ahead of the April 15th filing date.

GOOG

2006-02-28T14:53:00.000-05:00

I think the psychology of Google right now is mostly confusion, and now that holders have been burned twice by big ugly pullbacks, they are going to be very distrustful. And the bears are likely to be emboldened to short a bounce. Google is going to be more and more a battleground stock and it's going to be tough for it to make much headway after pulling two nasty surprises. Forget whether the market is correct in its judgment of the news. This stock is dishing out pain, and that means folks will not embrace it so readily

QQQQ - update

2006-02-28T13:37:00.000-05:00

sold ETF @ 41.32 for 0.22 point profit /// position flat. Since I was totally off with my timing I am content with making something back on the other side of the trade since the short side from yesterday was the right one to be on.

sentiment

2006-02-28T13:05:00.000-05:00

As of now the SP 500 has lost 18 points since yesterday's high. The good news is that the Volatility Indexes have ripped higher on the news (GOOG) and before long we will have buy signals.Remember, this tape is very headline specific, which certainly isn't much of a help, unless you're either clairvoyant or much more nimble than I am. There are some nice-performing stocks out there (BITS, SPLS, EVST, ESLR, BOOM, QDEL, AVNX, NPSP) but on the other side, we have some significant downside movers (GOOG, CYD, KG, SNDA, VPHM, JOBS, VCLK, ASTE, APOL, GVHR).

QQQQ - update

2006-02-28T12:41:00.000-05:00

initiated a buy @ 41.10 //// will add below 40.95 --- technical set-up.

AAPL update

2006-02-28T11:38:00.000-05:00

covered short position @ 70.50 for 0.65 point profit. //// still short 70.00P -------- I would have expected this stock to trade @ 70.00 or lower today with the overall market as weak as it is but I respect the relative strength over the last 7 days and stay on the side line.

S&P 500 Extremes

2006-02-28T11:22:00.000-05:00

While the S&P 500 10-day advance/decline line is getting up there, not too many stocks in the Index have been up for 5 days in a row (unlike a couple of weeks ago), and individual stocks aren't as extended from their 50-days as they were at the start of the year.

Housing : Slowing but not crashing

2006-02-28T10:58:00.000-05:00

The rapidly increasing inventory of New Homes continues to be a major concern. In previous housing slowdowns, the "bust" was a slow and steady process that lasted several years

QQQQ - update

2006-02-28T09:49:00.000-05:00

covered short position @ 41.60 for 0.20 point profit /// position flat --- looking to sell short again above 41.90.

charts of interest

2006-02-28T07:55:00.001-05:00

"comfort zone"

2006-02-28T07:47:00.000-05:00

Question ................

2006-02-27T19:08:00.000-05:00

If the markets are near five year highs in the face of nosty Iraq news, a looming Iran fuse, massive debt, foreign dependency, evolving stagflation and presidential approval ratings unseen since the Nixon era, what does that say about the moxie of the underlying bid? Nevertheless todays fade into the close should cause some further weakness tomorrow morning. Dow futures sold off from 11,145 to 11,095 - lets see if the buyers return around 11,080 where I see some support.

QQQQ - update

2006-02-27T12:41:00.000-05:00

sold short ETF @ 41.80 //// will add above 42.00 . --- technical set-up.

AAPL update

2006-02-27T10:41:00.000-05:00

My short position took some heat over the last 3 days but today the stock looks pretty weak and actually I was surprised that on friday it could not close above 73.00. I don't have anything special to report except that maybe we are in a trading range between 73.00 and 68.00 and bounce around during the next 3 weeks. On friday I saw a pretty big block of 70P going through @ the offer which could indicate ST further weakness.
I did sell last week the march 70P @ 1.60 for a small hedge.

sentiment

2006-02-27T10:32:00.000-05:00

There's hope that lower crude prices may foster an environment where we'll see some end-of-the-month window dressing, but much will remain dependent on crude and the Iran situation. You know my opinion about crude prices and for the rest the easy trade is to be short here and as we know this usually doesn't work out. As I wrote last week -expect further advances from the indices - the Q's have been gapping up this morning but are still about 10 cents away from the 50-day moving average. That moving average has marked the high for the day each of the last two sessions. The Qs have not closed above the 50 DMA for all of February, so that level bears watching. But the bottom line is still the same the higher we go the harder we will fall - the option picture beyond march looks pretty bearish and has not changed during up-days.

Risk management

2006-02-27T10:18:00.000-05:00

The random walk hypothesis says that price moves arbitrarily and unpredictably (unrelated to previous prices) around equilibrium values. To great extent, traders reject that hypothesis. We understand intrinsically that return relates to risk. Wagering on the flip of a coin gives you a fifty percent chance of heads, independent of the previous flip. A round of Russian roulette brings a one in six chance of catastrophe. Buying a lottery ticket creates a miniscule opportunity for great wealth and a high probability of total loss. How trading differs from outright gambling by virtue of the impact of volatility difference between instruments traded. Imagine that a coin flip retained a 50-50 probability distribution, but your betting “intensity” varied day-to-day. One day you might be betting a dollar and another ten times that amount. Would you still want to make the same bet?Investors must understand the importance of limiting losses, because recapturing drawdown is not linear. A twenty percent loss requires a twenty five percent gain to become whole. A fifty percent loss mandates one hundred percent increase to offset losses.Recovery requirements and DrawdownPortfolio Loss % Gain for Breakeven10% --- 11.1%20% --- 25%30% --- 43%40% --- 66.7%50% --- 100%75% --- 400%Speculators want to be on the right side of the risk-benefit equation. The capital asset pricing model developed by Sharpe and enhanced by Markowitz implies that a basket of well-chosen investments optimizes returns by adjusting for market (systematic) risk and individual security (non-systematic) risk. Mathematically, some express this as:Expected Return = riskless return + (beta x market risk premium)So what options does the prudent investor have available?Risk Management Options for InvestorsAsset reallocation to ‘riskless’ assetsAsset allocation to lower risk asset classesSelection of lower beta investmentsSelected market participation (technical or fundamental criteria)Market timingIf the investor, for whatever reason, envisions a high-risk environment, she must choose among the relative risks of returns on cash, money market instruments, or treasury bills, versus the volatility of market prices in that ‘high risk’ environment.The investor first has to ask what constitutes a high-risk environment? Because about half of market return historically has resulted from dividends paid from investments, it makes sense to assess where major indexes stand relative to traditional dividend yields. William Bernstein examined http://www.theefficientfrontier.com/ in 1997 threlationships between Value Line’s appreciation potential and a variety of criteria, including price-to-book, price-to-earnings, and dividend yield. Not surprisingly, the lower the price multiples or the higher the dividend yields, the better the return. The current fashion describes markets as ‘cheap’ because of projected earnings multiples. David Dreman showed the fallacy of that approach in The New Contrarian Investment Strategy (1982) where he found the mean error of analysts studies to be 16.6%.Risk management on individual trades involves the concept of position sizing and stop losses. Traditional trading theory states that one should not risk more than two percent of their portfolio on a given position. For example, with a 50,000-dollar portfolio, the 2% rule would limit losses to about a thousand dollars. Your position size in part will relate to the extent of the loss you are willing to take. The size of your trade also corresponds to whether the duration. For example, a day trader looking to capitalize trading SPY might have a stop as little as fifteen cents or less, with the expectation of making substantially more on each successful trade. Holding 1000 shares of an extremely liquid position with the intention of losing a maximum fifteen cents per share (plus commissions and slippage), is very different financially and emotionally than holding the same position overnight.Experienced traders know almost instinctively whether a trade is working right from the start. If the trade is going to work, it will seldom exceed your maximal adverse excursion (MAE), your ‘uncle’ position. The MAE could be a fixed dollar amount or a fixed percentage.Each trade consists of multiple ‘pieces’, the strategy and selection, the entry price, the stop price (uncle point), and the target price.Where does a trader set her stops? The trader has to accept that sometimes executing stops will lead to frustrating reversals. On the other hand, more often accepting small losses prevents the acquisitions of large ones. Most big losses begin with small losses. Traders also must recognize that the closer a stop is set, the more often it will be hit. Narrow stops set on volatile stocks have a far higher probability of execution. As a trader who prefers countertrend trading of oversold stocks, I’ll argue that buying extremely oversold (or selling overbought) vehicles (ideally when the general market is similarly oversold) has several advantages, particularly the ability to set closer stops. Another technique involves examining the average true range, and exiting on any violation of three average true ranges from the high or two average true ranges of the day. The average true range is the average over N periods of the range including the maximum or minimum close of the prior day, outside of today’s close.true range = max(high,closeprev) − min(low,closeprev)
The average true range may vary dramatically according to the volatility of stocks. For example, Google (GOOG), a 377 dollar stock, trades with an average true range (14 day) of over 14 points. Most traders aren’t going to feel comfortable with a stop of this size. International Business Machines (IBM), an 80 dollar stock, less than a fifth of the price of Google, trades with an ATR of 1.17, less than a tenth that of GOOG.Stop Loss SelectionMaximal adverse excursion based on experienceAverage true range techniqueViolation of key level, support, or trend lineVolatility based stopsFixed dollar based stopsPercent of premium stop for optionsUse of fixed dollar-based stops is self-explanatory, but harder to tailor to the ‘average’ trade. High-priced, volatile stocks like GOOG frequently move 10 or 15 points in a day. Unless using massive capital, traders’ stops could easily be hit by the combination of price and volatility.Traders who are buying ‘distressed merchandise’ that they consider dramatically undervalued might decide not to use stops initially, presuming their familiarity with the overall market conditions, company specific financial circumstances, and their time and risk perspective.

GM

2006-02-27T08:35:00.000-05:00

on friday I did the following trade at the close : bought the stock @ 20.00 and sold 20C and 20P (straddle) for 2.40(March06) against long underlying. I would continue to sell more 20P if we sell-off further. My equity exposure is net 40% long.

EURO/$

2006-02-24T14:30:00.000-05:00

sold remaining part of long position @ 1.1880 on a stop for 30 pips profit /// position flat---- obviously 1.1850 is big support but you can expect a lot of selling beyond that chart point.

Recession 2007

2006-02-24T13:14:00.000-05:00

The slope of the yield curve is likely to become an increasingly bearish indicator as this year progresses, and recent changes in the calculation of the index of leading economic indicators should not be interpreted as in any way denying that fact.One of the best-established predictive relations in macroeconomics is the observation that when the difference in yields between long- and short-term interest rates is low or negative, future GDP growth tends to be slow or negative. Pretty much any measure of the size of the gap seems to support that conclusion. Most academic studies have used the 10-year minus 3-month Treasury rates plotted in the top graph on the left. This spread has averaged 140 basis points over the last 50 years, but it narrowed to a value much less than that prior to each of the last eight recessions , and actually became negative in six episodes, five of which led to recessions.The spread has dropped dramatically over the last year and is now negative. The natural question to ask in this situation is, how low does the spread have to go before we start to get worried about where the economy is headed?
I have an explanation for the discrepancy between the yield curve's weak signal and those stronger indicators cited by others. Corporate spreads and stock prices reflect expectations of profitability, whereas Treasury yields ultimately reflect expectations of inflation and of what the Fed will eventually have to do to maximize growth without sparking inflation. I suggest that the labor market (over several decades, but particularly over the past decade) has changed in such a way as to allow firms a large cushion of profitability without producing inflationary strains. Under these circumstances, the expectation is that the Fed will eventually find that it can and should reverse its tightening policy without risking inflation and that it will do so even as profits remain adequate.
In the late 1990s we experienced a booming economy but without much apparent strain on the labor market. In late 2003, we experienced rapid growth and booming profitability, yet the labor market remained weak. The labor market has since begun to recover, but by most indications (with the noted exception of the unemployment rate) it has a long way to go. Between the "strong but not stressed" labor market of the late 1990s and the "weak but not recessionary" labor market of late 2003, there is a lot of "neutral territory" which could allow for an economy that is "strong" in terms of profitability (hence low corporate spreads) but "weak" in terms of labor demand (hence low Treasury yields).As you can see from the chart, it is rare for short-term interest rates to be as high as or higher than long-term interest rates, a phenomenon known as an "inverted yield curve". And unfortunately, those episodes have historically corresponded to periods immediately preceeding a recession. (The US experienced recessions in 1982, 1990, and 2001.)There are a few possible reasons for that correspondence. First, it is likely that low long-term interest rates (at least relative to short-term rates) are the result of some pretty pessimistic thinking on the part of bond market participants. Low long-term rates suggest that they think that the economy is going to slow, which will cause the demand for long-term borrowing in the economy to fall, and which will force the Fed to lower short-term rates in the not-too-distant future.Secondly, banks make a lot of their money by borrowing at lower short-term rates and lending at higher long-term interest rates. If that differential disappears, then the financial incentive to lend money disappears. And as banks lend less money, the economy tends to slow. So I would put this in the category of Not-Very-Good-Signs for the economy in 2006.
FED Funds Rate: 4.5% (overnight)6 Month CD 4.37%Five Year Note: 4.54%Ten Year Note: 4.54%30 Year Bond: 4.53%
Let me remind you that last year, the S&P500 gained about 4% -- about what you would get from a CD, but with quite a bit more risk.

Family Finances

2006-02-24T11:41:00.000-05:00

from WSJ : After growing rapidly during the boom of the 1990s, the net worth of the typical American family rose only 1.5% after inflation between 2001 and 2004, the Federal Reserve said in an update of a survey it does once every three years.
The Fed said the net worth of the median American family -- the one smack in the statistical middle -- was $93,100 in 2004. Net worth, the difference between a family's assets and liabilities, rose a robust 10.3% between 1998 and 2001 and 17.4% in the three-year interval before that.A booming housing market boosted the typical American family's wealth between 2001 and 2004, but stagnant stock prices and rising debt offset many of those gains.The report, the most comprehensive survey of household wealth, also found a widening of the gap between households at the top and the bottom of the economic ladder. "While the typical American household basically ran in place, less affluent households actually lost ground," said Stephen Brobeck, executive director of the Consumer Federation of America.The Federal Reserve provides the report Recent Changes in U.S. Family Finances: Evidence from the 2001 and 2004 Survey (PDF) on its web site.The snippets of information provided by the Wall Street Journal should cause investors to pause and reflect. During the past few years, many consumers used their homes as an ATM. Household debt escalated while home values increased. But now as interest rates rise, housing is cooling. If housing prices decline, then many families will be facing some difficult choices.In addition to higher interest rates, we also have higher energy prices. Moreover, inflation is likely higher than 2% or so as reported by government statistics.I am curious to see if this report and its conclusion has any effects on the market today. In my view, the market has been rather directionless over the last several sessions. I do not see a catalyst for moving the markets in one direction or the other. But I think this report might fuel the bears' concerns about the strength of the consumer and her ability to keep propelling the economy forward. The bulls will point to the fact the net worth has continued to increase despite some severe shocks to the economy, and now that the economy has normalized, we can expect the prior rate of household net worth to continue. I tend to side more with the bears in this argument, but I would not be surprised to see the market side with the bulls.

FORD

2006-02-24T11:22:00.000-05:00

initiated a buy @ 8.85 //// looking at their competitors like ATR,JAH,SHLM,CTB and GT .....FORD at current prices with over 70% off its highs and still with 5-y sales growth > 25% and still only 1.4 @ Price/Sales looks attractive to me but obviously till a new catalyst is found might be dead money for a couple of month but it show relative strength in case we have a market meltdown.

sentiment

2006-02-24T09:13:00.000-05:00

I think today the market is trying to find a bottom - again you have mixed signals pointing to a higher CPI down the road with a 50/50 chance that the FED is overtightening and causing a recession in 2007 but since price stability has been the priority I guess that is the price we will have to pay.
If we look at market sentiment numbers I still believe that there is a lot of negativity and odd-lott short sales out there which obviously provides a floor to market declines but on the other hand with the next hurricane season coming in 3/4 month I have to assume we will see $80/90 for crude oil . I predicted last year when we had the price spikes towards $70.00 that over the next 6 month prices would fall into the low 50"s. Well we saw 57.00 but we are unable to stay below 60 for very long and unfortunately there is still not enough spare capacity out there to deal with natural didasters and political unrests. Demand has been slowing inventory building but it seems by not enough to calm prices down to a more consumer friendly level . I wouldn't be surprised if the Dow continues to rally over the next 2 month but the higher we go the more severe the fall -- I will continue to stay modestly invested (30-50%) but from a trading perspective I favour the short side.

My downgrade on the analyst

2006-02-24T09:08:00.000-05:00

Friedman Billings downgraded INTC from Outperform to Market Perform this morning. See the chart below for their historical recommendations on INTC. I guess you keep your job on Wall Street these days if you stay between Buy and Hold for a stock and avoid any controversy.

chart of interest

2006-02-24T09:01:00.000-05:00

BIDU

2006-02-23T15:33:00.000-05:00

initiated a buy again @ 52.75 /// will add below 50.00.

Current Portfolio

2006-02-23T14:43:00.000-05:00

Short : AAPL,CAT
Long : GOOG, AMZN, YHOO, DELL, INTC, JBLU, SUF, TOL, SIRI, PXT, NEM, NEXM, GE, WMT and IBM--------- many of the stocks have short A-T-M calls 3/06.
Equity exposure net 35% long.

Individual Investors Shift Assets to Stocks

2006-02-23T13:35:00.000-05:00

WSJ- Online : "Individual investors are moving into the stock market at a stronger clip than seen in years.
The number of trades by individual investors has risen substantially at discount brokerage firms in recent months and jumped an estimated 30% to 40% in January from December. The discount firms, which offer lower-priced trades, also report that money flowing into stock mutual funds last month was at a near record level. Charles Schwab Corp., for example, saw $4.5 billion flow into its stock mutual funds last month, the highest amount since February 2000, when net investments hit $4.7 billion."
This is important for several reasons. Ask yourself this question: Are retail investors more likely to "pile into" equities at the very beginning of a Bull Market, or at the tail end of a Bull Market?
The answer is given a few paragraphs down:
"Rallying markets have piqued interest. The Dow Jones Industrial Average is up 3.92% so far this year. Yesterday, stocks rose strongly despite a report that the consumer price index jumped 0.7% in January from the previous month. Investors took heart, however, because the key inflation measure was up just 0.2%, excluding the volatile energy and food indexes. The Dow Jones industrials rose 68.11 points to 11137.17, its highest level in nearly five years."
So once again, we see that the little guy is late to the party. Its no surprise when we look at the headline news and data: The drumbeat of rally news about the Stock Markets at 5 year highs, the inflation "spin" (see above), the positive data recently on Retail Sales and on Home Construction. Nevermind that these were weather related temporary aberrations, the headlines were net Bullish.
This is how sucker rallies draw people in -- and this also how tops get made. Once the most naive and least informed buy in, who else is left to drive prices higher?
Retail investors are being drawn to stocks partly because of weakening returns from some other investments such as real estate and bonds, which have suffered as the Federal Reserve continues to raise short-term interest rates. Indeed, net inflows into bond funds so far this year are only half of what they were a year ago. Even investors' appetite for cash-like investments appears to be waning, despite yields of as much as 4% or even higher. Assets in money-market mutual funds, for example, were up only $4.1 billion last month compared with average January inflows of $33.4 billion for the past 10 years, according to iMoneyNet.com.
Let's review: Sit in cash when yields are practically zero, move out when yields are over 4% (6 mo CDs are paying 4.5%). Cut back on Bonds once their yields become attractive.
Another example of chasing last year's performance: retail investment in International funds: "Much of the interest in stocks appears to be going overseas. International equity funds, a sector that represents only 15% of total assets among all stock mutual funds, captured about 80% of the inflows into stock funds so far this year, according to AMG Data Services of Arcata, Calif. . . Foreign stocks' appeal stems in part from their recent superior performance."
Finally, let's have a look at prior such pattenrs of retail enthusiasm:
Domestic retail trading volumes have steadily climbed since hitting a low in February 2003, according to an analysis by Sanford C. Bernstein & Co., a unit of Alliance Capital Management LP, and are approaching levels last seen in 2001 before the market crash. Although active traders were the first ones to return to the market, "now we're beginning to see the core investors come back -- the families, the 40-year-olds with kids and retirees," says Bernstein senior analyst Brad Hintz . . .
The discount brokerage firms, which represent an estimated 8% of all retail commissions, say they are seeing a record level of activity, and many of them are rolling out promotions offering free trades and cash back to get investors to open accounts. OptionsXpress Holdings Inc. reported a record level of trades, new account openings, and assets last month. At TD Ameritrade Holding Corp., trades from just the Ameritrade business, which recently merged with TD Waterhouse, were up 32% last month from December, the second highest month-to-month increase since 1999. (The previous peak was January 2004, when trading volume rose 44%.) Online brokerage firm ShareBuilder Corp. says it opened more than 40,000 new accounts in January -- the highest number since 1999."
The lowest level of retail participation: February 2003. That was a month before the Iraq Invasionbegan, and turned out to be an ideal time to purchase equities. Indeed, that was the best time to make buys since the market topped in 2000.
The worst time? Well, the last surge in retail stock purchases in 20011 turned out to be amongst the very poorest time to make new purchases.
I trust that this comes as no surprise to those of you who pay attention to these sorts of things. Technology changes, new companies open, new fund managers garner the spotlight. All manners of related items shift, morph, refocus change.
The only thing that is timeless is Human nature. That song forever remains the same.

Dow futures /YMH06

2006-02-23T12:40:00.000-05:00

covered short position @ 11.115 for 8 point loss /// position flat. What started out to be a trend day down has turned into a nasty reversal or V-shape for the shorts. As much as this is constructive for further advances the volume on the upside again is lacking. It looks like that the Dow wants to move towards 11.200 first. I will continue to look for short entries since I still believe that the easy money on the long side has been made for 2006 and for now we are in a trading range .

charts of interest

2006-02-23T12:20:00.000-05:00

Dow futures /YMH06

2006-02-23T11:34:00.000-05:00

sold short @ 11.095 @ 11.121 --- supporting my argument from before : some of the Brokers I use are unable to borrow Q's,SPY and DIA .... too many daytraders doing the same thing at the moment------------

sentiment / Dow

2006-02-23T10:21:00.000-05:00

so far so good --- you have to treat todays action as a trend day down and attempt to sell OB osc. signals for short term scalps of 20/30 points. Watch over the next 4 hours how many times day traders will follow this simple but effective method - obviously the risk ..... because there always is one is that we change from down to reaction up or V-day. I have bought some @ 11.070 which I sold @ 11.090 and looking to sell 11.095's plus second entry +15. These are ST scalps which I normally do not mention here but since today so far we have witnessed a classic pattern lets see how many times it will work.

Dow futures /YMH06

2006-02-23T10:01:00.000-05:00

covered short position @ 11.065 for 63 points profit /// position flat.

sentiment

2006-02-23T08:30:00.000-05:00

obviously everybody knows by now that we are in overbought territory and if we do not correct today I have to assume that another rally towards new highs is in the cards - the option picture looks bearish but since expiration is 3 weeks away another upmove is still possible. For now I keep my cautious stand with some index shorts (YMH06) - the lagging Q's are certainly a problem down the road - a sustainable rally without the techs. ..... I don't think so. Bottom line : Dow should sell-off today below 11.070 .

option play

2006-02-22T18:31:00.000-05:00

NEM

2006-02-22T16:02:00.000-05:00

initiated a buy @ 57.00 /// will add below 56.00.

Market Leadership .....??

2006-02-22T14:42:00.000-05:00

It's not impossible for the stock market as a whole to go up if technology stocks don't. But it sure is hard for a short-term stock rally to turn into an honest-to-goodness bull market without the sector of Cisco Systems, Intel,Dell and Microsoft leading the way. That's especially true if the financial sector, that other great bull market leader, is struggling under the weight of more-than-expected interest rate increases from the Federal Reserve. So even if you don't own a single technology share, you'll want to know the odds that technology stocks will get it together and take on the role of bull market leader that the sector so often assumed in the 1990s.
Here are two possible outcomes:
If tech stocks do lead the market, the pattern -- if not the absolute magnitude of the gains -- will look like 2003, when the technology-heavy Nasdaq Composite returned 50% and the Standard & Poor's 500 Index ) returned 26.4%.
If tech stocks continue to show only periods of modest gains separated by steep declines, then 2006 will look like a replay of 2004 or 2005, when the Nasdaq returned 8.6% and 1.4%, respectively, compared with 31.8% and 47% for the Philadelphia Oil Service Sector Index . (The S&P 500 returned 9% and 3%, respectively). Unfortunately, the odds of technology stocks continuing to struggle in 2006 are pretty high. If that's true, investors like you and me need to search for the sectors or sector that will outperform the market if we're looking for anything more than modest returns.

Confessions for new traders

2006-02-22T14:33:00.000-05:00

found @ Elitetrader.com
If you are having problems....or have no clue about the markets whatsoever.....this may help you, i can relate.First off, i am a new trader also.....i believe i have the record for being the dumbest, most foolish person ever to take up this profession. If you are starting out like i did...take heed...there is hope!I started this 2 years ago. And most of that time, i've been trying to figure out why so many people fail at this. To give you an idea how out of it i was...i figured all you needed to make money in the stock market was an account, a computer, and online access and thats it...you can just quit your day job and start raking it in. (I quit my job) You can imagine to my horror and disbelief when i began reading that it doesn't take a few months to learn the ropes....but years. Worse yet....95% of everyone that starts this...eventually will fail. I was so heart broken i wanted to unplug the computer and close my account ....never to think about trading again. But for some reason i decided it was better to try and fail, then to never to have tried. So if you ever plan on making it someday...you must have the heart for it. OK............heres the deal, the markets are like lions, they are not good nor evil, they just simply feast on the weakest prey. Your job is to stay hidden in the tall grasses long enough so that your lil legs build enough strength so that you can run and keep up with the herd....thats how you will learn! What i mean by this is....risk control....money management...its simple math!! In the beginning, sound money management is not just important....its critical to keep you in the markets until you acquire enough experience to make some money. Forget about making money in the beginning....you need to worry about your money management. I cant stress enough how important this is. Its because of sound money management im still here today. RULE #1: Losses....you must not fear them, or it will mess with your mind...clouding your judgement.RULE #2: Losses....you must fear it like the wrath of God!....or you will be out of this game before you even see it coming.I remember one of my first trades i made....i had no clue...after i figured what button to hit to buy a stock...i promptly saw my stock take a dive....i was down $1000.00 in 10 minutes...then $2000....$3000....after about 30 minutes i couldn't take the pain any more got out with a $4200.00 loss. Odd.....i remember afterwards not being overly concerned about what just happened.... i remembered reading an article about Dan Zanger on how he commented that everyone should wipe out at least once if they are ever to go on and become great traders. I figured "cool" im on my way to greatness............................i was fool. NOTHING, NOTHING is more important that capital preservation!! Once its gone....you're out! You need to stay alive long enough to learn this game..... only way to do it is with strict sound money management....and the discipline to follow it. Listen....this is so important....i had 14 losing months in a row......last 3.5 months was able to win back ALL my money i had lost plus tack on a few grand on top! WOW my batting average must be like 80 or 90% lately right?......its only 42% folks. Forget the idea that you need to have a high batting ave to make $$....someone with a 30% BA can clean the clock out of someone with 70% BA!! Its a combination of both BA and win/loss ratio that matters.....and something you will never stop trying to improve. It can only be done by sound money management! (During the 14 losing months....i never risked more than .02 to .04% of my capital....swing trading.)Yes...losses are part of making money....but ONLY when its an acceptable predetermined amount outlined in your trading plan. I don't have to tell you that before you enter a trade, you should have a predetermined entry, stop, and target, don't TAKE THE TRADE IF IT doesn't FIT YOUR MONEY management PLAN!EX:...Risk/reward ratio...is it acceptable?Position size........can i buy x amount of shares with this stop size? You need to have a max amount of $ your willing to lose for that trade...AND max amount of shares you can buy depending on stock price. Just because your plan calls for a stop loss no more than say...$200 per trade, doesn't mean you can always risk that amount, you may have to scale back depending on price of the stock for safety. (Ex: $20 stock gapping against you 10% one morning...vs a $80 stock gapping against 10% . Your trading plan should have all these rules laid out before hand. If you find these rules to be boring or unnecessary.....you will be the lamb walking towards the lions mouth. I could go on and on about money management.....Next;....looking for / asking around older, successful traders for their exact specific way they make money.....FORGET IT!I remember being in some chat rooms...some traders would be making 10k or 25k in a week.....they wouldn't give me the time of day. They ones that were nice enough to talk would always say the same thing......"you must find a method/ style that works for you"......SCREW THAT.....its working for you.....your making tons of money with it...tell me...tell me!!I just didn't understand....................I didn't understand what was meant by finding a method that works for you...not someone elses. Just like i didn't understand why for 14 months i couldn't make money...at best come close to break even.....(not realizing how lucky i was to be using sound money management which always kept my losses tiny.)Just like i didn't understand that buying more monitors....using more sophisticated platforms (when the one i was using was already over my head)....would NOT be the trick to money coming in.Everyone thinks...processes information differently.....what works for one guy may not work for you! Its true....YOU MUST FIND THE METHOD / SYSTEM WILL WORK FOR YOU! The biggest obstacle in the way....is that you have to try so many different things to find the right one for you.....while trying to survive the mind games that are played everyday. Markets will make you sell when you should be buying....buy when you should be selling...etc. (After i got out with that $4200 loss....the stock rallied right back up!) The market is covered with traps for newbies! If....and only If, you survive long enough and become wise to the markets little tricks and traps...guess what...market has more sophisticated high-end traps for you....its an endless cycle....no one ever stops learning....if you think you figured out the markets and don't need to learn anymore...you will be left behind....quickly. The road to becoming consistent is very long and difficult. I have almost 4 wining months in a row that are winners......thats not consistent.....4 months isn't squat. Its not even a spec.....think about that if you just entered the markets for a few weeks or months. Its sooo tedious in the beginning....boring paper trades...by the hundreds for months at time.....while hearing how everyone else but you is making money.....you must have the heart and the patience to do the work in the begning.Only a fool jumps right in expecting positive results. Even if you had the best computer...the best broker...the best platform...knew all the chart patterns...YOU WOULD STILL LOSE....because you would be lacking the experience. If your just starting out...and you already found this site ......your very lucky. This is an important site. Why?....Because it has resources that allow you to see and evaluate so many things at once. It prevents you from getting an early idea or method implanted in your head like a baby duck (a reference in one of the Market Wizards books) and believing thats the only way....and not be able to adapt or change with conditions later. Its fatal. Its what almost happened to me................hence my screen name I recommend all new traders help other new/ or newer traders...give them a guiding hand...you will be helping yourself more than you realize.So......after 2 years of trading whats constantly on my mind???95% of everyone that tries this fails.Hope some of this was helpful to you new traders.

LINKFEST

2006-02-22T13:48:00.000-05:00

1)Economist keeps tabs on government's creative statistical reports 2)Fed minutes indicate two more rate hikes 3)Birinyi Associates review some market charts & tables 4)U.S. spending for health care is expected to double by 2015 5)If you want to predict the US market, look to Japan 6)How to succeed in the stock market by George Kleinman

charts of interest

2006-02-22T13:27:00.000-05:00

The Speculator - "rock solid / market wise"

*****ALERT*****

QQQQ - update

$/Euro

QQQQ - update

Dow Futures /YMM06

sentiment

Dow Futures /YMM06

Analyst expectations for GOOG

sentiment

QQQQ - update

*****ALERT*****

sentiment

QQQQ - update

S&P 500

Dow Futures / YMM06

Economy

Money Flows

Dow Futures / YMM06

QQQQ - update

Dow Futures /YMM06

AAPL update

NEM update

YHOO

BIDU

GOOG update

QQQQ - update

No surprises

Patiently...............

QQQQ - update

Trading & Gambling

IBM

GOOG update

Three Bulls..................

sentiment

Dow futures/YMH6

Dow futures/YMH6

QQQQ - update

IBM

QQQQ - update

GOOG update

Inverted Yield Curve

NEM update

"comfort zone"

SILVER

PXT update

GOOG

OIL- sentiment and my prediction

Dow Futures /YMH06

QQQQ

Diversification anyone ???

Dow future /YMH06

sentiment

Frustration building ?????

Pre-mkt. movers

EURO/$

charts of interest

Dow future /YMH06

Psychology

sentiment

EURO/$

*****ALERT*****

seasonals

GOOG

QQQQ - update

sentiment

QQQQ - update

AAPL update

S&P 500 Extremes

Housing : Slowing but not crashing

QQQQ - update

charts of interest

"comfort zone"

Question ................

QQQQ - update

AAPL update

sentiment

Risk management

GM

EURO/$

ALERT

ALERT

ALERT