Tuesday, March 11, 2008

416 POINT GAIN IN THE DOW

Phew, good thing I got out of my short position yesterday. I sold my QID shares at $56.81. Here's another example of my poor selling timing, if I waited just a few more minutes I would've been able to sell at a price that was 70 cents higher.

So today was a big day...the Fed has lent $200B to the banks which lead to Dow's biggest day since 2002. Everything looks a whole lot better now as most people expect positive gains in the indices. This could be the beginning of new all time highs, and we may have bottomed but here are my reasons why we haven't bottomed yet...

It's too early to say that we will be bullish. If you look at a 5 minute chart on the S&P 500, we haven't even confirmed a rally. If we break 1325, we will have a good chance of testing the 20-day and 50-day moving averages. Keep in mind that nine of the biggest up days in Wall Street history all occurred during the bear market of 2000 to 2002. Today's bounce should just remind you of spikes back in 2002, which, in hindsight, only provided opportunities to sell. This could just be another fake breakout. Institutions love these gaps, they want amateurs to run it up so they can short the heck out of it and watch the panic selling that happens. Further, after today's proposal we shouldn't be expecting a .75 cut in next week's Fed meeting. Aside from these reasons, let me introduce you guys to a "useful" market indicator. I shivered when my girlfriend asked me to go to MAC again to buy more makeup. The Lipstick Indicator is an "indicator based on the theory that a consumer turns to less expensive indulgences, such as lipstick, when she (or he) feels less than confident about the future. Therefore, lipstick sales tend to increase during times of economic uncertainty or a recession...This term was coined by Leonard Lauder (chairman of Estee Lauder), who consistently found that during tough economic times, his lipstick sales went up. Believe it or not, the indicator has been quite a reliable signal of consumer attitudes over the years. For example, in the months following the September 11 terrorist attacks, lipstick sales doubled"-Investopedia.

Alright, so that about sums it up. Again, we may very well be heading higher if we break 1325 in the S&P, but be careful and keep all these things in mind while you trade for the next few weeks. Oh, and I know I've been lacking charts in my posts, but I promise that you'll see lots of charts in the new layout.

Sunday, March 9, 2008

THE OVERALL TREND IS DOWN

After confirmation of a fake rebound (head fake), it became clear that the markets were heading lower. This week was a volatile one, but the S&P500 was due to test the 1300 support. Both Thursday and Friday were crucial days as we approached this level. I wasn`t surprised to see an early bounce off of support early Friday as this usually happens. Afterall, 1300 is a strong support, if we were to break the support immediately the markets would be in a complete bloodbath. After a mini rebound we proceeded to drop below 1300...if we continued to drop throughout the day a gap down Monday morning would've been certain, instead we got another mini rebound near the end of Friday which puts us right back to Friday morning's level. I am still holding my bear ETF from Monday but wish I took a profit mid Friday afternoon. I'm not too pleased with myself because in a matter of minutes I lost $1.80/share. I seem to be buying at the right times, but I've been way off when it comes to selling my positions. In volatile markets like these, you need to have your eye on the market all the time.

The overall trend is down, so I don`t expect any movement upwards next week. Let me break it down this way, there's a...
5% chance of going up, a 40% chance of going down, and a 55% chance of moving sideways this coming week.

CONTEST
There have been 6 entries to the Ad Space Contest so far, if you`re still interested in entering, please refer go HERE. The Contest ends on the 19th of March.

EXCITING NEWS
In April, Hedge Against Speculation will have a brand new layout and domain! No more blogger, things will be much more professional, I will keep you posted on this.

Monday, March 3, 2008

WIN A 125X125 AD SPACE

I am running a contest. The winner will receive a 125X125 Performance Ad Space for one month.

RULES
Reply to this message with a picture of your 125X125 ad along with your website and email. I will choose the best designed ad out of the bunch.

CONTEST END DATE
All entries must be entered by March 19, 2008. I will select and announce the winner the following day. The winner will be contacted through email and once I receive confirmation their ad will be displayed immediately.

PRIZE
The winner will receive an ad spot from March 20 to April 20, 2008 on the right side of my blog.
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If you are interested in purchasing an ad today, email me at richardt@ualberta.ca

OTHER AVAILABLE AD SPOTS (hover over pictures for prices):
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Sunday, March 2, 2008

SHORT-LIVED RALLY, ONLY A HEAD FAKE

I should've known better, in this volatile market anything can happen. I expected the S&P500 to creep up to the 1400 mark by the end of the week and this obviously did not happen. S&P's inability to break out to the 1400 trading range is a pretty big clue that the recent rally was merely a head fake. So this isn't exactly comforting news for me...I'm stuck in my long position of NYX. Getting stuck on the wrong side of the fence is a horrible feeling and something I've been trying to avoid this year. Holding this stock over the weekend was also another fatal mistake (I had some technical difficulties, I was trying to sell my shares on Friday, but my online brokerage just wouldn't follow through), it is pretty obvious now that the markets will gap down in the morning come Monday. The only relief I could possibly get is if Bernanke decides to cut rates on Monday...highly unlikely, but still a possibility.

Let me explain what may have happened last week and where we are heading this month. The US dollar dropped in value earlier last week, this causes US investors to have to pay more for stocks with their more and more worthless US dollars. This also boosts foreign investors' buying power and results in a higher market. So that along with "good news" last week brought the markets higher, but if last week was in fact a head fake then this market is going to head lower...much lower for the rest of this month.
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UPDATE
I sold NYX at 10:30am on Monday and bought QID shortly after. It's no time to be bullish right now...we could see another January bloodbath this month.

Wednesday, February 27, 2008

A MOVE TO THE UPSIDE

After moving sideways for days, the S&P 500 is finally out of its symmetrical triangle.

I've been bullish since Monday and will continue to be for the rest of this week. With Google and Apple being hit earlier this week, I'm surprised the markets have been doing so well. Due to their price and volume, a lot of strength is needed to propel the NASDAQ up from a negative Google or Apple (bullish indicator). However, we did not hang on to our gains today so this worries me a little. Nevertheless, I think there's still room for some upside before we head lower. I expect the S&P to test the 1400 mark again...remember, there's a lot of resistance at this point, so unless there's fantastic news I wouldn't bet on a further breakout. Inflation is exceptionally high right now, so if Bernanke does continue to cut rates that's not exactly good news for the economy.

Note: I am still holding NYX, I did not sell my shares before Tuesday like I said I would.

Friday, February 22, 2008

DRAMATIC TURNAROUND

Tack så mycket! That's Swedish for thank you very much, or at least that's what Google tells me, haha. I'd like to thank all of you for visiting my blog. In the past month, this blog has had over 1000 clicks with a returning visitor rate of 40.21%. I've seen visitors come from all parts of the world with 67% of them coming from Canada, 26% from the US, 3% from the Bahamas, 2% from the UK, 1% from Sweden, and 1% from India. Further, my analytic software tells me that the average time spent on my site is 4 minutes and 3 seconds.

Anyways, let's take a look at the DOW now.

If you were trading at around 3:30pm today you were probably thinking the same thing I was..."what just happened?!?" In less than 2 minutes we recovered from a full day of selling. The markets were down nearly 2 days in a row, it looked like we were finally getting a sure direction in the markets but that all changed after word that a bailout plan for troubled bond insurer Ambac Financial could be announced next week. So what's the word on the street, should we be going long or short? I wish I could tell you but this rumor in the last half hour of trading put the indices right back inside the symmetrical triangle. For this reason, I would not go long nor short at this time, wait for a sure signal before picking a side.

Note: I am still in my NYX trade, there's a good chance the markets will rally on Monday (DOW had lots of volume near the end of the day). Nevertheless, I don't see myself holding NYX past Tuesday.

Tuesday, February 19, 2008

IT'S A WAITING GAME NOW

It's a waiting game now. Technically the indices are still in a symmetrical triangle. I was thinking that we might get a break to the upside this morning, instead we continued to move sideways. I'm guessing that tomorrow's CPI numbers may determine whether this trinagle breaks to the upside or the downside.

The sell-off near the end of the day indicates that investors aren't expecting good numbers. I didn't anticipate a sell-off so I ended up buying NYSE EURONEXT (NYX) at $67.09...I'm at a 36 cents loss right now. The chart below pretty much sums up why I bought NYX.

With the markets being so uncertain right now, this position I have in NYX isn't sitting pretty. If it breaks below $65 I'm going to have to take a loss.

Oh by the way, I just wanted to share this site: www.HitTheBid.net with you guys. I find Jefferson's videos quite entertaining...like these ones for example:
Sony Tech Call Part 1
Sony Tech Call Part 2

Thursday, February 14, 2008

TOO MUCH RESISTANCE

What a turn in events. The market as a whole looked bullish yesterday, we ended the day right at resistance. There appears to be a higher low, another sign that things are looking good. However, we were unable to break 1370 in the S&P today; therefore, it's unlikely that we will get a higher high. News this morning didn't look promising so I decided to go against the market and pick up some QID. Since we didn't break the 1370 resistance today, we are still stuck inside the symmetrical triangle. I suspect that we will end the week in the negatives but keep in mind that a symmetrical triangle means that this market could easily swing to the upside or downside, so keep stop losses in place.

The chart I detailed below has more on why I think we are still in a bear market.

Sunday, February 10, 2008

FALLING WEDGE

A falling wedge on Apple (AAPL) was brought to my attention last Thursday. As I have been busy all week I was unable to follow nor post this bullish formation. After dropping 40% in price you may have noticed that Apple just recently broke out late Friday. This may be the cause of shorts covering and if this is the case, a huge rally could advance.

Setting stop losses under $119 and buying it near its low of $121 either in the morning or after the bull pull-back would've been perfect. Unfortunately, I missed both opportunities. Nevertheless I will be watching AAPL play out over the next few days, I may enter after another bull pull-back (hard to say that will happen though with NASDAQ up 9.50 in the aferhours) or wait for AAPL to break its resistance of 125.50 (Friday`s close).

Seeing as the financials have been down the entire week, it may be possible that people have been taking profits from the financials and entering high beta tech stocks like AAPL and RIMM. Both have some room to the upside before hitting the near-term resistance. I see institutions driving up tech prices next week and then knocking them back down shortly after.

Tuesday, February 5, 2008

REVERSAL AT 1400


Things look to be going my way. Speculating that the peak of the suckers rally was near, I bought SDS in the middle of a heavy rally on Friday. Assuming that the rally is a suckers rally, a reversal at 1400 is certain. Turns out that my prediction was indeed correct, the index reversed at 1396. On Monday we got a strong sign that the uptrend was ending, we got a Bearish Harami. Further, as of today, we dropped below the 20 day moving average. This week continues to look bearish, but I plan to put some stop losses in place to secure my profits. The only thing that can revive this market now is good insurers news.

Friday, February 1, 2008

SUCKERS RALLY

Want a thorough look at what's happening in the markets? Well this video from Free Trading Videos.com does just that. As you may have read, I am still bearish so I strongly agree with everything this video has to say. Just to sum it up, we're currently experiencing a 'suckers rally'. With the market closing up, there are more and more bulls everyday. Fears and concerns are starting to fade away and this is when the amateur starts buying back the stock market. This is exactly what institutions want, they want you to buy into this mess...this 'suckers rally' gives institutions a perfect opportunity to sell into this bounce. At this time we are still in a downward trend, instead of looking for opportunities to go long, start looking for opportunities to short.

Give this some thought: With today's poor job statement the market should be experiencing a negative vibe, instead there is a positive outlook. Mergers and acquisitions (M&A) are giving people hope. Refer back to the video...what's happening to the big four? If institutions were buying right now, shouldn't prices be rising significantly in these four stocks? Institutions do have investments in these stocks, but are now finding opportunities to sell as amateurs buy. M&A is just an excuse for the market to stay afloat, without this M&A news, institutions would not be able to gradually get out of their long positions. An aggressive .5 cut shortly after a .75 cut should spark a massive rally, instead we got a small rally followed by heavy selling led by the institutions.

Disclosure: I bought SDS today to hedge my long position in APP. May have bought it too early, we'll just have to wait and see. Also, my recommendations of BHP (1 day ago), HOLX (2 days ago), WYNN (5 days ago) and YUM (2 days ago) would've made you around $7, $6, $15 and $3 respectively. As you can see I am an active trader, I would've sold all these stocks by now. This is why I don't pitch any of my stocks here, instead I post them on forums and only post my longer-term recommendations on my blog. If you want specific stock picks, leave me a comment.

Thursday, January 31, 2008

V

Phew, I'm glad that my APP is doing well right now, people are starting to finally look into this stock. I've noticed that there are a few more bulls in this market thanks to the 50bps cut...that's nice, but I still believe that the correction is not over yet. I would consider myself one of these bulls right now, but since the market direction is still unknown I only have 50% of my portfolio invested, the rest is in cash. The S&P should test the 1400 mark within the next week...but if it's unable to break through that support we will be testing new lows.

Now you know I'm bullish on American Apparel (APP), but Visa (V) is another company I may be interested in.

I'm sure you've heard the buzz over their new IPO, but is this company worth investing in? Now there's tons of positive comments surrounding Visa but let me list you some of the negatives first. One thing's for certain, with all these credit issues surrounding financials, Visa will not mirror Mastercard's past performance. Further, do we all remember the hype surrounding Tim Hortons? THI was up for a few weeks but dropped shortly after. The hype surrounding this IPO is something that I would be scared of. I still plan to play the hype as I have done with several Chinese IPOs, but my plan is to get in and out quickly...if that fails, I would consider holding the stock long-term. All in all, before buying into the hype do some research to see why they are going public and why they need to raise $10B from this initial public offering. Don't be fooled by all this excitement surrounding this IPO and Mastercard's great return, Visa is certain to crank up their IPO price and it may be too overvalued by the time average buyers can buy the IPO.

Monday, January 28, 2008

WEDNESDAY IS A NEW DAY

By the looks of it, Wall Street expects the Fed to cut 50bps this week (2.15 EST on 1/30/08). Investors took the news of a big drop in new home sales as a sign that the Fed must lower interest rates again. But will they? And how big of a rally will we get if they do? It's hard to say...today's volume was ridiculously low and I fear that the market is going into Wednesday over bloated. Also, the markets have been up three of the last four trading days, and people don't seem to be as worried as they were last week...so there is a possibility that they may do nothing or just cut .25. No matter what they do this week, I'm hoping you all have cash on hand for the big news. As a trader, you should be ready to react and pounce on any given opportunities. If the markets drop I will look to short to hedge my long position in APP.

Here is what I did today, I said over the weekend that I had mixed feelings going into Monday, but I decided to look into SDS anyways seeing as the Asian markets were in ruin and the U.S. pre-market was negative. I bought SDS in the morning...I got kinda worried 30 minutes into the opening so I decided to set a sell stop just incase the market decided to swing the other way as it has been doing for the past month.

Friday, January 25, 2008

SORRY TO SAY IT

Just as I predicted, today's rally was short-lived. By midday we lost all our morning gains and by the afternoon we headed towards negative territory. My prediction was spot on, so I hope you got out of any long positions in time and used that money to buy QID. I find it rather immature that some investors including Jim Cramer are calling bottoms in the market already. This correction is far from being over, the bull mentality Cramer has needs to change before anything gets fixed. Just see how wrong Cramer is, and has been in this video.

So...we may get short-term bottoms along the way, but we have yet to test the 2004 lows, and if the Fed doesn't cut 50bps come Tuesday we will be testing those lows this week. Technically, it looks like we're heading down on Monday in the S&P500, the NASDAQ has a similar pattern but is showing a bullish divergence. Has tech been oversold? Perhaps, but picking up some QID on Monday shouldn't hurt you. I'm thinking of getting into some SDS though. Anyways, have a good weekend...and I'm sorry to say it, but I'm bearish in this market.

1/27/08 UPDATE: I'm starting to get mixed feelings about Monday. With so many earning reports coming out tomorrow, you need to be careful when picking a side...you don't want to be on the wrong side of the fence. The markets can turn on you at any moment, you're probably better off just holding cash going into Tuesday. Remember, holding cash is a position too!

Thursday, January 24, 2008

A LONG TERM INVESTMENT IS A FAILED SHORT TERM INVESTMENT

A long term investment is a short term investment that has failed. Keep that in mind these next few days if you are going long. Be very careful, tomorrow should start off green with all this good news and the futures up tonight but in these volatile markets anything can happen. We didn't get much volume today, an indication that this rally is not very strong. Remember, we are still bearish...Fridays in a bear market are not the best, they have the ability to sell hard in the afternoons, so keep that in mind when you're trading tomorrow. Also, as of today, we have retraced up to 50%...this is a dangerous mark, because those who got hurt are looking to take some shares off the table. I see the markets moving sideways towards Tuesday's Fed meeting; from there we could move sharply up, or sharply down from this 50% retracement.

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