BUY BUY BUY - The Stock Market is Creating Better Illusions Than Houdini
Posted On Thursday, October 30, 2008 at at 2:10 PM by ChrisQuickly, go all in. We have reached the bottom. Not so fast. In our current market, emotions are playing as a higher factor than fundamentals. But like a heroin high, it's only going to last a bit and then cruel reality will once again set in.. Yesterday, I discussed the probability of a green day, especially in Asian stocks dealing with the possibility of a rate cut in Japan. That possibility is still lingering.
Today, we officially found out we had a contracting economy(one more quarter of those and we've officially got ourselves a recession) with the GDP report, but the "bad news" was better than expected.With that, surprisingly, came a pretty well stimulated day. Good enough that I unloaded the rest of my Apple $110 strike price contracts for double what I bought into them for. And with those proceeds I'm back in heavy to FXP at $90. Ahhh, I feel so much better now. It's like coming in from a rain storm. Getting back on the short side is so much more comfortable in this market than playing the long. Let's take a look at where we're at:
See the trend? It looks like a long hike up, but it goes by faster than you think. Let me be frank. We may see FXP cut in price even further before it explodes. This is because next week looks to be what I call a "Rave Week." A Rave Week is when there is so many things going on you don't know whats going to happen. Lets not forget the short squeeze we are feeling for the redemptions coming in Mid November. Also, elections are next week, and with Obama leading, who knows what kind of response that will cause. And of course, everyday new bad news will loom over the market trying to bring it down. We may be told next week that all are banks go under and we will still see green. We may have the best news ever, only to find red in the market. Whatever the case, there will be a lot of noise during next weeks trading. Tomorrow will be a telling day.
So why buy FXP now? Because in December, watch out! I would love to see the market rally all next week. That way, SRS, SKF, and SDS will all be prime for buying, because I believe our big, bad tidal wave is coming in December and January. The holiday season the last hurrah for a lot of retailers. When they see the horrible sales volume the holidays bring, out go the lights. We are going to see a lot of big, national retailers go under next year (my picks: Circuit City, Office Max, Office Depot just to name a few). The ones that remain will be hurting, bad. So, if I continue to see FXP drop, I will continue to buy in $10 increments. I bought today at $90, if we see it reach $80, I buy more, $70 again, etc... Remember I have a nice pile of cash of GAINS sitting on the sidelines from the past two weeks. We've got room to wiggle.
I don't feel comfortable with any longs at this point. I almost do about GDX (Gold ETF), but I like their options, when their price is below $20. With all the Federal help in the credit markets, we are bound for inflation. SRS and SKF have come down significantly, but not near as much for a buy for me. Remember if you choose to buy FXP now, realize we may not see big gains for another couple of weeks. Don't worry, the gains will come, but maybe not until late November. You may see it go down another 20% before going up again. Like I said before, this ETF is not for the faint of heart. Be patient. I hope you all are riding these waves with me. It's been a great ride so far. Just don't hate me if I'm not 100% right. I will try to be 80%. You never always know what this market will do.
I will give another special update this evening to discuss how the Asian markets are doing. Usually, we get a pretty good idea of how FXP will perform from looking at how the Asian market does. This Rally should not last long. Upcoming news will prove that. Just wait until the next job report comes out. Check back tonight for the Special evening update. Happy trading.
Almost Back To Ground Zero - Shorts Here We Come
Posted On Wednesday, October 29, 2008 at at 11:59 PM by ChrisWell, as we expected, The Fed went through with their cut of 50 basis points. We saw the market rally in anticipation of the cut as well as stay fairly strong after, until the last 10 minutes where we saw a lot of profits being taken. I sold out of most of my call options, because DIG, RIMM, and UYG were all up strong and yielded strong gains. I gained a 90% return on my Nov. expiring RIMM option, 70% on my DIG option, 60% on my UYG option, and I kept my .QAADB, April expiring call option which I bought for $9 (It closed today at $15), because I believe Apple will continue to go up. They are cash liquid, have no debt, and continue to rise above with their innovation.
Now what goes on tomorrow? Usually, I would expect a pretty strong sell off, considering we had two pretty strong days of green. In this market, that's more we can ask for. However, Japan looks to make their own Fed Cut, which if they make a strong one, would most likely send our market skying tomorrow, especially Asia stocks. In fact, as we speak, Hong Kong's SSE is up quite a bit off of anticipation.
So for me, Tomorrow is a measuring day. Another day in the green, expect our short positions to be in prime position to buy back into. Personally, I feel it will be a green day, so I will be looking to get back into FXP or SKF if it gets in the low $90's or below. Also, I will maybe to look to get out of my Apple (AAPL) option if we see it go up another 50%. If for some chance, the sell off is stronger and pushes the market down, tomorrow will end up being an "observance day" for me. Remember though, to not give up on the market. You cannot count on how the market is going to finish until watching it five minutes before it's going to close. We saw a 300 point swing today in 7 minutes. The market is very volatile and a Red Morning can be a huge Green Afternoon, so keep tabs.
So keep your eye out and if we see another strong green day, look to building up your short FXP position, because as we saw from last week, that's a great wave to ride in this market. If it's red, don't worry about it, because election week is next week and I think we'll see some more green next week. Happy trading and we'll see you tomorrow.
The Dow up over 10% - Did You Get On The Wave?
Posted On Tuesday, October 28, 2008 at at 6:02 PM by ChrisLike I said patience is a virtue. You should have not been too surprised, because we here at Crash Market Stock said it was coming. In any regard, I hope that you are finding ways to make money in this market, because the opportunities are ALL AROUND YOU!
So here we are, a huge rally, up over 10% for the Dow today. All of the options we discussed are up anywhere from 30-90% depending on which ones you bought. And after completely liquidating my FXP, there was not any downside today. So what now...
Tomorrow will be a very interesting day and I'm going to be very cautious to what I advise. There are many elements constantly pounding on the market everyday telling us Bad News. I mean, even today we got the worst consumer sediment report in 30 years. You would think that would devastate a market. However, this time, I believe there was more positive pounding, temporarily, to give us this huge run. But there is a lot less positive to work with than negative, which is why we need to be careful when playing the long. In fact, GDP reports come out Thursday, which I am sure will now show a recession.
As for tomorrow, we have the big announcement. Now, no doubt most of the reaction of the cut was factored today, but not all. This puts us in a sticky situation. Most are expecting around a 50 basis point cut in the rate. Anything less than that, will probably send this market down tanking (coupled with the people taking profits from today). If they cut to expectations or more, I believe we'll see another healthy rally tomorrow. Remember, there are billions of dollars out there sitting on the sidelines waiting for the "bottom", and as soon as they see signs of life, they dump it in.
As For me, I plan on keeping my option contracts and hopefully selling them tomorrow for a healthy gain. Then, depending on how the market moves, I would love to get back into a short position. Notice below the chart for FXP. See the trends?As you can see, there is a pretty correlating trend with spikes in this ETF. Good fluctuation from $80-90 up to $190. For me, as soon as it gets below $100, its a buy, and look what we found last week. The great news is after today, it took such a beating, its back down to $113. Another day of that and I am back in. For your options, look to hold on tomorrow and think about liquidating at the peak of the day tomorrow. Remember, it may be better to sell it before the Fed's announcement, because as we saw from the Bailout vote, action can cause the market to move down. If we see FXP hit $92 or below, I would get back in. There is too much bad news to come to keep that stock below $150. Good luck, Happy Trading, and we will see you tomorrow.
Patience is a Virtue... Even With The Stock Market
Posted On Monday, October 27, 2008 at at 5:00 PM by ChrisAnd we were so close. From now on, you may just want to save yourself the time and only turn on your computer to check the status of the stock market between 12:50 and 1:00pm (PST), because lately the last ten minutes we have seen this market move anywhere from 3-5%. We enjoyed a majority of the day in the green and saw, for a brief time, increases in gold, oil, Rim, and Apple. However, that was quickly wiped out the last five minutes of the market. Don't worry, all is not lost.
On the bright side, we saw FXP hit $184, wow. So for all who heeded the call at my $92 buy in, has now doubled their investment on that stock in 1 week. No need to thank me, I'm riding the wave with you. Although it looks as if this stock will never be halted, I found it time to unload a majority of my position. I mean how greedy can we get. We may see it creep close to $200, depending on the market the next few days, but I don't want to roll the dice.
One dilemma this puts me in, is now I am not in a short position to cover my longs. Sure, I still have a minor stake FXP, but nothing that will hedge my longs. The good news is, all of my long purchases were option contracts, so there is a maximum to my downside risk.
So why go long in this market? Do I think that we have reached the bottom? NO! But I believe there is enough news in the next two weeks to encourage a healthy 1000+ rally and it could happen on any day. What are these reasons?
- Fed is meeting to discuss and is expected to make another cut to the rate. Historically, this has been a great way to stimulate the market. Depending, on how big the cut is, the market could really take off. It could take off tomorrow just in anticipation for it. If they cut it 50+ basis points, watch out.
- Elections. Historically, the market always slows prior to an election, but than usually gets a healthy bump afterwords. As it looks as though Mr. Obama will be elected, that can easily stimulate a run.
- Hedge fund redemptions expire Mid November. It is in their best interest to have the market as high as possible for these redemptions, so look for maybe a manipulated run in that regard.
The Dow is still going Down, Down and Down. More Opportunity For You!
Posted On Friday, October 24, 2008 at at 9:09 PM by ChrisWell, we have seen yet another Red day in the Stock Market and while most people are outside banging their heads on the wall, I am excited for the new opportunities that are presented to make some money in the market. It is for this reason why I recommended the initial load up of FXP. Today, we did see a decline of the Apple (AAPL) options, however, FXP hit $160, still giving us strong gains for the day. It is essential in this market (at least at this point), that whenever you are long, also hedge it with a short position, because for the next year I see this market struggling.
Because of continual days of red in the market, I think we are due for a rally. I did say yesterday that I thought that rally would have been today, but that's ok. KEY DATE: The Fed meets October 30 to discuss the economy. You can bet that if the market is still trending downward, we may see a historical 1 point cut to the fed funds rate. If so, watch out! We will probably see a 1000 + day movement on the DOW. So I foresee some expectation of the cut beforehand.
I think some opportunities to look at are Gold. Commodities have been slammed this month and gold is at a 52 week low. With the FED cutting the rate, some will fear inflation, boosting up Gold. On Monday, look to see the trend of the market. If it looks to be up in the pre-market, considering selling a big portion of your short position and maybe load up on some January expiring, either GLD or GDX options. This should give you plenty of time for a nice good pop in gold. If it looks to be down on Monday, let FXP make you some more thousands and towards the end of the day, maybe look into loading up on the Gold options. I think next week is a Green Week. See you Monday.