Tuesday, June 5, 2012

Sometimes There Is No Trade.

1284 has been taken back but barely just.  The market seems to be moving along the script written and depending on what action Draghi takes tomorrow, it might aim for the stars. How far it will go up is anybody’s guess. We better keep in mind that it is a counter trend rally and expecting the market to go up when the trend is down is again an expensive proposition. Unless you are nimble trader, do not even bother with the bounce and wait for the correction to get over. If you must, you may even think of shorting it when a sizable bounce has been achieved. Then again, you must know what you are doing.

I read a lot of fellow bloggers, traders, rational thinkers as well as irrational nuts. In my life time, I have followed many Pandits only to find that nobody knows any better. Sometimes however we come across words said or written which are profound and strike a chord right away. The following is an example of such. It came from Josh Brown of The Reformed Broker:

·         It is okay to admit when you don't have an edge.
·         It is okay to say that you simply have no idea what's happening next.
·         It is okay to sit out the possibility of an oversold bounce or a big snapback rally.
·         It is okay to shut down the trading software and shut your mouth.
·         There are forces at work here that many do not respect.  There is "unprecedented" and then there is this, whatever the hell this turns out to be.
·         You have a trading plan for bank runs?  For the spontaneous dissolution of the world's largest economy?  Congratulations on that, you're the only one.
·         I understand that sentiment is so bad that literally any positive news will mean a sharp spike in the markets.  But so what?
·         And what happens after?  Why does anyone think that this spike will be sustainable in the absence of actual improvement on the China/Europe/US employment front?  Why would anyone other than the most nimble traders be worried about missing it?
·         And also, it can always get worse.
·         Respect the fact that we have no idea how far this can go before it has "gone too far".  Respect the fact that once again, there is no leadership, no Man Behind the Curtain and that even the best and brightest and most connected and well-read are themselves grasping at straws here.
·         There is no solution, only a choice of what may be the least bad.  There is no consensus, no one alive has ever seen anything like this.
·         I opt not to try to be cute here.  I opt to look and listen and bide my time.
·         Sometimes there simply is no trade.  I believe this is one of those times.

I have printed it out and now it is right before my eyes where I can see it all the time and remind myself to have proper discipline. The 1st rule of the game: do not lose money. The 2ndrule: Read rule # 1.

Among all the bounces in all sectors, Crude will possibly give the best opportunity for a short term trade. Because it is so oversold. I will decide tomorrow whether to take a trade in Crude. But only when it is safe.

There is nothing much to say today. Everyone is tired of bad news.  The funny thing is, none of the news coming out of Europe is new and they were there even in 2011. I remember last year I wrote about the pink elephant in the room that is Italy followed by Spain. Nobody seems to remember Italy yet but believe me it will come. But I think the biggest danger to the world capitalism will come from USA.  USA has already started to monetize debt through back door and in six months time, they will be forced to do it openly. Bernanke will fight the scare of deflation with more money printing and when the bubble burst, USA will have massive inflation. It seem to be far away but it will arrive one fine day.

For now, we just wait and plan how best to save our capital. Thanks for reading http://bbfinance.blogspot.com/. Please forward / re-tweet / post it on your wall and invite others to join. (Twitter @ BBFinanceblog)(Stocktwits: Worldoffinance)