Will It Hold Wednesday.

The day was according to the plan. All the asset classes are moving in tandem and appear to be in line with the expectation. A quick review of various assets classes are as follows:

Equities: We are coming closer to the cycle top and while my upside target in SPX is 1425, we came pretty close intra-day at 1420. Will that be considered as target met? I have started scaling in short positions with inverse ETFs for indices and will add some more tomorrow. Again, the basic premise here is “Patience” and “Agility”. The correction may or may not start tomorrow. But this was a counter trend bounce which we called well in advance and had a bounce target. Now that we are close to that target, both in terms of price and time, it seems that short trades are high probability trade.  The coming down move most likely will make a lower low than what we had on November 16, enough to create doubt and fear in the minds of the retail investors. That is when the Boyz will buy cheap and pump the prices up again.  As you have seen in yesterdays Dilbert cartoon, someone will create Media frenzy, Banksters will pump or dump the prices and Sheeples will be sheared off.

I am sure that when I will call you guys to go long next month, many of you will hesitate and wait for everything to be OK. And when everything will seem OK, it will be time to sell again. To win this con game, we have to go where the puck is going to be, not where the puck is.

Precious Metals: Silver had a moment of madness and spiked higher but gold was not able to cover the loss of yesterday. I did take a small short position in silver with ZSL with a very tight stop. If Silver closes above $ 35 next week, I will close this trade but for now I expect silver to correct along with equities. How much it will go down I am not sure. The 1^st target is a close below $33 and then I will add some more short positions. So right now, there is a range for this trade and I would be monitoring this range for further action. I am not touching gold for now and will wait for all risk assets to bottom before going long again.

Crude:  Crude made a possible double top around $ 88.50 and did not held on to the gain. Like equities, here also the short term cycle has topped or about to top and I do expect further correction in Crude prices. I am short crude with SCO and will add some more tomorrow. Once it closes below $ 86, we can be very sure of the coming correction and the minimum downside price target would be around $75-$77. Let’s wait and see how it plays out. I think this one is a high probability trade.

Coffee:  While coffee seems to have made a bottom, the hourly chart is overbought and we might see some pull back shortly. It is where that pullback ends will give credence to the bottoming of coffee. There is no hurry. From a high of $308.9, coffee had corrected to $ 144 which is more than 50%. So we have lots to cover on the upside and we can afford to wait for a while for confirmation. I just want to draw your attention to this potential winner.

Nat. Gas: Most likely it gave a short term sell signal but I do not think it is going to be anything serious. The biggest oil company in the world, Exxon Mobil is getting in Nat. Gas in a big way and when such a giant starts taking a position, we know the future. I would be looking to add Nat. Gas as a long term play in future.

Bonds: For many months now Bonds are moving in a range. TLT made a high in last July and since then it is just chopping around. As there is no clear direction, I have not touched it. But the long term trend is clear. If you are long bond, it would be better to book profit. The interest rates will start going up starting sometime in the next 3-4 months.  TBT will be the trade of the life time then. But we will have to wait for that trade as the time is not yet ripe for taking any position in Bond. The inverse relationship between Bond and Equity is about to get discarded.

That’s all for tonight. Thank you for sharing my thoughts. Hope you are able to pass on the blog to your friends and join me in twitter (@BBFinanceblog). As I said yesterday, come January, we will have a paid subscription service to selected few with specific trade ideas. I will be emailing at least once a week high probability trades with entry, stop loss and exit points. If you have been reading this blog for a while, you know that I will try to minimize risk and look for high probability trades.  Of course it will be a paid service and I am looking only a selected few. So if you are a serious investor, with investment of minimum $100 K or more, looking to earn decent return on your portfolio consistently without speculation or undue risk, do send an email to: bbfinanceblog@gmail.com to be included in the mailing list.

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The "How On Earth" Factor.

How many of you were tempted to short or did actually short the market in the morning. It was as if the bottom was about to fall off. Exactly the stuff I wrote yesterday. Did you feel that you are going to miss out? If you did, you are not alone because I myself felt like that and that despite my own writing that such a thing is going to happen. So I just walked away from the trading desk for an hour.

Now all the talking heads, media of all kinds and of course ZH is attributing the rally to Mr. Boehner. But Mr. Speaker sure did not read my blog post of yesterday. Nor did I know that he would speak today or whatever he would say.  Someone has asked over email which chart / indicator predicted the sell off and subsequent rally. The answer is: there is no Technical Indicator which will tell you that there will be sell off tomorrow morning and bounce in the afternoon. It is much more complex than that and much more intuitive. At least it has helped some of you folks to stay out of harm’s way and I am glad for that.

So where do we go from here? My reading is that the bounce will continue tomorrow and tomorrow most likely would be a good time to start scaling in some short positions. My personal favourite is Crude. I am still debating about Silver. I am not sure if it will correct and how much. But Russell 2000 looks a good candidate and so does Facebook.  However please do your own due diligence and have proper stop loss in place for any trade you take. And please do remember, the market is not going to tank whatever ZH may say.

People who know the inner working of the Washington DC have started buying already. But they will want retail to sell out and drive the price down some more, so that they can buy cheap. I would suggest that you start preparing your buy list along with your Christmas present list. Consider this advice my Christmas gift! I am not saying that we buy now. I am saying that we should be ready so that when there is some fear in the market and things look bad, be ready to pick up the bargains.

Few days back I brought your attention to Coffee and identified JO as the vehicle of choice. Today JO gave the largest bullish wick in months from its long term support line. I will be scaling in JO on the long side of the trade with a tight stop loss.

My sabbatical will end in December and from next year I will be back to what I do for living. Crunch number. The blog posts will be irregular but we still have a month or so. Those of you who think that I can add value to your investment and trading, please email to be included in a select list. I will be sending personalized email to this group highlighting trading / investment opportunities every week. If you have been reading this blog for a while, you know that I will try to minimize risk and look for high probability trades.  Of course it will be a paid service and I am looking only a selected few. It will cost less than a daily cup of Starbucks' Cafe’ Mocha.

But those are plans for next year. Let us make some money with free advice this year and we will take from there. Thanks for sharing my thoughts and hopefully you will also share it with your friends. Stay frosty folks. 

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Today's Watchword: "Patience".

For those of you itching to short, some more patience is needed. Tomorrow the market will tease you with some more selling and you will be tempted to short. You will think, gosh, I am going to miss the opportunity. That “Fear of missing out” will come in play. Only thing I can say is: have patience. The cycles for risk assets are up for few more days. It does not mean that market will go up and up. It just means that although we may see some more selling tomorrow, we better wait for the cycle to top before we short, least we fall for a bear trap.

While I expect one more round of selling starting December, I am not sure of the magnitude of selling. May be it will continue for the whole month of December but if some sort of kicking the can down the road game is played by the politicians, the selling may not be very deep either. So it is a fluid situation after all and while the only trade is a short trade for now, let us be ready to get out of the water very quickly. For, only the direction is certain and not the level of up or down move.

As I keep repeating, the world and USA is not going to end tomorrow. ( It will end little later) While we have some nice opportunities on the short side we are also going to have some great opportunities on the long side as well and those opportunities are coming up much quicker than you can imagine. And if you have not noticed already, for the retail investors, it is easier to make money on the long side than on the short side. 

PM sector, particularly gold is not showing the strength and is nowhere near $1780, its earlier high for this year. That makes me think that may be one more correction is due for gold along with other risk assets. But I do not want to short gold and as of now waiting in the sideline to go long.

The situation in Europe is not all that bad as the MSM and ZH would have us believe. In long run, may be in next 18 months or so, Euro will split up and there will be two Euro. A Northern Euro consisting of the strong economies and a Southern Euro of the PIIGS led by France. And it may sound a bit far-fetched  (Like the Apple $ 500 call) that Northern Euro will become the reserve currency of the world. But that is still some months away. Till that time, USA will be able to print as much as it want and still keep the bond yield at ridiculously low level. They are talking of reducing $ 1 trillion over 10 years, when the deficit is over $ 16 trillion not considering un- funded liabilities. It’s a joke and sooner we realize the joke, better for us.

The other side of the joke is that everyone is MSM and all talking heads are going ga ga over the bounce in housing and now everyone wants to join the gravy train. Particularly all Pundits are talking about home-builders like LEN and TOLL. I think this trade is now overcrowded and better avoided. Sorry guys, you are late in the party and it is better to give it a miss. In any case I do not believe that Housing has bottomed and we will revisit this subject after six months.

Some of the readers may be getting confused as to what are my views of the economy. Is it improving or going to hell in hand basket. I tell you what. From your investment and trading point of view, it does not matter what you believe. All it matters as how your portfolio is performing. While I do not believe that the end is upon us tomorrow, I also do not believe that we are any better off than we were four years ago.  But in the mean time the Fed has flooded the market with crisp notes and we would be fool not to take the advantage. The whole system is rigged and we are mere pawns. But let us not trade with our belief.

That’s all for this evening. Thanks for sharing my thoughts. Please remember the Amazon link.

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Tale of two Indices.

It’s a tale of SPX and NDX. When the correction started 70 moons back from a high of 1470, SPX came down to 1344. 126 points or 8.6% . Not really earth shaking but OK.  NDX came down from 2880 to 2494 i.e. 386 points or 13.4%. Tech. stocks were lower across the board lead by Apple which dropped almost 25% from peak to trough.   

Now while the bounce is in progress, SPX has retraced about 50% while NDX has retraced little above 38.2%. I expect SPX to retrace up to 61.8% which is around 1420 +/- few points. Will NDX also retrace 61.8%? 61.8 retracement levels in NDX is around 2730. If so then NDX still has another 80 points to run.  It is not guaranteed but with cycles up for few more days anything can happen. The point here, if you are thinking of shorting the indices, better wait for few more days and if you are thinking of taking a day trade, NDX is a better option than SPX.

What is worth noting, since September 14, SPX has lost about 60 points and unless we are very nimble trader, watching the market move every moment of the day, did we lose much by staying in the sideline? Well, we did not exactly stay in the sideline; we dabbled in Nat. Gas for a nifty profit and now waiting for other opportunities. We may get another chance of shorting and this time many parameters are lining up. While shorting, we have to be very quick to grab and run because this is not going to be the end of the world that many are waiting for.

The USD index continues to behave as expected but apart from NDX other risk assets are not showing much vigor. At the point of writing Euro has broken up and has touched 1.30 and yet Crude is languishing and hardly any movement from Gold and Silver.  May be they will also break to the upside but so far that has not happened.

Last week I closed most of my Nat. Gas position and thank my lucky starts that I did. It is always better to be lucky than smart. Nat. Gas corrected almost 4.5% today. So far it seems that $3.70 is the support and that held. The longer term price target is much higher but nothing goes up or down in a straight line.

 Coming back to the Euro, the irrational exuberance is being attributed to the  successful completion of the Greek Aid. Gosh, how long to listen to the same story and how come the market reacts the same way every time. I cannot attribute any logic or reason except that short term cycle of risk assets are up for the week.  So maybe we should just ignore all noise and stop looking for reasons and logic and just accept it as they are.

Among many stories and news that I read during the day the one that touched me is the following : Supermarket Owner Gives Away Stores to his 400 Employees: http://news.yahoo.com/blogs/trending-now/supermarket-owner-gives-away-stores-400-employees-191200868.html. God bless him and his family.

Before hitting the “Publish” button, here is a contrarian short idea.

(H/T Schaffer’s Market research)

If shorting crude is going to be a good trade, may be this one goes hand in hand with that trade. Please send your feedback and ideas as to how best to short Oil Services.

Thanks for your support and help and for reading the blog. 

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A Must Read Interview

If you want to make a sense of all the economic data and find out where the country is going without all the BullS**t coming out of doom and gloom camp please read the following interview:

http://www.businessinsider.com/bill-mcbride-of-calculated-risk-2012-11

Have a great week end folks.

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Market Gives Thanksgiving Gifts.

Hope you all had a great ThanksGiving. Today the half day session presented quite a nice Turkey, deep fried Texas style. Only folks complaining were Zerohedge who found many reasons why this is a fake rally. Most likely they do not read this blog otherwise they would have known that we have called for this bounce weeks back. We can also tell them that this bounce will continue for better part of next week. It does not mean we are long. But we can save them lots of heartache and agro.

Those of you who lost tons of money since 2009 getting caught up in bear talk and that imminent collapse here is one blog you must read everyday just to re-wire the brain.  http://www.calculatedriskblog.com/

Bill was 1^st to start financial blogging before doom and gloom blog became fashionable and he identified the collapse of the financial system in 2007. He is a genuine person who is not into ranting and always gives facts to justify his position. His website is hosted here in America and he does not get money from anybody to create negative propaganda. This one is a must read for those of you who have been brain-wasted by Voldemort.

Anyway, the half day session saw all risk assets rip higher. Gold and silver had a nice jump and most likely the trade suggested by Stock Trader’s Almanac is going to be winner 13 year in a row. But if you also remember, the exit date of that trade is around December 2-4. So if you are long PM as a trade, remember to take profit. Crude however is moving in the range. But the most important thing which I thought worth mentioning today is the dollar index.

US$ Index dived almost 1% which is a big move in one day and no wonder PMs are jumping higher. But crude has not been able to close higher when USD is at a low, it does not bode well for crude in future. This chart of crude is from Lance Roberts.

I had written before that Crude may bounce upto $ 91-92 and this chart supports my calculation. Should Crude reach that level and Dollar Index reach 79.50 in the next 3 or 4 trading sessions, it will set up a nice short entry.

Nat.Gas reached close to my up-side projection and I had closed half my position. Most likely I will look for getting out of the rest by next week. I expect Nat.Gas to go up $ 6 but in short term, it has gone up almost 50% in 6 months and is time for some pull back. It may not happen but why take the risk.

Equities most likely will see some pull back on Monday before one final push up. The sell set up will kick in around 1425-30 or November 29^th, whichever comes 1^st. And this time I plan to go short with some leveraged ETFs.

In my last post I wrote about coffee. I think it is bottoming and look for the confirmation as highlighted by our dear reader in the last post. This has to be a long term trade and have your stop loss according to your risk tolerance level.

So you see, we have lots of opportunities coming up next week.  Santa is giving you advance gifts and I hope you will be nimble enough to grab them. I cannot directly tell you what trade to take. I can only say what I have done. So join me in Tweeter because I will tweet as I take a trade. Also please share the blog with your friends who may benefit from it.

Enjoy your long weekend and have fun. Thanks for your donations and supports. The blog now has a link for a job board and I hope it will be useful to some of you. Looking for your feedbacks and questions.

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Happy Thanksgiving.

So here we go again. SPX up 4 days in a row and yet except one day, it has not done much. In 4 days it has covered less than 50 points and is struggling with the Fib.38.2 retracement level. There is only half a trading day this week and then the cycle is up for another 4 /5 days. As of now, I do not think SPX will cross 1410 with any conviction and even if it does, most likely it is going to falter at 1420.

I borrowed the following picture from Peter  Brandt.

However I disagree little bit with the level of the bounce and I think it will bounce another 15 points higher from here although I bailed out.

I closed my TQQQ call options today and half of the long position in Nat.Gas. Although there is no immediate danger for Nat.Gas and prices will most likely go up some more, I decided to take some chips off the table. We must leave something for the next guy.

The Middle East cease fire was inked today after few last minute blasts but Crude was up for the day, although it was at the same level as day before, just below $ 88. If you listen to the logical explanations of the Crazies, you would expect Crude to sell off after the fighting stop. But the opposite happened. Yesterday I wrote that it is still little early to short Crude. We need to wait for few more days till the bounce fades in all risk assets. This is another trade which I think would be a safer bet.

Another short trade I am looking at is Silver. If Silver fails to clear $34 by the next week end and closes below $32, I am going to take a stab at shorting silver. But for that few conditions have to be met. I will tweet if I enter the trade.

Also, take a look at coffee, which I think is making a long term bottom like Nat.Gas. Out of the two vehicles for coffee, JO and CAFÉ, I prefer JO. It is less volatile and more stable.  30%-40% return is quite possible in a year but you have to give it time and be patient.

You see, there are lots of opportunities and fish out there without worrying too much about the equities. We will either go long or short when we have all the parameters lined up. But in between there are other opportunities which we can be watchful for.

That’s all for this evening. If you are travelling, travel safe. Don’t let the trolls at Airport bother you too much.  And for your Black Friday shopping, do remember the Amazon link in the blog. Once again, thanks for the donations. 

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