What a wild Monday…run up first then a wild downside swing and then recovery, with the indexes ending in the green, except for the RUT, but just barely red. A trader’s dream environment though, with volatility, the VIX with a 4 point range, and a 180 point swing in the Dow. And as I noted yesterday, the 3x ETFs were a goldmine. I used BGZ and TZA during the wild downside move to cash in, and the ES futures on the upside moves….it was a good thing. 
Here’s the 15-minute chart of the S&P500. The 1-hour dive at noon was awesome, if you caught it. I’m glad I chose to eat at my desk today!
The eco reports were all positive today, with a pop in home sales and a real good ISM report. Tomorrow we have Factory Orders and Auto / Truck Sales later in the day. Oh yeah, and the FOMC meeting starts Tuesday with a conclusion on Wednesday. So we’ll get an announcement from them on Wed. with similar announcments from the Bank of England and the European Central Bank on Thursday.
Speaking of banks….Last Friday, 9 banks were closed by the FDIC, bringing the total number of banks closed this year to 115. Which brings up some funny anecdotes about banks: “The economy is so bad, when you buy a toaster your free gift with the purchase is a bank!” And another: “The economy is so bad that if the bank returns your check marked “Insufficient Funds” you can call them and ask if they meant you or them.” heehee.
Okay, trade well everybody 
Published on
November 2, 2009,
3:29 am in
Trading and Weekly.
Tags: BGU, BGZ, ES, QID, QLD, Russell, SP500, TNA, TZA.
If you had slept through Thursday, the markets only went down a little bit on Friday. But if you got suckered in on Thursday’s trap, you probably got upset.
Remember that many mutual funds had their year end take place on Friday, which surely contributed to the selling pressure as they locked in gains and reallocated their portfolios. But Monday starts the historically strongest 3 months of the trading year. Of course last year wasn’t very inspirational. 
Reading articles and blogs over the weekend, it sounds ominous out there. But, when everyone gets scared, it may be time to pick up some cheap stocks. Looking at some charts, we look to be close to support in the S&P500, around the October lows.
The Russell has already cut through its October lows, after putting in a double top, and is approaching its September lows.
FOMC meeting this week and lots and lots of economic data with the monthly Non-farm Payroll report on Friday topping it off. The futures this evening have already put in a 10-point range and looking up. Should be the start of an exciting week. I’m going to concentrate on the ES futures this week and also watch the 2x and 3x ETFs like TNA / TZA, BGU / BGZ, QID / QLD. I’ll let you know how that pans out. 
I was well on my way to rake in all the profits from a falling market until……about 2AM Tuesday morning, the WSJ leaked out that the Prez was going to re-nominate Bernanke. Oh boy, did the markets ever love that. The futures had a steady up move until mid-morning when the bulls got tired. The bad part was that I wasn’t going to be around this morning so I placed some “hail mary” stops in case things got bad. Bang, bang, bang, those damn bulls popped every one. By the time I got to my office I had no positions open. Ugh!
And as usual, when your stops get hit the market reverses and goes your way. I just sat and watched for a while, but eventually went back into BGZ which did well in the afternoon and actually sold half the position in the afterhours. So I have a small position for the overnight. The overnight sessions have been pretty wild…last week they were very nice to me, but this week I’m paying the piper.
Just look at those index charts. Don’t they look toppy to you? I’m still looking for that correction….a little one and a big one.
…can’t trust that day, as the Mamas & Papas sang. The markets were still hungover from that Friday drunk of housing magic and Benny cheerleading. But eventually the buzz wore off and it looks like it may be a couple days before we can party again. The bulls were happy happy this morning, but got tired real fast and started falling over by afternoon.
Of course me sitting in 3x short ETFs made for an uncomfortable morning. Sure I nickeled and dimed myself going for some longs like ERX and TNA, while still holding ERY and TZA, but I made some realized profits while still enduring unrealized losses. Near the close I added BGZ to the mix.
So far the futures are agreeing with my prognosis of some downward momentum, but 11 hours is a long time. Let’s see what the rest of the world thinks.
Yesterday, I wrote a diatribe on the supposedly optimistic housing number. Then today I see in the Wall Street Journal this little article: Fewer Delinquent Mortgage Borrowers Are Catching Up.
Because borrowers are less willing or able to catch up on payments, foreclosures are likely to remain a big problem. Barclays Capital projects the number of foreclosed homes for sale will peak at 1.15 million in mid-2010, up from an estimated 688,000 as of July 1.
That’s not a housing boom. Is it?
Well the plan for holding BGZ overnite worked great….sort of. I exited half the position in the premarket for a nice 8% just “knowing” the other half will double that in today’s crash. I mean Asia and Europe dumped….we would do that also, wouldn’t we? Duh! No! The markets gapped down at the open and trickled up the rest of the day. I let go of the other half of BGZ for about a 3% gain….still nice, but not what I was envisioning in the morning. 
That is one of those psychological hurdles I’m still wrestling with. Rather than be happy with a trade that provided me a profit, I mope about what I could of had if I had closed the entire position near the top. A variation of that is when I close a position that has hit my profit target and then watch it continue up. The burn keeps getting hotter as it continues to go up. AXL is a good example of that this week. It actually doubled after I got out. But I digress. You don’t need my personal demons. 
After letting go of BGZ, I played some scalps with TZA and BGU, yeah the opposite of BGZ. I got in and out of both with some cash in hand and then finished the day grabbing some more TZA to hold overnite. I’m really testing fate now…I’m 3 for 3 on my overnite holdings and going for 4. My chances are decreasing, but I don’t know if China is done dumping. If not, we go down. If yes, well I’ll be correcting myself in the morning.
Another big tell in the morning will be Initial Jobless Claims. Remember last week when they were a bit worse than expected? Yes the day ended up, but only after a bunch of down. Oh, and of course, it’s the day before OpEx. Wild is in the cards!
Happy Trading 
Well the day did end green but not very convincingly. Today’s up volume was lower than yesterday’s down volume. So I’m looking for more downside on increased volume just to flush out some indecisive bulls before going up and flushing out some bears. But that’s what options expiration week is all about….inflicting pain on the most people possible.
So, again, I picked up some BGZ at the close….it worked Friday, it worked Monday, what the hell, it will work today.
Finally Being short over the weekend paid off big time….I love it when a plan comes together.
Futures started it’s downward trek early Sunday evening, but really started moving after Japan’s GDP was not as good as expected and China started falling hard. The markets continued down until about 1 hour after the U.S. markets open. After that we watched paint dry….boring!
I took profits on BGZ and then re-entered back into BGZ and added some DXD. I thought I’d be out of both by the close, but missed it. So now I’m holding a short position overnite. I’m looking (or is that hoping) for some follow-thru on Tuesday.
PPI tomorrow. Until then, I’ll watch what happens in China.
Although the markets didn’t do much but consolidate some more last week, I kept the pressure on to the short side and it worked out fairly well…the markets did close lower finally for the week. I opened a position in BGZ near the close on Friday, and so far this evening, the futures are cooperating
With earnings season for the 2nd quarter pretty much over and a fairly light economic report week, we do have to contend with options expiration. Well I guess we do have PPI reports to look at and the weekly initial jobless claims report, so the week may get a little wild. Remember, options expiration is designed to take as much money from as many people as money managers can.
I’m still looking for that correction because I still think the markets are overbought. Of course I’ve been thinking that for a month now. But, I’m adding in a high bullish sentiment into the mix which indicates a bearish tendency to the market.
For some interesting reading, head over to Minyanville and read: Why the “Economic Recovery” Is a Trap.
Happy trading y’all….and keep those futures heading down.
I just noticed that I didn’t log in and post to the blog yesterday. I had such a great day trading yesterday I went out to eat, drink and be merry…..and I guess I did a bit too much of all 
We’ve had two up days in the market, but I’ve been pulling out money using the short ETFs and taking a couple short moves in ES and NQ (S&P and Nasdaq emini futures). On Wednesday I traded S&P puts, TWM and BGZ a couple times and stayed overnite with QID and BGZ. Got out of all that early this morning….and then got back in and out and in TWM and added a few QQQ puts for overnite. Let’s see how that percolates. And I’ve taken a short position in ES this evening. I’ll see if I get out before going to bed, but if not, I’ll put a 4 point stop loss on it. (I’m short at 1015.50 if you’re following).
Both bulls and bears can make an argument for today’s action. That’s what makes a market! But how do you explain the lack of any pullback worth mentioning over the last month, during which the markets popped? The news has not been all peaches and cream during this time and the earnings numbers haven’t been universally stellar, and revenues have all been down. Even today, the futures were sky high but got tempered when the retail sales and job claims numbers came out…both bad. But the markets still closed green, but on very low volume.
The action this week looks very much like a top, but still hasn’t broken down. I guess that’s why I keep shorting. But there’s still a chance the markets pop to the upside. Some numbers for Friday are the CPI and Industrial production. Both will give clues to what the market does. So nimble is the word
Okay, so after the non-farm payroll announcement I went short, thinking that this was not “good” news….I mean a quarter-million people got laid off in July!! I was thinking a pop, yes, but I also thought that sanity would quickly set in. But no! The markets kept going up and I was stopped out of BGZ and TNA fairly quickly.
Then I sat and watched….and got my courage back to TNA again…and I got my money back and then some. The fun for me today was AIG. I took a few trips both up and down…yeah, it was fast and furious!
I ended the day taking a short market position via QID and EDZ. We’ll see how Monday turns out.
Later this weekend I’m hoping to find out why GS and BO (that’s President BO to you!) knew the numbers the day before. Do you think their doing some front-running 
Yesterday we went down during the day and recovered most of that trip by the close. Today we went up first, but quickly reversed down, and again we tried to get positive by the close…again falling short. Volume was down as traders wait for the Non-farm Payroll on Friday…..which reminds me, does anyone care about the Farm Payroll?
Again, BGZ was very good to me, and QID tagged along. I’m still dragging some XLF puts around that got a bit closer to breakeven. By the end of the day I went flat with just the puts left.
Now tomorrow I’m looking for the bears to take one more….no matter what the numbers come out. If they come out bad we sink from the get go and keep on diving. If numbers are better than expected, I think we do a gap or a run up, and then we start our trip down again. So report time will decide how we play, go short immediately or wait for a rally to enter…it’s a plan anyway.
Now to see if the market cooperates. 
It looked like some common sense was coming into the market today as the indexes moved down for most of the day. The stupid stuff was that the banks were running up as the markets moved down. There were more declining issues than advancing issues in the NYSE, but the advancing volume was much greater…I think by virtue of those rampant banks. C alone traded 2+ billion shares, the same bank that took all our tax money to be saved. Here’s one even better, AIG up 63%, yep, that’s no misprint! And if you want to see how good this recovery will be, read this: About half of U.S. mortgages seen underwater by 2011 from Reuters.
For me, the day was not bad, but not good either. I had an ES trade that made a couple hundred and traded BGZ about 5 times to scalp some more, both up and down. Near the close of the day I positioned myself into some BGZ and QID for overnite. QID was my bet in CSCO and BGZ was my bet on overbought markets that need to correct so we can move up with a real bullish stampede. I’m also still underwater with some XLF puts, but I’ve got until September to get that one right.
Futures have continued their downward move as I write this….getting ready for the Chinese markets to open. Initial Claims in the A.M. and we’ll see if CSCO brings the rest of tech down with it and maybe pull some banks down too.
