Trading update, Thursday 9/29/11

Changed the logic on the FAS entry order, and was filled at 8:00 am this morning at 11.25. Germany voted to increase the funding for Greece, and the market took that as an incremental positive.

I have added an entry stop limit order for a second FAS lot at just above today's high. I am not sure why, but I am feeling a bit more optimistic about the financials.

I have placed a FAS exit limit order at 15.65, which is just below the high made at the end of August.

Disclosure: Long FAS.

***remember this is an illustration of what i am trading and my thinking...it is not a recommendation for you or anyone else to buy or sell this or any other security...trade at your own risk...my positions my change at any time without notice***

Trading update for Wednesday, 9/28/11

As I mentioned yesterday, it looked like the FAS was getting ready to generate a daily swing sell, and the FAZ was getting ready to generate a daily swing buy.

Well today, both of those setups were triggered. The FAS sell is circled in red, and the FAZ buy is circled in green:

Since I am still on the fence about the the market impact of a possible $3-5 Trillion dollar fund for European sovereign debt, I decided to favor going long the FAS for a longer term hold, as opposed to long the FAZ for a shorter term swing. This continues to be my bias.

I have an order to buy 1 lot of the FAS at 10.35 or at just above today's high of 12.14.

Barry Ritholz's Big Picture blog had a good article today on the importance of taking the stop loss if you are a trader, a bank or a country. Managing risk is what keeps us in the game, and taking the stop loss lets us play another day.

Disclosure: No positions in the securities mentioned.

***remember this is an illustration of what i am trading and my thinking...it is not a recommendation for you or anyone else to buy or sell this or any other security...trade at your own risk...my positions my change at any time without notice***

Oops, I thought I cancelled that order!

Trade maintenance is important and I got sloppy. Last night after catching up on the day's market activity, and realizing that the $3-5 Trillion dollar fund to support European sovereign debt issuers and holders, might be a game changer, I thought I had cancelled my order to sell my single lot of the FAS in the mid 12's. Well as it turned out, I didnt cancel the order and it was filled near the high of the day. Booking a profit is nice, but the order should have been canceled.

Looking at recent days of trading activity, the FAS actually looks like it is setting up for a sell here, and the FAZ is looking like it is setting up for a buy here, based on the swing trading tactics of Oliver Velez. Having said that, I am still concerned that this European fund could be a game changer. I will continue to watch both the FAS and the FAZ, but will be more willing to buy the FAS for a longer term hold, as opposed to buying the FAZ for a shorter term swing.

I have placed a FAS entry order for 1 lot at 10.35 and 1 lot at 9.35. I have no open orders for the FAZ.

Disclosure: No positions in the securities mentioned.

***remember this is an illustration of what i am trading and my thinking...it is not a recommendation for you or anyone else to buy or sell this or any other security...trade at your own risk...my positions my change at any time without notice***

A $3-5 Trillion what?

The always prescient Todd Harrison of Minyanville.com discusses the possible ramifications of a $3-5 trillion fund to backstop European sovereign debt issuers and holders.

Is this more medicine to mask symptoms or a cure of the disease?

To me it sounds like medicine, but of such strength, that it might begin to provide some intermediate to long term optimism for the financials.

I am long 1 lot of the FAS, and have cancelled my swing sell of this lot in the mid 12s. I have also canceled an earlier buy of the FAZ in the low 50s. This fund could be a game changer, so I want to see how the market responds to it over the next few weeks.

In my view, we still have slower global growth, and the increasing possibility of a recession here in the states, as well as a highly probable partisan presidential election cycle that will not inspire confidence in the electorate.

In any case, I will watch and wait to see if I want to begin buying the FAS for anything more than a short term swing trade.

Disclosure: Long FAS.

***remember this is an illustration of what i am trading and my thinking...it is not a recommendation for you or anyone else to buy or sell this or any other security...trade at your own risk...my positions my change at any time without notice***

Articles of Interest, Sunday 9/25/11

Help Wanted:

"Has our leadership lost its mind? Do these people go home on weekends to some offshore island, where everyone’s retirement fund is doing fine, everyone’s kids have jobs and no one’s mortgage is under water? Where is the urgency? This is code red. We are facing a possible global financial contagion triggered by European banks choking with sovereign debt spreading their woes to an already weakened U.S. financial system" Thomas Friedman, 9/25/11

El-Erian Sees Global Economy Slowing Next Year:

"Former U.S. Treasury Secretary Lawrence Summers said he has been to 20 years of IMF gatherings, and “there’s not been a prior meeting at which matters have had more gravity and at which I’ve been more concerned about the future of the global economy.”

"Billionaire investor George Soros said “something needs to be done” to safeguard Europe’s banks because Greece may be unable to avoid default."

US Dollar Index and Precious Metals update, Sunday 9/25/11

Back on 9/20/11, I wrote that recent history suggested that when the US Dollar Index, rallies, the SP500 trends sideways at best, and down at worst. At that time, the US Dollar Index was breaking out of a 6 month range.

Now the range break continue to the upside. I believe this strongly suggests that the SP500 will continue in its sideways range at best, or downtrend at worst.

Looking at the Precious Metals, GLD (gold ETF) suffered its largest weekly loss on a percentage basis in many years. At best, GLD remains in weekly uptrend.

SLV (silver ETF), suffered its second large weekly loss of the year. At best it is clinging on to a 7 month base, but that looks to be in jeapordy, and another downleg into the mid to low 20's might be upon us.

I am not sure how much of a relationship these two metals have with the US Dollar Index though.

Disclosure: No positions in the securities mentioned.

***remember this is an illustration of what i am trading and my thinking...it is not a recommendation for you or anyone else to buy or sell this or any other security...trade at your own risk...my positions my change at any time without notice***

Trading Update, Thursday 9/22/2011

My profitable exit order was hit yesterday for the FAZ at 63.65. I considered getting longer on a move above the high made on 9/20, but decided against it as the there wasn't enough of a pullback on the daily chart to justify the move. There might have been enough on an intraday chart, but I was focusing on the daily.

This morning in the premarket, I purchased 1 lot of FAS at 10.52. I am currently looking to exit this lot in the mid 12s. If the FAS moves against me, I will get longer. I still have 5 lots left to purchase. I don't believe that this is the big long term low that I have been looking for in the Financials, but I will get longer at predetermined levels if it goes against me.

Disclosure: Long FAS.

***remember this is an illustration of what i am trading and my thinking...it is not a recommendation for you or anyone else to buy or sell this or any other security...trade at your own risk...my positions my change at any time without notice***

Trading Update, 9/18/11

Started a new long FAZ position with a single lot at 53.65, which is towards the bottom portion of the recent 6 week range. I am currently offering this lot at 63.65, which is below recent resistance in the 67 area.

I really enjoyed attending iFundTraders recent trading seminar in Boston. It was fun to see old friends and to bring an IT colleague with me. It was great to see Oliver Velez again too.

Disclosure: Long FAZ.

***remember this is an illustration of what i am trading and my thinking...it is not a recommendation for you or anyone else to buy or sell this or any other security...trade at your own risk...my positions my change at any time without notice***

Trading Update, 9/14/11

I added another condition for the FAZ entry order, such that if it drops to the lower portion of its recent range or if it breaks a bit above Monday's high, I will enter with 1 lot.

Some analytical highlights from Todd Harrison's always insightful and instructive daily column over at Minyanville.com:

• The trick to the European debt "trade" is to avoid ad-hoc, one-off solutions (as we saw in the first phase of the crisis) and address this mess with a comprehensive plan.
  
• You know my take -- debt destruction and/or reorganization is the only true medicine -- but you also know it won't come easy. The toughest, and typically right decisions rarely are.

Disclosure: No positions in the securities mentioned.

***remember this is an illustration of what i am trading and my thinking...it is not a recommendation for you or anyone else to buy or sell this or any other security...trade at your own risk...my positions my change at any time without notice***

Trading update, 9/13/11

I profitably exited the FAZ yesterday, with one lot going in the pre-market, and the other lot going in the aftermarket (although the chart shows the second lot going out today, which is not correct).

I currently have an entry stop limit a little bit above today's high.

Disclosure: No positions in the securities mentioned.

***remember this is an illustration of what i am trading and my thinking...it is not a recommendation for you or anyone else to buy or sell this or any other security...trade at your own risk...my positions my change at any time without notice***

Articles of Interest, Sunday 9/11/11

I believe that the news flow for financials continues to be poor, but not poor enough to suggest long term buys are in order yet. I will continue to trade the financials from both sides, until i believe that a longer term bottom is being put into place. In my view, that may not occur for another 6-30 months (yeah, that's a large window)!

German dissent magnifies uncertainty in Europe

French banks poised for Moody's downgrade

BankAmerica to layoff 45,000

Disclosure: Long FAZ.
 
***remember this is an illustration of what i am trading and my thinking...it is not a recommendation for you or anyone else to buy or sell this or any other security...trade at your own risk...my positions my change at any time without notice***

The US Dollar Index is breaking out of it's recent range, but does it mean anything to the US Stock Market?

The US Dollar Index is breaking out of its recent range, but does that imply a high odds move in the SP500 in a specific direction?

When the US Dollar Index rallied from mid 2008 - early 2009, the SP500 (SPY as proxy), dropped. When the US Dollar Index rallied from late 2009 - mid 2010, the SP500 chopped sideways in a sloppy action. Now that the Dollar Index has broken out of 6 month range, if it begins to trend upward, does that portend sideways/downward action in the SP500?

Based on market behavior for the past 6 years or so, it does.

Disclosure: No Open positions in any of the securities mentioned.

***remember this is an illustration of what i am trading and my thinking...it is not a recommendation for you or anyone else to buy or sell this or any other security...trade at your own risk...my positions my change at any time without notice***

Articles of Interest, Friday 9/9/11

Stock Traders Almanac: Sector Seasonality is on Track

Todd Harrison: The Market is speaking, are you listening?  and this was written two weeks ago!

ECRI: WLI ticks up, but growth rate weakens

Stock Traders Almanac: Hemline Index still Bearish

FAZ entry stop hit, profit targets identified

The FAZ entry stop was hit at 59.55.

Currently looking sell half the lot at 67.65, and the other half lot at 72.65.

Disclosure: Long FAZ.

***remember this is an illustration of what i am trading and my thinking...it is not a recommendation for you or anyone else to buy or sell this or any other security...trade at your own risk...my positions my change at any time without notice***

Open Entry Orders for Friday September 9, 2011

I have placed a stop limit order for Friday for the FAS and for the FAZ, just above today's highs. If the financials move outside of today's range, and this move does not occur on an opening gap, then at least one of the orders should get hit, and I will be long one of these vehicles. If the move does occur on an opening gap, then one of the orders might get filled.

Profit Targets have not been determined yet, but I will be looking at recent pivot points as a guide.

Disclosure: No positions in the securities mentioned.

***remember this is an illustration of what i am trading and my thinking...it is not a recommendation for you or anyone else to buy or sell this or any other security...trade at your own risk...my positions my change at any time without notice***

Booking Some Gains

• Exited FAZ in the premarket this morning for a decent 20+% gain.
• Currently looking to enter FAS on a pullback into the low 10s...
• Watching FAZ for another potential entry as well, but will wait for the chart to set up.

Disclosure: No positions in the securities mentioned.

***remember this is an illustration of what i am trading and my thinking...it is not a recommendation for you or anyone else to buy or sell this or any other security...trade at your own risk...my positions my change at any time without notice*** 

Articles of Interest for Tuesday 9/6/11

Reluctantly, Europe Inches Closer to a Fiscal Union

European Banks Under Assault in Market Reminiscent of 2008

The Financials: Current Thoughts.

• it is my belief that the financials will continue to be a tell for the longer term direction of the overall market, with the SP 500 eventually moving in the same direction as the financials, though the financials will be more volatile...
• at this point in time, i believe the there is 35% chance that the FAS, will retest its March 2009 low (around 4.00), sometime by the spring of 2014, and that there is a 65% chance that it will then go on to retest its February 2011 high (around 34.00), 2-4 years after it hits whatever low it puts it....
• i am focusing on swing trading the financials as a means to profit from the above thesis: FAS (triple leveraged long, goes up 3:1 when the underlying securities go up; FAZ (triple leveraged short, goes up 3:1 when the underlying securities go down); the underlying securities are those contained in the Russell 1000 Financial Services Index....
• I believe there will be tremendous opportunities to profitably trade the up and down moves in the financials and that the FAS and the FAZ can facilitate that...these vehicles are not without risk, as they are not really designed for longer term trades, but rather for shorter term trades...but even with these risks, i will be using them for trading purposes, and if they begin to trade significantly out of synch with their underlying index, then i will re-evaluate them as trading vehicles....FAZ and FAS has traded out of synch with the underlying on numerous occasions, so past pivots points appear to have less relevance for present day trading, especially for the FAZ....the XLF could be another useful proxy for financial service company index....

 

Disclosure: Long FAZ.

***remember this is an illustration of what i am trading and my thinking...it is not a recommendation for you or anyone else to buy or sell this or any other security...trade at your own risk...my positions my change at any time without notice***

Stock Traders Almanac Review of Current Conditions

Deja Vu All Over Again