| Stopped out |
3/8/2006 11:36 AM EST |
I just returned to the office, to discover those recent index purchases were (in part) stopped out.
My trader tells me I was "early;" I consider that a euphemism for wrong.
I will look to redeploy when the set up gets better: A little more oversold, and closer to the bottom of the channel.
It would be too ironic if the most Bearish guy on the RM site was long when the bottom finally dropped out;
Position: long partial positon SPY
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UPDATE: Martch 8, 2006 2:35pm
So even if I am becoming a contrary indicator, the discipline must trump the conviction. The timing was wrong, and a partial sale was part of the original plan, and so half the SPX postion was sold.
When I was first learning to trade, we called that "Throwing a Virgin into the Volcano" — a partial sale is a sacrifice to the trading Gods . . .
just curious…. where do you usually set stops?
Bad call, but Good discipline. Nothing wrong with that.
How much more oversold do things need to get? If the close holds somewhere in this range, we’ll be a day away from maximum oversold and very, very close to the bottom of the NDX trading range. I’m not sure how long any rally would last, but I’ll be putting my money to work on the long side if we close near the lows today.
This was just an index trade — so they were much tighter than usual, or for individual names.
Also, we run a dual model fund — when both separate trading models line up, we go large, and when only one does, we put on smaller, tighter stopped positions.
This was a partial buy in one model (mine for Qs and Smeis) and a buy from my partners m0odel (SPYs).
Since neither was super bullish, we kept them to small positions and very tight (1.5%) stops.
I suspect there is a snapback coming, but I need some additional clarity to reposition . . .
>>>I suspect there is a snapback coming, but I need some additional clarity to reposition . . . <<< Could you define clarity? Love your articles and short/long term thesis. I've read all the articles about other technicians, but I don't remember reading your own specifics on what you are looking for (ie. "clarity") to initiate positions. TIA
I think there’s a tradeable bottom coming. May not last long but I’d want to see the VXN close below its open. It’s at the top of the 20 day Bollinger Band. P/C is about 12% above its 10 day MA, not extreme but indicative of fear which you’d want at a bottom.
JMHO I think bonds rally into option expiration, then roll over again.
Hi Barry,
Always enjoy reading your musing and insights. It would be ironic for a bearish guy and great technician like you to be caught in the beginning of a bear market.
A few essays from SafeHaven are on stockdigg front page forecasting 2/27 as the market top and the beginning of the next bear cycle. Would like to hear your take on it. Thanks a lot.
long is not wrong
Commodities, Rails, Industrial Cyclicals (Textron, Manitowoc, Cat, Cummins, etc) and Broker/Dealers have been barfing. I don’t think it’s any coincidence they are all moving in tandem both up and down. Not that stocks are falling off of a cliff…yet. May not be a cycle top but if rates don’t behave, it likely will be.
I wish this were my original thought but there really aren’t many original thoughts. I can’t remember where I read this but it is a very plausible and interesting way to watch the markets. The argument is that as we’ve outsourced a fair amount of our manufacturing, we’ve outsourced much of the inflationary pressures associated with it. (Not to say there isn’t inflation here.) That has many consequences that are never forseen until the impact of global stasis is already impacted. The impact on the American economy is that much more of our profits are based on the service economy. So, a tight long/short rate will disproportionately and negatively impact American profits. On the global scale, risk has been transferred even more so to the developing economies. They feel the brunt of the inflation pressures in commodities and oil. Guess who is significantly less sophisticated and diligent in fighting inflation? Yep. So, as those economies have been less diligent in raising rates, they run the biggest risk of runaway inflation. Ultimately, that may play itself out with American consumers but the biggest dilemma is with the emerging market economies. Just at a time when the average American is chasing emerging markets because of the great returns they yielded in the easy money cycle. I’d still argue money is pretty easy but that might be changing.
So, are these equity moves foretelling and end to the commodity boom or just a healthy correction that will still bring more inflation to emerging markets?
When you think about it, we are really like locusts. lol. We feed on the cheap markets of the world and when one gets too expensive (First Japan, then Korea, then Taiwan, now China, next Vietnam and India, eventually Africa.) we feed on the next. But, the global economy always seems to benefit from such a policy. A win-win. Eventually a consumer class is created and most benefit…..so far.
Run, Barry Run.
When you originally posted about your purchase, my first thought was, “the bear has capitulated, this must be the top.”
I think you have good insights and if I were to chose any commentator it would be you.
But if you get caught in a bear, it isn’t ironic, it’s a lesson from the goddess. Most of us are not traders or short term timers, those who are make mistakes. It isn’t a game for the public to play.
Don’t get me wrong, I’m not an indexer though I think price averaging indexing is a great technique for those with a long term (15+ year right now) outlook. I even pick stocks because with low prices at brokers one can imitate an index in many cases except ratrher than buying all carmakers one gets Toyota and Honda (risky, but I think less so than the alternative.) I’ve had pretty good luck with sectors. 2 years ago it seemed obvious that energy and foreign stocks had good odds, a small herd was forming. 6 months ago I bought gold miners.
But most is just buy and hold for years. I figure even if they get hit by bumps certain energy and foreign stiocks will have strenght for a while and that if nothing else gold statyed flat for years and needs to catch up, then add currency and inflation concerns.
These are guesses based on macroeconomic hunches and so far they seem ok, though 3 or 4 years from now I may do indexing.
But short term timing? It requires a certain psychology and awareness. I have used the hunches of educated people such as yourself to time a few buys and sells, but these were probably going to happen anyway.
From a trading perspective, I’ve been bullish since the Post Katrina low (thats only short term)
And as I’ve written a dozen times, my expectations remain for a Q1 top —
I got caught trying to finagle a quick pop to the upside — not early, but worng. (and I’ll proly try again later )
Well, if Barry is an anecdotal example, then it seems like alot of stops were flushed out today.
Technically, we exceeded yesterdays low, breadth was poor throughout pushing into heavy oversold territory, but we are managing to bounce now above yesterdays low.
That’s a decent amount of flushing should any positive catalyst develop.
i covered my shorts today… back to cash. any more downside looks like pennies and not dollars to me…
BTW- there’s NOTHING worse than being right on the point, but wrong on the timing. Arrrrrrrrgh! LOL
Seems like the yield curve inversion has abated…
…”positive catalyst”…?
Barry,
If you are bearish after q1, why try a shortterm trade
on the longside, with so many external risks…..why not start building a medium bearish trade with averaging in to a decent position in the next with 20-30 days. any blow off top in the very near term future could be hedged with call or call spreads…?
How about just unlucky. The VIX turned at 11:50 (on the 5 minute charts) and so did the entire market. Overlay the VIX on any index and you’ll see what I’m talking about.
I love an honest analyst!! Most analyst would not admit their losses. You are a rarity.
I am still long with qqqq and believe your “short term recommendation” will be profitable. Timing is everything, but if we had perfect timing we would all be wealthy and retired at a young age.
Thank you for the wonderful advice of the past. I am looking forward to your next recommendation.
Well… at least it wasn’t a thumb.
Momentum, momentum, momentum. Did you guys realize both Bears and Bulls are hard to make money recently.
Jim Cramer now says “there can be no turn in the U.S. when you have people like St. Louis Fed President William Poole.” And that “If there is going to be a turn — and I don’t believe we are going to get it yet — it will have to be made somewhere else, somewhere besides the U.S. ”
Funny, just 2 months ago, he was saying “this is the best environment I have seen for stocks in six years.”
SPX low today was 1.75 points past the 61.8% Golden Ratio retrace of the ramp from 2/7 to 2/27.
That’s a decent support point for a bounce into the next ramp.
The way I see it, there’s a lot that can stand in front of a US (and global) bull market right now. The biggest factor being the funding morass in pensions and health care. Taxes are going to have to rise to cover state plans, and something is going to have to give with health care coverage, as nobody is saving for this and employers aren’t locked in like they are with pensions.
Second is the coming hurricaine season. Climatologists aren’t expecting any change from the past two years. These cycles last about ten years.
The bond volatility index is the lowest it’s been since just before the (once every 7000 years) LTCM event.
What kind of sacrifice would this be?:
…two guys at a public urinal (long single type)… one accidently drops $5 in from out of his pocket… then, he purposely pulls another $5 from his pocket and drops it in… and then finally he reaches down and takes the two 5s out together.
neighboring guy: “Why’d you do that?”
the guy: “You didn’t think I was gonna reach in there for just $5, did you?”
(attribution: unknown)
Barry,
I admire your courage to publish your trades and your positions.
Trading is inherently stressful and to talk about your positions and be subject to second guessing by your readers only adds more stress. Do you really need this?
Probably not!
Although I do find the responses HERE to be worthwhile — they are generally supportive and helpful, and many smart traders who post are quite insightful — but I am rethinking future posting at Real Money’s columnist conversation.
The petty sniping is not worth the time or the feedback — its just not worth bothering.
The nonsense at columnist conversation is what led to The Big Picture: Debate 101
Barry,
What do you think of yesterday’s (3/9/06) market action? Looked very very weak in the morning only to close higher.
emdgmd
correction….. 3/8/06 action (haven’t had my coffee yet)
Although I’m not a subscriber @ RM any more, the last few months I used the website I noticed that nearly all of the writers who actually had something to say rarely or never posted in CC. Come to think of it, it seems like the guys who use CC the most are the ones who view it as a trash talking forum (David Merkel excluded). I mean, Robert Marcin is a brilliant guy, but he’s the Billy Packer of trading; anyone who doesn’t trade like he does is an idiot (i.e. If you’re long natural gas, oil, gold, silver, or if you’ve ever shorted the stock market, you should go back to effing sheep or whatever your worthless job was before you decided to become a “trader.”). As Barry alluded to, my impression from visiting this board over the last several months is that there is more substance in the comments section here than on RM CC.
Anyway, I didn’t get the close I was looking for yesterday (close near the lows), so I sat on my wallet. I’m not willing to chase this setup because I simply wouldn’t know where to get out. Hopefully, the daytraders will fade the open this AM and drop us back down to 2250 on the COMP so I can get my money back to work doing something other than sitting in the money market (trading is lots of fun provided you actually get to trade more than once or twice a year – as has been the case for me in 2006).
Well, the daytraders have granted me my wish. Now if they can just keep the dip buyers out of play I can take action.