Sunday, August 4, 2013

Are We There Yet?

The following is from yahoo Finance:
A study from Spectrem Group asked wealthy and affluent investors "what do you wish you had done differently in the crisis."
For the top earners-those making $750,000 or more-the No. 1 answer was "saved more." Ranked second was "done more research about finances on my own" and then "not taken on as much debt."
Their regrets have turned into real action-with possible impacts on the broader economy. Since the financial crisis, the wealthy have become the nation's top cash hoarders, filling up deposit accounts and money markets at a rapid clip.

Well, at least somewhere someone is being prudent.
That was something I have been shouting about from the rooftop for last many months.

George C. asked the following question:
Hi BB,
I have been reading a lot about cycles and they seem to be less and less reliable these days. What is the margin of error ? For example you mentioned a cycle top of July 25. We just pounded out a new high on August first. so what its the "zone" of this cycle top ? I also do not understand why shorting is not a good idea if one truly believes in the cycle, assuming there is some margin of error that could trigger a stop on short position. Otherwise we have to rely on broken support levels, moving average  crossovers etc.....
In this market I am losing faith in information. For the past several months I have read many credible articles and blogs, including yours that speak of extreme sentiment, record high margin debt. low levels of mutual fund cash etc...yet there is not even a moderate correction. I know things take time but I am wondering if FED printing can push this for many more years. Simply amazing !
Love your work and patience, just venting. I am afraid to go long for sure but have been for quite some time. 

And my answer was:

Hi George,
As you might have seen, I work from the side of being ultra cautious.
So I will take trade when everything that I watch line up.
When the trend is up and cycle is up, it is safe to go long. But when the trend is up but cycles have topped, I would stay away from taking any bets. Does not mean we should short. Because, we also need price confirmation.
As for now, the cycles have topped, but we have no sell signal. Therefore no going short. Going long is out of question. This is the time when greed overtakes retail and Mom&Pop gets in equity.
My up-side target for SPX is in the range of 1720-30 and we are not there yet. Last May, we went short but the indices kept going higher till everyone threw up their hands.
We are coming to that inflection point. No other market in the world is following the US market. So the US markets cannot just keep going on for ever. You might be interested to read the following:
http://www.mcoscillator.com/learning_center/weekly_chart/u.s._nearly_alone_in_making_new_price_highs/
So just hang on. Keep lots of cash on hand. Opportunities are coming soon. Gold & Silver will bottom in a month after another sell off. We will short bonds big time by Fall. Short equities big time.
Technical analysis alone will not get us anywhere in these markets. But patience will.

Hope that helps.

In my years of writing finance blog, I have actually come across only a handful of investors who are willing to wait and not be greedy. I had one subscriber, whom I shall call "The Troll". That guy would pay money for subscription and then do just the opposite of what I would say. I would scratch my head in bewilderment. For e.g. during the last correction, we closed our short position and went long XIV. After few days, the correction resumed and XIV was hit hard. I asked everyone to hang on tight with their XIV. But this A**hole sent mocking email, saying how smart he was and how he did not follow my advice and did the opposite by going long UVXY. Well, after a month, XIV is over 25% up!

And he is not alone. I see folks always trying to score on every turn, going in and out of positions almost every day. And I shake my head in disbelief.
Have patience folks. Don't listen too much to those talking heads in TV. They get paid to say stuff and sell snake oil. Only you can save your money. Wall St. wants to get their hands on your savings. They can do so when you are greedy.

I do not have to prove anything to anybody. I have made calls on record over the years and I think barring few and some in the early years, when I was still perfecting my system, most have come correct. I have a full time job which keeps me busy. I do the Newsletter and Blog as a hobby and I can do without A**holes. My record on gold and silver is close to 100% and I pray I am able to maintain that. But I am not trying to beat up my drum. All I am trying to say is that, whatever is your method, whomsoever you follow, you must have patience and not chase every shiny thing that catches your eye.

Stay Focused and stay nimble.

Good luck trading / investing everyone.


Monday, July 22, 2013

After A Long Leave Of Absence.

I have not been able to post anything for quite a while now.
It has been extremely busy and just keeping up with the weekly newsletter has been a challenge.
Let me quote from some of the newsletters that I had written in the last few months:

On June 5, I started to close all short positions and sent this email:
:Starting to close 50% of all positions (Except WEAT & CORN)

Then we long XIV around $20.50-$21 range.

On June 9, I wrote:
From a pattern standpoint, the pull back was corrective and with our short-term momentum work hitting oversold levels I have increasing evidence that Friday’s bullish reversal represents my anticipated June minor low. I would still see this as the basis for another bounce/rally into deeper June, anticipating a retest of the May high at 1670 to best case 1700.

XIV did well and continued to go higher. However, around June 19, the indices failed to clear 1650 and the correction resumed. Our resident troll started to send abusive emails but I said the following:
The stock market is ruled by fear and greed.
We are no exception.
We are mostly out of the market except for XIV and now that the indices have broken the earlier low, the momentum has shifted to the downside. However the downside is limited to SPX 1565-70 which will be enough to generate tons of short interest before the bounce.
I expect to see another bounce soon at which point we will close our XIV.
For now, do not give in to fear and panic.
Gold and silver has reached my downside price target but the cycles have not bottomed yet.
All in all, it is fishing time, and do not give in to fear or panic nor to greed.
Have a great weekend folks.


On June 30 I wrote the following:
  •    From a daily trade point of view, I think we have seen the bounce and the correction will continue till 1st half of July. If 1560 is taken out in SPX, the next stop is 1535 and then 1510. But I am not fully sure whether 1560 will be taken out or not and hence I am hesitant to take a short trade here.

  • From a weekly perspective, I am fairly certain that we will see another rally to new high of around 1710 by 1st half of August.

  • On July 11, I wrote:

    Yes, the low came in early.
    For those of us who cannot wait and must have something going, here are two items worth going long with:
    SLB:  with a sell stop at $ 74.00
    XOM: with a sell stop at $ 89.60

    The target for upside moved a little bit. SPX can go upto 1740.


    Now the XIV is at $25.78 (I had sold 50% of XIV at a loss of about a buck), SLB is at $84.80 and XOM is at $94.83 and I have advised subscribers to book profit.

    How is that for hitting the ball, Mr. Troll?

    We are still waiting for the cycle bottom of gold and silver and waiting to short treasuries. We are mostly in cash and I am asking readers to raise as much cash as possible and be patient.

    Do not be greedy like the Troll nor be a spineless snake.
    If you want to be on the right side of the market, you can join the readership and subscribe by donating $99 per month by clicking the "Donate" button.
    However, I do not trade very much and wait for the right opportunity with a very long term outlook. I am not a day trader nor do I care for the short term moves. I am looking forward to what is going to happen in few months, not in few days. So if you have a short term outlook, you will be wasting your time and money. If you do not have the patience and want to buy or sell always, the talking heads in TV will be a better bet. I am not looking to become a mass market newsletter writer nor am I looking to become rich by selling subscription.

    Thanks for reading this post and good luck investing everyone.



    Sunday, June 9, 2013

    Thank You!

    Life of Finance Blogger can be tough.
    People have different time frame for trading and we all expect instant and positive results for all our trading. That is simply not possible and many times Trolls send abusive emails.
    However, once in a while, someone send encouraging emails as well.
    The following is an email from one of my long term subscriber:

    Hello BB.
    Thank you so much for a the many good calls you have come up with.
    This has been quite a experience for me.

    I would like to thank you for the newsletter and the many blog entries
    you took the time to author.
    I would also like to share a bit of my trading history, and the
    reasons for me to sign up for the newsletter. You see I have been
    trading for 7-8 years. It all started with the many daily discussions
    about media, politics and financial bubbles of the danish housing
    market (I live in Denmark), almost needles to say my views was/is
    contrasting to the media painted views -  most the discussions back
    then was ending the same way, with my friends telling me "if you are
    that smart, go make some money". Well, I opened an account and so it
    began.

    After the beginning of my trading there was big wins and big losses,
    my trading style was about macro and stats, I thought, but I was so
    wrong. For me it was mostly about emotions. I became emotionally
    exhausted and the timing of the swings was my bad. I saw ETF 3X move
    up and run away with gains up to 100% ending with losses in the double
    digits. What agony.

    So I left the "minute chekking" - checking accounts on hourly basis -
    emotional stress and returned to where my successes were (looking from
    my trading history). It took half a year before I did any trade again
    - and quit levered ETF as a whole (up till now). I never thought I
    would be subject to this level of stress because I am a very clam guy.
    After my pause I got some checks and balances in place which could
    counter some of my bad trading habits (for instance if a trade goes
    against you the counter trade is not the right one either, it not
    about being IN - its about capital preservation).

    I started following you on the blog and it was a easy choice signing
    up for subscription to the newsletter and that was the first time ever
    I paid for trading advise. But I knew I needed some guidance to grow
    with. Partly so I would not revert to my old trading patterns of wild
    swings (happened before) a sane voice so to speak, and to get my
    emotional toolbox in order.

    And now I am more confident than I have ever been and hoping to
    continue the journey with you on ward and finally this week concludes
    some of the best winning 9 months for me.
    My deepest thanks for the advise and being the sane voice I needed so much.
    THANK YOU.

    With the best regards.


    I was both humbled and touched with this email.
    Thank you my friend.

    Coming back to market, our exit time was very good and so far our new trade has played well. I was not able to scale in the 2nd part because it ran away from us on Friday but I decided not to chase it. I think the trade will come back to us on Monday to a certain extent when I will add the balance position.

    I see a long term top forming on Housing and would think that with the coming bounce we should exit housing if we are long housing. Also with the sentiment negative on gold, I see a long term bottom forming but I still think we will have to wait somewhat more before we can go long.

    Thank you and wish you all great trading.

    Thursday, June 6, 2013

    First Meaningful Pull Back.

    It has been a while since my last post. It is simply a function of lack of time. In the mean time, I have somehow managed to send the Weekly newsletters to the subscribers.
    I was hoping for a market TOP around 1st week of May and accordingly we went long VIX (UVXY) and short Emerging markets and other sectors including Finance.
    However, there was an over-shot and the markets kept going up till May 22nd. Obviously, there were some doubts amongst the subscribers. I kept stressing that the correct has simply been delayed not cancelled. And we kept hanging on to the long VIX and short everything else trade.
    Yesterday and today we closed our positions. We made a tidy little sum on UVXY and peanuts on others. But at least there was no big red anywhere.
    Now we are taking a new position for a short term trade.

    I think we are in the process of a giant TOP forming which will take us till the end of summer before we see any major correction.
    For now, I think the short term correction is over and we will see another bounce soon. How far it will go is a question of time. But if it fails to make a new high, we have problem. Big problem or little problem, I am not sure at this time.

    We stayed away from Gold and Silver because I think the cycles did not bottom. Nor for that matter the cycle for Apple and we will see more downside for Apple as well.  We are waiting for more favourable time to go long PM sector.

    We play the game by the seat of the pants. And we always correct the course of action as we go along. We cannot be correct 100% of time. For e.g. I am holding grain ETFs for few months now and I am under water, although not by much. But I am holding onto those positions for longer term. And that is where I find most folks have problem. Committing to a position for long term. May be we got brain washed by leveraged option trade, when we start expecting instant results. We get impatient and when a trade initially goes against us, we get scared. The cycle of fear and greed plays on.

    Hope you guys are doing great.
    Trade safe.

    Saturday, May 4, 2013

    We Have A Road Map

    I have taken permission to quote part of an email exchange with one of our long standing subscriber, who knows the meaning of patience and looking at longer term picture:


    Adrian McMahon Stone
    4:54 PM (20 hours ago)
    to me
    You have nerves of steel BB!

    I feel like throwing in the bearish towel..with all the other bears.. a sure contrarian sign.

    I will commence my ******* next week.

    All the best

    Adrian

    To which I replied:

    BB Finance <bbfinanceblog@gmail.com>
    9:36 PM (15 hours ago)
    to Adrian
    But surely you are reading my Newsletters and Emails!
    Did I not write about the BOYZ pushing SPX past 1600 about 10 days back and few times thereafter?
    Everything is going according to plan.
    No need for panic my friend.
    Have a great weekend.
    BB


    Just to demonstrate that we are not flying blind. We are well aware of what is happening around us, risks and rewards and we are positioning accordingly. 

    We do not believe in fancy charts although we execute our trades based on TA. And we are looking a much longer time frame. Mostly in months and years not in weeks, leave alone days. We are looking at what will happen in 2018-20 not next week. I know this is not for everyone and we get anxious / worried when a position initially goes against us. But then I have faith on my system and have seen it work better in longer term. That is why I am long grain today when no one loves it. That's why we went out of gold at $1660 over 2  months back and waited patiently before we get long again. Regular readers will remember our call for Apple many months back. 
    Of course we have our share of misses but looking back, had I hold on to those positions for longer term, most of them would have turned winners.
    On the whole the winners are far more in numbers and longer we wait in a position, better our rate of success.

    People send email asking how to subscribe. I have quite a few selected subscribers who have been with me for long time. There was a time when I took sabbatical for a year and wanted to spend time writing  They have been with me since then. But now I am back to my high pressure  12 hours + day job and I really do not have much time for blogging, however much I love it. But I am committed to all my subscribers, that I should be able to reply to every question, every email, that they may have. All I want folks to know that there are alternative methods of investing, we do not have to hit every ball and score on every turn. I used to provide it free here in this blog but then folks do not value free stuff and most are looking for quick gain. So my style may not be suitable for all. Better to provide it to those who are on the same page with me.

    I will close by repeating one of the old calls. That "Tectonic plates of the financial world" are shifting. If I would still be writing in 2018 and you would still be reading it, we will exchange notes about that call.

    Safe trading , no, safe investing everyone.

    Have a great weekend.

    Monday, April 29, 2013

    Life In The Fast Lane

    Or would you like "Hotel California"?

    Either way the thrill of going up and up and never to worry about coming down must be real giddy.
    Didn't I say not to short yet.
    Although all your indicators are screaming over bought most are throwing in the towel and joining the buy express.
    Where do you think we are in the following curve?

    My take is, we are right at the Euphoria stage.
    And that was why I wrote don't short yet about 2 weeks back.
    Although we went out of the long positions in Jan. end , we did not short the market. We gave up this 80-90 points on the upside because we want to catch all the ride down and not take any risk. And if any of you are still long, now may be the time to cash in for good.
    After many months, we are now ready to take new positions and subscribers have been given the tip and trades for the coming week. 
    And no, I am not looking to get rich by selling Newsletter Subscription.
    Good luck trading all.

    Monday, April 15, 2013

    Don't Short Yet.

    Just a quick note.

    A 40 point drop in SPX in one day is  reason enough to say: "I told you, the risks are high".
     We went out at 1510 and today the market is around 1550. I have one question who were long in the last two months. Did you get out in time?

    However, I think it is not yet time to short the market. We still need to give it some more time and the subscribers will know when to short.

    Same goes with Gold. It is still not the right time to long gold because cycles did not bottom and there will be separate email to subscribers when the time is right.

    Grains did not suffer much damage today because all weak hands were flashed out last week. And Oil has some more to drop but I am not shorting it.

    All in all, we are in good shape and hope everyone is raising cash to take advantage of the coming Tsunami.

    Note to the Troll: New subscription rate for the month of May and onward is $ 99 per month. Only the existing subscribers for April get to renew it at $ 49.

    Good luck trading all.

    Sunday, April 14, 2013

    Troll Attack

    Last week one Troll send some abusive email because of my call of long grain. As always with the Trolls with origin from unknown fathers, they are afraid to give their name or email or engage in any conversation about their point of view. This one was no exception.
    What the Troll does not understand that my time horizon could be different from his. (I assume it is a he). I am looking out 6-9 months out and may be some more. And Wheat sold off 6.5% from around $700 only to come back to that level in few days. I think the Troll saw a paper loss and panicked. But if you have a heart of a chicken and no conviction in long term trend, why bother with investing in stock market. Buy a lottery ticket from your neighbourhood convenience store.
    I have successfully called for :

    • Start of the up-trend from beginning of 2013.
    • Gone out of long gold position at the correct time and despite intermittent bounces, advised everyone to stay out of gold and silver.
    • Advised not to short the market till price confirmation is obtained.
    I would think anyone of the above would be sufficient for some gratitude but that is asking too much as I see it now.
    You may ask, if I know that it is not yet time to short the market, why did I get out of equities and gave up 60-80 points rally? My answer is I am not a market timer. From experience I know that it is impossible to get out at the exact top or enter at the exact bottom. I also know that risks are high and risk reward ratio is not favourable. I am not trying to score a hit with every 10-20 point up or down, rather looking for very long term trends and ride with it. 

    But I have come to realize that financial blogging a futile exercise. These days I am lucky if I get any time during the week to write anything. And I am working on setting up an offshore hedge fund and work with high net-worth clients. Folks who don't crap in their pants with short term loss but look for longer term trend and profit. Who can hold their drinks so to day.

    So my dear Troll, all the power to you. I am off to something bigger and better. 

    Sunday, March 31, 2013

    Shifting Of Tectonic Plates


    The earth is made up of moving tectonic plates and yet we don't ever feel them moving, except when it is too late. That's when we have tsunami or earthquake and have death or destruction upon us.

    Believe it or not, the tectonic plates of our finance world are moving and moving fast. Today the central bankers of the world led by Bernanke of the Fed are giving the last moment gift to the top 1% of the oligarchy. Because very soon another tsunami or earth quake will visit us soon which will make 2008-9 look like a movie trailer.

    I am not a fan of Prechter or ZH and I do not like to continue spawning storing of imminent collapse. I have been long till January and have been on the sideline since. But we have not shorted the market despite various indicators saying top. Nor did I buy the theory of collapse of the world till now.

    However, I see that we are reaching an important infliction point. My favourite route remains SPX reaching an important top in April, followed by a deep correction in summer. That should be followed by another sharp rally in Q3/Q4 before the onset of a deep bear market.  The exact timing of going long or short will vary and will be available to subscribers. These are general market direction but we use many parameters and price points to decide when to go long or short. The guiding principle is that the only way of wining is not losing.

    For the month of Feb/March, many have paid subscription only to hear me say : wait , don't short, need confirmation of this or that before taking any action. There were no instant gratification because we are not looking to score on every 10 point turn. Rather the focus is on weekly or monthly trend and not get distracted by the news. If that is your focus as well, you are welcome to join the gang of subscribers. But if short term trading is your focus, I am not the right guy.

    Hope you had a great Easter weekend and all ready for the month of April. It is going to be exciting in fits and starts and most likely will demonstrate the formation of an important top. But we are not going to front run and will wait for confirmation before taking any action.

    Wish you all best of luck in your trading / investing.

    Tuesday, March 26, 2013

    Same Old, Same Old.



    It has been a while I did a post here.
    Fact of the matter is, while I am super busy and all the sabaticals that I took last year is now catching up with me, there is nothing much to do but wait patiently.
    Yesterday the markets had a bearish reversal day. And today it is pumping up. All to convince the sheeples that the only way to get rich is TBFD.
    So what yesterday's selling was all about? Did you say Cyprus?  Oh yes. The Euro politicians have shown that in case of emergency, they will put their hands where ever they can. Earlier they would socialize the loss and privatize the profits. Now they would rob the common men to save the Banksters. Great news now that we know that no body's money is safe.
    And what is today's ramp all about. It seems because home prices are now at the highest level since 2008? So the problem of Euro Zone has been solved and we have the collective memory of a gold fish.
    But none of these news drive the market. Rather they drive the retail investor sentimement. And speaking of that the powers that be (TBTF Banksters) know how to manipulate that retail sentiment. Over the last few months, the bottom level is being convinced that we are at the beginning of a new bull market. Only then the retail will buy stocks and they normally buy at the peak.
    However, I think we will continue to see this rollar coaster ride for the major part of April before any decent correction. So my advice to the subscribers have been to stay on the sideline and avoid all kinds of temptations. It is still not the time to short yet.
    We may get occational day or two when we will have 1% sell off but again we will see markets being pumped up on low volume. Doing anything in such sitiation is bad for our financial health.
    I know it is damn difficult to remain patient for month after month and do nothinig when the entire 24/7 news media is trumpeting how we are missing on the golden opportunity of getting rich and retire quickly. But that is their agenda. Our goal is to protect our savings and investments.
    Just remember, what goes up, comes down. And Wall St. is not above the laws of gravity.
     

    Monday, March 25, 2013

    Student Loans Are Diving Underwater

    The student loan market has a lot of factors that seem to say "Stay the heck away!": they're relatively easy to qualify for, college costs have increased far more rapidly than general consumer prices, we now seem to feel that EVERYONE SHOULD HAVE A COLLEGE EDUCATION. ELEVENTY!!!, and most importantly, the job outlook for many (most?) college grads is to put it mildly, pathetic.  

    This graph from the Washington Post piece points out some evidence that we might be seeing the beginning of the next "bubble pop".  Although they're a fairly small part of the overall consumer loan market, student loans are more likely to be 90+ days past due than any other loan class.  And the percentage is growing pretty rapidly. 
     












    Luckily, the Unknown Daughter gets free tuition at Unknown University.   We still have a half-dozen years until we have to shell out for college, but it'll take a lot to justify her going somewhere other than to my (fairly low-cost) school. 

    Friday, March 22, 2013

    But I'm Not Dead

    It's been almost a year since I last posted.  And a lot has happened at Unknown University since then.   I'm waiting to hear from the University P&T Committee and the Provost on my tenure case (I've made it past all the other hurdles - department, college peers, college P&T committee, and dean).  So I've been keeping a low profile since then regarding the blogosphere and trying to get stuff done.

    Since the last post, the Unknown Baby Boy (a.k.a. KnuckleHead) has turned 4.  He is a lunatic, and a great deal of fun (despite the occasional head butt to the package).   The Unknown Daughter (a.k.a. Future Ruler of the Universe) is finishing up 6th grade.  She's planning on going to a 1-week computer camp to learn HTML this summer, so the blog might actually end up looking good.  On the down side, she just let slip that she's sweet on a young man, so it starts.  Looks like I'll have to buy a large knife to sharpen with e demented grin when he comes a-callin.
     
    Oh, and I had a minor heart attack just before Christmas - no damage to the heart muscle, and I've been back riding since about 2 weeks after.
     
    I'll resume regular posting once the tenure stuff is resolved.  Lots of stuff to catch up on. 

    I the meanwhile, here's something completely unrelated to academia (I just found it funny).  It's John Cleese's remarks at Graham Chapman's funeral.  Now THAT is a eulogy.

    Saturday, March 16, 2013

    Quo Vadis SPX?

    Some say SPX is headed for the moon. Well, that was bit of an exaggeration, but surely we hear talk of SPX 2000. Personally, I think a long term top can be found around 1600. The question that I ask, whether that long term top is now or still few months down the line.

    While many are pointing to various extreme reading of various indicators, I do not see any sign of correction yet. Only once so far the sell signal was triggered but that did not match with my other indicators and I decided not to short even when the sell signal was on. On hindsight, it was a good decision because had we been short, it would have caused us emotional pain and in some cases, the short positions have been puked already resulting in actual loss.

    While I am advising subscribers not to short and stay on the sideline, for some of you who are short already, I would say that bear the pain if you do not want to book the loss. Nothing goes up for ever and this moon rocket is also subject to the law of gravity. Ben and other powers that be think that stock market is equal to economy and a higher stock market means a strong economy. So the never ending money printing and inflating the balloon goes on. We have seen this many times in the past.


    And we know how it all ends. This time is never different. Only we do not want to front run and get run over.

    So far the bubble has been formed in Equities and we have not yet seen the rise is other asset prices like Oil or PM sector. Before the bubble burst, we will see all these asset classes rise again. Oil should take out its all time high and gold should make a new high. Question is when. For now, the BOYZ are working on a simple plan. That is to get the retail and lagging fund managers move in to equities. It works on the simple hope that some else will buy the stocks at a higher price at a later date. If you don't believe, just look at the chart of Apple few months back. When Apple crossed $ 700, they were  talking about Apple $1000 and folks who bought Apple at $ 700, were hoping to flip it around soon. Same story now with something else.

    Dow ended in red this Friday after 10 consecutive weekly gains and 8 new all time highs in a row. And SPX is trying to make its all time high. I think it is so damn risky to go long here but also not the right time to short. Not yet. There are other fish to fry in commodities and there is less risk there.

    The blog posts have been irregular and my apologies for the tardiness. I intent to post at least two/three times a week but time is difficult to come by. In any case, I did not have much to say since my last post except repeating that:

    Cash is King.

    Have a great weekend folks. 

    Saturday, March 9, 2013

    Everything Must Be Great


    DOW made new high!. Yeeeee.
    Now everything in the world must be al-right and every American is now rich. The retirement accounts are filled to the brim and no body cares what the crooks do.
    But I feel little sad for ZH and Prechter. These guys are running out of ideas about what to write about the imminent collapse of USA. Not only the collapse (which was just round the corner) never materialised, even a 10% decent correction is also not on horizon. Only last October they were saying that QE4 has failed to do its magic and QE is dead. So far I have not seen anything anywhere saying sorry, we were wrong.

    Anyway, now that Indices have or are in the process of making new high, where in the sentiment cycle are we?
    I personally think we are in the Euphoria stage. The retail is just now getting excited about the rally while the TA guys have given up.

    Our collective memory is short. Otherwise, we would have simply looked at what happened during the same period of last year.
    This is a daily chart of SPX from December end of 2011. Does the up move of 2012 looks similar? If they look like ducks, walk like ducks and quack like ducks, then most likely they are ducks. And most likely this years pattern is just a repeat of last year. And by that token, the bears should remain in hibernation till the better part of March. 

    We went out of all long positions by end of Jan. with SPX around 1510. So far we have given up about 30 points rally but we have no emotional roller coaster ride. We are what is called reluctant bear, sitting on the sideline. Just waiting for the move to exhaust itself. We have avoided all temptations to short because our model did not give us the go ahead signal. And we are not looking for the end of the world, not yet.

    Coming back to the market, the shearing is not yet complete. 
    I think the BOYZ will spend another couple of weeks to corral most of the sheeples. Retail almost always buys at the top and why it would be any exception this time? And for those TA enthusiasts looking for all sorts of elusive Da Vinci Code for the Top and shorting relentlessly, only to lose the underpants, I have news for you. The Fed is buying Bonds almost every day for the month of March! (POMO Days are here again).

    I am not for a moment saying that buy buy buy. On the contrary, I think if we are long, its better to take chips off the table and raise cash. We have gone off gold and silver sometimes back and are waiting for the cycles to bottom. But I am not shorting anything yet. Subscribers will get email when the signal comes and they know the levels to watch for.

    So far the market is moving as per my base line projection for 2013. If ZH and Prechter can continue till 2014, they might have some chance of gloating. But that's a long shot. We will take one month at a time and put forward our steps very carefully. From now till next few years, before I make any investment or trading decision, I will be asking myself: how much will I lose, if I am wrong, instead of thinking how much will I make. 

    Its a jungle out there. So don't front run and trade safe.
    Have a great weekend folks.


    Wednesday, March 6, 2013

    You Want To Know What Is Risk?

    What is risk?
    Risk is the amount of money you will lose if you are wrong.
    To know how ordinary investors chase beta and lose money, you must read the following:
    How to lose money
    It is said the bulls make money, bears make money, pigs get slaughtered.


    Thursday, February 28, 2013

    Test Of The High?

    Today the indices were up for most of the day but some late selling forced them to close in red.
    Was it was a re-test and failure of the last high? I think it is still early to call today's action as failed re-test.
    However, SPX is still above 1500 and DOW still above 14000. I would like to see indices making a lower low 1st and then re-test the 1530 level in SPX and fail there. Only time will tell whether the market will actually behave that way.

    But what lead to the last hour selling? Was it fear of Sequestration or just regular pump and dump action?

    But more than the red indices, I would like to draw your attention to Gold which again closed below $1600. I think the bounce in Gold is over short term and we will see some renewed selling. So those of you thinking about catching the falling knife, better be careful. However when the mood becomes totally negative on gold, that would be the time to go for it. We will have to wait a while longer for that to happen.

    Nothing much is happening anywhere else really.

    Equities will continue their up and down dance for a while more. Grains are still making a bottom before the rally. No much to do in Oil and Nat. Gas either.

    All in all, we are in the waiting mode. Our sell signal has been triggered but something else is holding us back from going short at this point of time. I am expecting some whipsaws in market action and better to avoid emotional and moral hazards.

    Folks normally get frustrated when there is not much action. We think we always have to buy or sell but in reality, we don't have to. Sometimes it is better to give up short term gain for longer term opportunities. This is one of those times.

    March subscription is still open for two more days, before the next Newsletter comes out on Sunday and if you would like to avoid walking in the dark, you are welcome to join the gang.

    Wednesday, February 27, 2013

    Bull vs Bear. Who Is Winning?


    Few days back I wrote that the bull may be wounded but not dead.
    Today's market action again proved my point. One day SPX down 2% and next day it is up almost another 2%! Go figure.
    The fact remains that upside is limited but Ben is not ready to accept defeat so quickly and easily. And as you know, there is no easy trade. When everyone is expecting the "Top", it remains in hiding. The market will kill the early bears and suck in the late bulls. And another new month is coming with new fund allocation. Why give up all the free money?
    But why every 10-15 point move up or down make such huge news? For one, the 24/7 news media is hungry for sound bites and dramatizes every small insignificant issues. But the more important thing which was point out by Josh Brown of The Reformed Broker is that, almost everyone has jumped in the options bandwagon and are playing with leverage. A 1% move has multiplier effect when combined with leverage. This is not investing. This is speculating. And speculation is anything but good for long term financial health of an individual investor.
    So where do we go from here?
    For one, I have avoided the urge / temptation to go short for now and have advised subscribers likewise. I am sure I will lose some of my subscribers with my constant call for caution and not having enough action. But the fact is we are making a top and direction is not clear. We have a sell signal and yet I am hesitant to take action based on the sell signal. And it is my policy that when in doubt, do not trade. I would shoot, only when all the ducks are lined up in a row. Sometimes give up short term opportunity for longer term clarity.
    Folks who have been in the market long enough know that we make 80% of the profits from 20% of the trades.
    Going back to the question, who is winning the battle of bull vs. bear, look the following picture for an answer:
    It is the TBTF Banksters who are winning.
    Yesterday Jamie Dimon told an analyst covering the bank to go F**K himself.  The following is from Reuters:

    At a J.P. Morgan investor event this week Mike Mayo, an analyst at CLSA, who has been a critic of large banks and, at times, Dimon, asked if J.P. Morgan wasn't at a competitive disadvantage compared to more highly capitalized peers. (Here is a playback via Business Insider: link.reuters.com/fys36t)

    Mayo: I think what I hear UBS saying in the presentation is that if I'm an affluent customer I'll feel a lot better going to UBS if they have 13.5 (percent) capital ratio than another big bank with a 10 percent ratio. Do you agree with that?

    Dimon: You would go to UBS and not JPMorgan?

    Mayo: I didn't say that. That's their argument.

    Dimon: That's why I'm richer than you.

    This exchange shows what is wrong in the system and Jamie Dimon personifies the arrogance of the Banksters and how they game everything.

    In this environment, it is important that small investors start with "Return of Capital" not "Return on Capital" because the fat cats will steal everything otherwise. Avoid risk and everything else will follow.

    That's all for tonight. Good luck trading every one.

    Monday, February 25, 2013

    March Subscription Is Now Open

    It is the Subscription renewal time again.
    How quickly a month pass!
    It was on 1st of Feb. when SPX reached 1513 and we went out of the market.
    Now it is morning of 25th Feb. and SPX is starting the day from 1515.60
    Not much has changed in the last 3 weeks and we saved ourselves emotional trauma by waiting in the sideline.
    So is $ 49 a month worth for having an action plan in this market?
    Many of our readers think so. It is less than a cup of coffee per day from your favourite coffee shop and yet provides you, the reader specific action points on various asset classes with at least two weekly updates, if not more.
    Extract of some part of one of our old Newsletter is here for your review:

    Equities:
    The coming week, we have two indicators for sell signal:
    • SPX closing below XXXX, DOW below XXXXX.
    • VIX closing above XX.
    When we see the Indices closing below those levels, we will know that we have seen the highs. From then on, it is a question of Indices making a lower high or re-testing the previous high and failing in the process.

    ....................................................................................................................
    I think we have a good opportunity coming up and let us remain focused on that only, nothing else. We are not economists and at least I do not understand how it works. Just concentrate on making money with low risk.  

    PM Sector:
    We have met our downside price target of Gold. Silver still has more to fall before it can find a bottom. While I am sure about a new all time high in gold but we may have to wait for 2014 for that to happen. The idea is to buy it when everyone hates it and I think we are reaching that point. Many of you may already be thinking that there is no future for gold. Main Stream Media (MSM) is writing about how Soros sold his gold. So we are getting there. However, if Gold closes below $1600, we will have still lower prices and that will remove all weak hands. So for now, we wait on the sideline with respect to PM.


    Only parts of the Newsletter. And the levels keep updating / changing to reflect the dynamics of the market price movement. Apart from Equities and PM, we cover Oil & Nat. Gas, Copper (sometimes), Grains & soft commodities and treasuries.

    Are we always right? Nobody is or can be and we are no exception. But we make every effort to reduce risk and shoot only when when we think all the ducks are lined up.  And I try to explain that we do not have to be always invested (Only Wall St. wants you to be 100% invested 100% of the time) and cash is a position. I quote from Josh Brown: "Guys talking about being all-in or all-out can and will change their opinions quickly. This is what they should be doing as professional, full-time speculators. But are you a full-time speculator? If someone can and frequently does go from fully invested to all cash to fully invested over the course of a few days, is there any particular reason that you should be paying attention to them? Will they personally be calling you to give you the second half of their trade? Well, most of you don't realize this so when someone says "ALL IN" or "ALL OUT", it gets you talking, thinking, retweeting, sharing etc.

    So if you think caution is your style and you value your savings, want to grow it in a low risk manner, may be you should give it a try. Click on the "Donate" Button above and pay $ 49. In the subject line mention Subscription for "March" and you are all set.

    I look forward to hearing from you soon.

    Thursday, February 21, 2013

    The First Warning Shot.

    We heard the first boom.
    Intra-day, SPX went below 1500 but closed above at the end.
    While we saw a breach in the up-trend it will be wrong to say that the bull is dead. Wounded yes, dead? No.
    Those who are thinking of shorting the market now, should do well to keep the fate of this guy in mind.



    This was the 1st meaningful pull-back in many moons and at this point of time, is just a healthy correction.I think we will see a bounce very soon, may be as soon as tomorrow. Only when it makes lower high, we can think of an intermediate term top. Just like last time.


    When the indices made few lower highs and there were reversals of reversals of reversals, we did see meaning-full correction.  It will follow similar path this time around and prudent traders / investors should wait for price confirmation.

    Subscribers know the level to watch for and when the sell signal will be triggered. They also get mid-week and end of the week update, which help us to remain on the right side of the market without front running.

    Other risk assets are getting slaughtered as well. Oil had a flash crash yesterday but for now I think it has found a bottom. But there is no such respite for precious metals. We have been out of it for a while and waiting in the sideline for the right time to get long. But we may have to wait for a while till everyone gives up on gold and all gold bugs fly away.

    Some other interesting trades are developing in the soft commodities/ grains / Nat.Gas and we will have some action there soon.

    All in all, end of Feb./ early March promises to be interesting in contrast to the last 3 weeks which has been a boring kind of market.

    Hope you all are doing great and wish you all best of luck trading.

    Monday, February 18, 2013

    Risk Reward Ratio

    Readers sometimes ask me why am I more in cash and less in the market.
    My answer is that it always has to do with the "Risk Reward Ratio".
    Take the current situation for e.g. When the media and ZH was screaming danger in last December (ZH is always screaming wolf anyway) I was telling readers to get bullish. We were long for the whole month of January and went to cash when SPX moved close to our price target of 1510. And for the last 3 weeks we have turned patient bear and yet not shorted the market. The reason we are not being long equities here can be explained in the following long term (monthly) SPX chart.


    Assuming SPX keeps going up as everyone in Wall St and all talking heads in CNBC are saying, the upside in my view is limited to 1550 which is 2% up from here. It may take another 2 weeks and market does not correct, just to kill all the bears.
    But on the other hand, should there be a correction (Not the end of the world, mind you) the long term support is a 1300 level, if 1400 does not hold. At 1400, that is 8% correction and at 1300, that is 15% correction.  So at best we have 8% / 2% = $ 4 risk and at worst 15% /2% = $7.5 risk. In other word, to go long here hoping to make $ 1, we will be risking $ 4 to $ 7.5. Is it worth it?
    Just to break even on risk reward ratio, we need another 8% upside from here which is 1641 in SPX. I think that is bit far fetched. And although Ben has promised unlimited money, let us see what happens with the Sequestration thingy coming up in March.

    Mind you, I am not suggesting that the world as we know it, is about to end. Simply because I do not know how economy works and what will be the unintended consequences. I just know how not to take unnecessary risk or at least I try not to.

     But I get the feeling that I am in that Jeep and the Volcano has already exploded and all the ash is bearing down. So better run or be in cash to take advantage of a better entry later.
    Now you know why I am in Cash.

    Thursday, February 14, 2013

    Teflon Market, Patient Bear.

    Or its Deja Vu'

    Its 2012 all over again. In the morning, the futures were down and markets opened lower but by mid-day BTFD crowd came in and helped push SPX in tiny green. Most likely tomorrow will be tiny red. Historically, Feb OpEx, which is tomorrow is green. So we will see who wins, red or green. But it does not change anything. And while we are on the sideline, some will short the market out of sheer boredom, only to have emotional trauma and lose money. Some will go long thinking this is the beginning of new bull run and shares will never correct because Ben will have their back. They will also lose big time. Its all about timing.
    Timing says, do not front run, shut out the noise and the Zen moment will come. 



    I know subscribers are getting impatient for lack of action, but we start with the premise that 1st goal is not to lose money. Rest will follow.

    So folks, no new nugget of wisdom or fancy charts to share. Just chill till the appropriate signal comes.

    Monday, February 11, 2013

    Dairy Of A Reluctant Bear.

    It has been a while I posted in the blog. But the fact is, there has not been much to write home about.
    We were long for the whole month of January and when SPX started flirting with 1510, we exit all long positions and have been in the sideline since then.
    The indices have been chopping and churning and grinding higher very slowly. In the process, killing all bears and convincing everyone else to BTFD
    Sentiments are at all time high:
    And indices are in the overbought territory.
    However, overbought can remain overbought for a long time, till no one is left to sell and everyone is a buyer. When we start hearing about SPX 1600, we will know that the gig is up.

    So we are not front running. Subscribers know the levels to watch and when the sell signal will trigger. Knowing those critical levels have helped us to avoid the whipsaws. We are watching VIX very closely and that is another of our indicators.

    We have also stayed away from commodities including PMs and while we did not short it, we fully anticipated the sell off in gold and silver. Now we are waiting for the sell signal in oil and Nat. Gas. There is no play in grains or soft commodities either.

    All in all, we are practising patience and keeping our emotional health in good shape. Not to mention preserving our capital as well.

    Hope you all are having fun in this BTFD market and although I have turned into a reluctant bear, I am now a patient bear waiting for the fish to land in my mouth.
    Good luck trading everyone.

    Tuesday, February 5, 2013

    Told You So.

    I have been out from 5.30 AM in the morning and is back at 11.30 PM at night. Have been busy with multiple meetings throughout the day and have not had a chance to see what is happening in the market.
    Now that I see how the market played out during the day, I find that SPX was up 15.58 points.
    And I can just laugh , shake my head and say that I told you so.
    Let me know how are doing in this backing and filling market.
    Good luck trading folks.

    Monday, February 4, 2013

    In The Chop Zone

    Indices sold off today by 1% or more.
    Understandably bears are jubilant and bulls are giving it a shrug.

    However do keep in mind, in Wall St. there is no bull or bear, only Weasels.

    If you have read last few posts, you know that my upside target was 1510 in SPX and while we briefly crossed it last Friday, we have been moving in 10-15 points range. The 15 points sell off has not done any damage yet. The market is still on buy signal. That does not mean we have to buy. That simply means we are not going to short, yet.

    The story is same with Gold and Silver. Moving in a range.
    Same with Crude.

    We went for skiing last weekend and after coming back we see that nothing has changed. So we have decided to wait outside the ring and watch the show.

    Subscribers know what level to watch for the sell signal and when not to front run. While we do expect February to be a great month we also know when not to jump and this is one of those times. In all likelihood  those who shorted the market today will be disappointed tomorrow and those who go long tomorrow will be disappointed the day after. There is no play in commodity either.

    Therefore , dear reader, let me repeat the old and tired formula: Cash is King

    Thursday, January 31, 2013

    1500 Breached, But Just Barely.

    Well, SPX did not hold 1500 at close but after hours futures are up and my prognosis remains the same as yesterday. That we will chop around here for a while before the next move.
    Gold and silver gave up all the gains of yesterday and that's exactly what I was afraid off.
    Everything is churning and I find such situations quite frustrating and outright dangerous for the portfolio.
    So we better go for skiing.

    We will come back when it the time is right.
    Subscribers will get the 1st glimpse this Sunday as to what the crystal ball is predicting. And if you would like to know, please join the gang. Time to join the February subscription runs out on Sunday.

    Have fun folks.