Archived Blog
Posted September 13, 2009 at 1:16 AM
The DOW is at an inflection point with some fairly strong resistance. The index is likely to move back down into the trading range this week. We moved up as I suggested would happen as indicated in my post from last week. My target was 9630 and we had a closing high of 9627 on Thursday 9/10. I felt we had a chance to break above 9630 but it was not to be. It was a shortened trading week after the Labor Day holiday and I expected more volume than what we got. There doesn’t seem to be more conviction to drive the market higher at the moment. I expect that we may be range bound for the short term. The range is 9253 to 9650. Should the index break below 9253 I will begin to lighten up on my long positions and then look to 9117 as a key area of support.
The SPX finished the week at 1042 and my post from 9/5 projected a finish at 1039. The index printed a Spinning Top and a Bearish Harami to close the week. I feel that we will trade back down into the recent trading range in the near term. We need more market participation in order to drive the index above recent highs. Look for 1044-48 on the upside as immediate resistance and 1016 and 992 as support on the downside.
As has consistently been the case since the March lows, the COMPQ has outperformed the DOW and the SPX and been the leader. This week has not been an exception. I called for a bullish move this past week and felt that the index would challenge the recent high at 2059. The COMPQ exceeded that level to finish the week at 2081. Friday formed a Spinning Top/Bearish Harami and as a consequence we could see some bearish activity in the beginning of the coming week. I am not sure that it will be anything more than a brief respite. We will just see how it plays out. Look for the upside resistance to be 2089 and then 2211. The downside support resides at 2059, 1993 and 1958.
Posted September 13, 2009 at 1:07 AM
Posted in 
Posted September 13, 2009 at 1:04 AM
-This trade is set up as a credit spread with the short call in the near month closer to the money and a long call the next month out usually one to two strikes above the short call. The trade is a diagonal because it is a two legged position with the options at different strikes and different expiration months. The trade will profit anywhere below the breakeven of the near month short call plus the credit from the spread and possible long call appreciation. Volatility crush on the back month call will reduce the breakeven point above the short call strike price so it is best to pay attention to the implied volatility of the long call when setting up the trade. The fact that the back month call is further OTM should mitigate some of that risk because the Vega is less. Review the risk graph and you should gain further understanding of the risk and reward of the strategy. Best, Robin
Posted September 13, 2009 at 1:02 AM
ECONOMIC REPORTS
MONDAY 9/14
None
TUESDAY 9/15
PPI, Retail Sales, Retail Sales ex-auto, Empire Manufacturing, Business Inventories
WEDNESDAY 9/16
Core CPI, CPI, NET Long – term TIC Flows, Capacity Utilization, Industrial Production, Crude Inventories
THURSDAY 9/17
Building Permits, Housing Starts, Initial Claims, Continuing Claims, Philadelphia Fed
FRIDAY 9/18
None
EARNINGS OF NOTE
MONDAY 9/14
None
TUESDAY 9/15
ADBE, BBY, CBRL, KR
WEDNESDAY 9/16
DBRN, ORCL
THURSDAY 9/17
DFS, FDX, PALM
FRIDAY 9/18
None
Posted September 13, 2009 at 1:01 AM
It’s not how fast you go, but how little you slow down” The words of an Olympic ski coach to his athlete who refused to give up after suffering a critical injury that left her a paraplegic. This young lady made the most of her situation, continued to compete as a physically impaired athlete and was inducted into the Olympic Hall of Fame. Certainly, the challenges of trading cannot be compared with the challenges that this extraordinary young lady faced.However, there are lessons to be learned. She possessed mental toughness and it takes mental strength to be a good trader. More importantly, the lesson is that it is not “all or nothing”. Our young athlete could have given up because she could not compete in the same way that she used to but she chose to select a different venue to in which to compete. I have seen traders that have metaphorically pointed their skis straight down hill without regard to the hazards that exist. Their speed had in fact negated their ability to turn and adjust for unexpected contingencies and as a result, many times they would “crash and burn”.
Had these traders merely dialed down their velocity to the point where they could negotiate turns in their trading, they would have survived to trade again. Consistently moving down the hill and staying in the race is what matters. “It’s not how fast you go, but how little you slow down” Best, Robin
Posted September 5, 2009 at 10:28 PM
The DOW broke down out of the Bull Flag but did so on low volume and bounced up Thursday and Friday. After Labor Day we should see increased volume in the markets and a short term re-test of recent highs. September is historically a very bearish month so it will be interesting to see if we follow that historical pattern this year. I have my doubts. If the market decides it wants to go down, there should be plenty of time to see it coming and we can just join the move.
The SPX is also setting up for a short term retest of the top of the recent Flag. The index needs to push above that high on some volume. Should the index fail to break out, we could be in for some range bound trading in the short term. My sense for the direction is that we will challenge 1039. At that point we need to evaluate the strength of the move and assess its chances for further appreciation.
The COMPQ has been the leader in the move up from the March lows and will, in my opinion, continue that role. We have historical patterns that bode for a bearish move down in September, yet there are unique circumstances in that there are some fund managers that have not believed the credibility of the Bull Run and have not participated in the gains. Those institutional investors don’t want to be left in the train station and should drive the market higher into the end of the year with increased volume. In any event, we will just follow the big boys and profit.
Posted September 5, 2009 at 10:23 PM
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Posted September 5, 2009 at 10:22 PM
-This is the component risk graph of the synthetic short stock position.
-This is the composite risk graph of the synthetic short stock position which is comprised of a short call and a long put at the same strike and expiration month.
Posted September 5, 2009 at 10:20 PM
ECONOMIC REPORTSMONDAY 9/7None
TUESDAY 9/8Consumer Credit
WEDNESDAY 9/9Crude Inventories, Fed Beige Book
THURSDAY 9/10Initial Claims, Trade Balance, Continuing Claims
FRIDAY 9/11Export Prices ex-ag., Import Prices ex-oil, Michigan Sentiment-Prel, Wholesale Inventories, Treasury Budget
EARNINGS OF NOTEMONDAY 9/7None
TUESDAY 9/8CASY, PBY
WEDNESDAY 9/9MW, ZLC
THURSDAY 9/10
LULU, NSM
FRIDAY 9/11CPB
Posted September 5, 2009 at 10:19 PM
One of our students at www.markettamer.com recently forwarded an article to me that evaluated the forecasting accuracy of 50 of the most recognized “Market Gurus”. The statistical analysis was conducted over a two year span with nearly 4500 measurements. The bottom line was that the accuracy of the aforementioned Gurus was a “Coin Flip”. So, here we have an entire industry of people that are proclaimed as experts in their field and the best that they can do collectively is to be right about half the time. As a retail trader you may be paying for some of this advice. What do you do when you are wrong half the time? Well, hopefully your winning trades are significantly larger than your losing trades or 2) you must learn to adjust the losing trade to better optimize the changing trend of the stock.We at www.markettamer.com specialize in the latter. As a result, we put ourselves in a position to take advantage of the new direction of the stock allowing the trade that was losing to be in a position to win. Don’t rely upon others to give you advice on what to do to create wealth. Learn to do it yourself.Posted August 30, 2009 at 1:34 AM
The DOW formed a Bull Flag this week after breaking higher on last Friday’s session. The index has been moving in a sideways trading range for most of August. The immediate upside target is the high from Friday’s session at 9630. Then look for 9654, 9794 and 10365. Support resides at the low of the flag at 9459 then 9438 and 9117. We will just have to wait for the index to decide where it wants to go. If we get a break out of the flag with decent volume, that will be key.
The SPX is also in a flag pattern. The top of the flag at 1039 is the first upside target with 1044, 1106 and 1134 the next on the radar to the north. Support is at the bottom of the flag at 1016-1018 and then the swing lows from 8/17 at 978 and 7/29 at 968. I’m waiting for a break. Don’t guess, just follow it and hop on board.
The COMPQ attempted to break out of the flag on Friday, but was beaten back into the consolidation. The first upside target is Friday’s high at 2059 then 2070 and 2211. Support resides at the low of the flag at 1993 then 1962-9. The entire gap from 8/14 – 8/17 at 1969 – 1949 will act as good support. Finally, the swing low at 1930 should provide significant support.
I am still bullish until the market tells me otherwise. There are many that have tried to short this market too prematurely and gotten hurt by doing so. Let the market tell you what to do. You don’t have to get the first part of the move. When a correction happens you will know when to optimize the turn. I am currently delta neutral and selling premium. When the market breaks from its current consolidation then I will adjust and profit from the directional move.
Posted August 30, 2009 at 1:32 AM
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Posted August 30, 2009 at 1:30 AM
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Much like the Long Put Synthetic Straddle, this strategy entails selling short stock and buying ratio calls to bring the position to delta neutral. The risk is limited and the cost is actually less than a standard application of the straddle. It is best to enter the position at a point of low volatility with an expectation of increasing volatility.
Posted August 30, 2009 at 1:29 AM
ECONOMIC REPORTS
MONDAY 8/31
Chicago PMI
TUESDAY 9/1
Construction Spending, ISM Index, Auto Sales, Truck Sales
WEDNESDAY 9/2
ADP Employment Change, Productivity – Rev., Factory Orders, Crude Inventories, FOMC Minutes
THURSDAY 9/3
Initial Claims, ISM Services
FRIDAY 9/4
Average Workweek, Hourly Earnings, Nonfarm Payrolls, Unemployment Rate
EARNINGS OF NOTE
MONDAY 8/31
SINA
TUESDAY 9/1
CRMT, TTWO
WEDNESDAY 9/2
HOV, JOYG, ZLC
THURSDAY 9/3
CIEN, DLM, JTX, KKD
FRIDAY 9/4
HRB
Posted August 30, 2009 at 1:27 AM
I recently attended a minor league baseball game while on vacation in Oregon where the Eugene Ems were playing the Yakima Bears. Between innings, the Public Relations people for the Ems pulled people from the stands to play fun games sponsored by local area merchants.
One of the games was “What’s In The Box” and was sponsored by a local hair styling and beauty salon. The lucky young woman that was chosen to participate was given a 6 month gift certificate for products and services at the salon; a very nice gift. However, she was given the chance to exchange her prize for an unknown gift in the box. The crowd was chanting and urging her to choose the box. She had a very generous prize. She was already a winner. She could walk away ahead. The young baseball fan chose the box. She chose the box because it’s human nature. What contributed to her choosing an unknown outcome for a known and generous outcome? There were several reasons: 1) Peer pressure to do so 2) “Take a chance” mentality 3) Personal greed 4) curiosity and the excitement that I call the “Christmas Morning Syndrome” that you may recall experiencing as a child when you couldn’t wait to open your gifts. I can guarantee you that the promotional people know human nature. The first gift would have been the better choice because she got a lesser prize by choosing the box. The hair salon got their marketing exposure for less.
So, what does this have to do with trading!? Everything! At times, we opt for an unknown and riskier outcome instead of a known outcome. We stay in trades too long, turning unrealized gains into a realized losses. We sometimes approach the market with a gamblers mentality instead of treating our market activity as a business.
The lesson here is to know that when you feel that you want to choose the box, remember my baseball story and choose the 6 month gift certificate instead. You will be further ahead. Best, Robin
Posted August 25, 2009 at 10:58 PM
As mentioned in last weeks blog, I felt that the DOW was likely to continue its climb and it has done exactly that after a brief two day pullback. The next stop on the trainride to the north country is 9654, 9794 and 10365. Look for 9117 to provide immediate support then 9088 and 8878. I see the index continuing to move higher. Watch for key areas of support and resistance and observe how the index reacts to those levels.
The SPX is also likely to continue the move higher. The next resistance level is 1044 and 1106. 978 and 956 should provide support.
The COMPQ will look for 2070 and 2211 as the next area of resistance. Support should be located at 1930 and 1905.
I am currently on the road, so the analysis this week is very brief. I will go into more detail upon my return early next week. As such, you will not find the charts as normally provided. Thank you for your understanding. Best, Robin
Posted August 25, 2009 at 10:56 PM
This position is a non-directional play consisting of long stock and ratio puts. Enough puts should be purchased to bring the position to delta neutral. This is a volatility strategy and should ideally be placed in a period of low volatility with an anticipation of increased volatility. The position is a limited risk, unlimited reward play. It is more expensive than a traditional straddle, however, because stock is used to optimize the bullish side of the strategy, it reduces the negative effect of time decay and volatility that would normally be present if we used long calls.
Posted August 25, 2009 at 10:54 PM
ECONOMIC REPORTS
MONDAY 8/24
None
TUESDAY 8/25
Durable Orders, Consumer Confidence, S&P Case /Shiller Home Price Index
WEDNESDAY 8/26
Durables Ex Transportation, New Home Sales, Crude Inventories
THURSDAY 8/27
Initial Claims, Q2 GDP – Prelim, GDP Deflator, Q2 Core PCE
FRIDAY 8/28
Personal Income, Personal Spending, Michigan Sentiment – Rev
EARNINGS OF NOTE
MONDAY 8/24
WINN
TUESDAY 8/25
BMO, BIG, BCSI, BGP, BKC, CHS, COCO, MDT, MYGN, SPLS, TUES
WEDNESDAY 8/26
CWTR, DLTR, KIRK
THURSDAY 8/27
AEO, ARUN, BEBE, OVTI, RY, TOL
FRIDAY 8/28
NONE
Posted August 25, 2009 at 10:51 PM
This is an article that was published a few weeks back that may have not gotten the attention it deserves. There is a lot of wisdom in these words. We felt that it deserved another look.
There are some very sincere people in the world of stock market education, but unfortunately as with most things, there are those that don’t have your best interest at heart. Read and ponder the suggestions presented here. Best, Robin
Article published courtesy of David at www.thecrosshairstrader.com
When making a decision about whether or not to read a trader’s advice via a blog/website, I believe a few qualities can help you separate the wheat (the good) from the not so good (chaff).
When I say “advice” I do not necessarily mean recommendations to buy and sell. I mean insight from a “trading partner” who can help lead you along the path of success. You will understand later exactly what I mean.
THE REALITY
Everywhere you look there are purveyors of trading information ready to sell this system or that system, this technique or that one. Every weekend I turn on my TV (the weekends are about the only time I watch TV) there is an infomercial on how to trade a trend or how to trade better, followed up by dates for you to attend local free seminars in your area. By the way, seating is limited so reserve your space now! Then you have the internet-or shall I say infonet-where stock trading sites are available 24/7. For instance, type in the keywords “how to trade stocks” and you get 25,900,000 results as of today. In case you missed it THATS OVER 25 MILLION RESULTS! Is it any wonder why professional traders who have found their way make so much money on those who have not?
WHAT NOT TO LOOK FOR
For most novice traders the search for what works is elusive for three reasons: 1) they have no idea what to look for, 2) they usually believe the first choice is the best choice, and 3) they believe that what looks the most sophisticated is the right choice. It just does not have to be this way. Just as in trading, patience is the key.
A sites rank (whether it shows up on the first page of search engines), how well designed the site is, the past trading record of the site’s author(s), how many times the site gets linked to, the ease of navigation around the site, the number of topics covered, whether it is free or members only, etc. has very little, if anything, to do with the quality of the information provided and its ability to help you successfully navigate the trading battlefield. These really have more to do with selling ad space. What really matters is the character of the site. Let me explain.
WHAT REALLY MATTERS
The qualities I look for when choosing to follow a trader is his/her consistency, passion for the market, focus, and honesty. Now, how do you do this?
1. Consistency. I believe this is the most important quality because without consistency all else fails. In other words, who you read should practice what is preached. If a trader preaches consistency with a particular setup yet you find he uses one indicator one week to make a trade then uses another the next that he has not previously mentioned then he may be consistently inconsistent. He either has a set of rules or he does not. This will take time (a little longer than the “free trial” period associated with members only sites) and a little effort on you behalf, bu the time and money (if members only) will be well worth it.
2. Passion. How can you tell if a trader is passionate about her site? Answer: the content is original and insightful, not mostly filler from other sites. And the content is up to date, not last week’s news. There are not a few sites out there that do nothing but steal posts from popular sites and re-post them with no rhyme or reason for doing so. These sites are usually full of ads, pop-ups, and annoying bells and whistles. Do not get me wrong, there is nothing wrong with a LITTLE advertising, just not so much that it takes away from the real purpose of your visit.
3. Focus. Let me give you a personal example. I trade options with a simple technique while adhering to certain psychological principles that I believe to be vitally important to a trader’s success. With that in mind, I enjoy reading sites that focus on options trading, technical analysis, and the psychology of trading. If you find a site that majors on nothing and minors on everything, then you have a recipe for majoring on the minors: not good when it comes to trading.
4. Honesty. How can you really know if the trader on the other side of the screen is completely honest about her trades and the way she trades? You can’t. But the first two factors above really go a long way toward establishing a sense of honesty. You can only deceive but for so long. Another way to know is to ask yourself: Does the trader reveal the mistakes and bad trades along with the good ones? Does the trader recognize that things can and do go wrong? Or, does the trader focus only on being right and all the trades that worked. What about the ones that did not? Admission of failure is a very good sign of honesty because even professionals make mistakes, just not as often.
SITES IN THE CROSSHAIRS
So what sites make THE CROSSHAIRS cut? I read both free and members only sites and really do not distinguish between the two. I will not comment on the following as I do not want to influence your decision, but suffice it to say all of the following exhibit, to one degree or another, the qualities listed above and are well worth a look.
I am sure my list will expand but just as in trading it is important that you make wise decisions about the blogs/websites you read. Keep your focus and keep it simple. Separate the wheat from the chaff.
It is my hope that you find in my site the same qualities I look for in others. If so, then I really do have something worth writing about. I will never feel alone waging wars on the battlefield as I am comforted knowing trading partners are there with me.
Posted August 15, 2009 at 8:16 PM
The DOW is in a trading range between 9200- 9438. Volume has been decreasing, so there is indecision and lack of conviction. Some technical analysts are calling for a substantial pullback. From a fundamental perspective it seems that the market should be succumbing to the headwinds. However, I believe the market will have pullbacks which is a healthy process, but nothing approaching the bearish move that some project. For the short term, I see a continued climb. With that said, I will follow the market and if it should decide to correct, I will be on board for the move. Look for key support and resistance levels and assess how the market is reacting to those levels and you will have your answer as to the direction. Don't fight it, just go with it.
The SPX is the same story as the DOW. There will be opportunity to catch a nice move out of this consolidation. The trading range is currently 992-1018. Look for volume on the breakout/breakdown and go with the move. Don't try to guess the direction but rather, let the index tell you what it is going to do and hop on board for the ride.
The COMPQ has been the leader in the recent bull run. There is no reason to believe that will change. Look for the technology laden index to make the first move and lead the way out of this stagnant environment. The current trading range is 1962-2016. Watch these levels closely and be aware of a breakout/breakdown and play it accordingly. Volume will be your key indicator to watch in order to ascertain the credibility of the break.
