Saturday, July 28, 2007
Check Your Head: Part 2
Ragin' and Boone have certainly been successful in keeping us entertained with a great ERTS recommendation and the teaser from Boone's "Stearns the Bear" short. But aside from Stearns the Bear getting "blasphemed" in his nether eye, there has been little talk of the clobberage the markets endured last week.
The charts posted in part 1 were the SPY, COMP, and DJI, flipped upside down. If your initial reaction to those charts was bullish, then pay careful attention to your reaction to the charts flipped right side up.
Consider this simple experiment. Next time you have to walk away from your quote screen, for maybe an hour or so, before looking at it again, take a mental assessment of your positions. If you have many positions, consider focusing on the few you are the most familiar with, in regards to how they typically trade intra-day. Make a prediction of where you think they'll be trading, and then check the quote screen again.
If you are like me, the mental assessment and prediction process described above, if focused on, can be slowed down so that our biases become more easy to discover. For example, when I experiment with the process, upon returning to the quote screen, I often find that where I want the stocks to be trading is often different from where I really think the stock will be trading .
If you were bullish when viewing the flipped-upside-down Nasdaq chart, the 3-year weekly chart shows that the index is still at the top of the range established when it came off its lows in 2002. The index could drop another 150 points (~6%) and still be in the middle of this range. It could also drop another 400 points to reach the bottom of the current range, a ~16% drop from Friday's close.
The charts posted in part 1 were the SPY, COMP, and DJI, flipped upside down. If your initial reaction to those charts was bullish, then pay careful attention to your reaction to the charts flipped right side up.
Note on these charts the anchoring effect that is generated when I draw lines indicating where I think the indexes will be going. I've just drawn lines which illustrate the markets' tendency to move up and down. What actually happens may be entirely different, so do not anchor too heavily on the Head and Shoulder reversal patterns illustrated.
As for the flipped-upside-down charts, if you wanted to buy them, do you want to sell the current markets equally as much?
Consider this simple experiment. Next time you have to walk away from your quote screen, for maybe an hour or so, before looking at it again, take a mental assessment of your positions. If you have many positions, consider focusing on the few you are the most familiar with, in regards to how they typically trade intra-day. Make a prediction of where you think they'll be trading, and then check the quote screen again.
If you are like me, the mental assessment and prediction process described above, if focused on, can be slowed down so that our biases become more easy to discover. For example, when I experiment with the process, upon returning to the quote screen, I often find that where I want the stocks to be trading is often different from where I really think the stock will be trading .
If you were bullish when viewing the flipped-upside-down Nasdaq chart, the 3-year weekly chart shows that the index is still at the top of the range established when it came off its lows in 2002. The index could drop another 150 points (~6%) and still be in the middle of this range. It could also drop another 400 points to reach the bottom of the current range, a ~16% drop from Friday's close.
Even if one abhors chart-chomping and feels it is akin to reading tea leaves, prognostications aside, charts do help illustrate a range of possibilities. Check your head to be sure your biases are not unduly influencing your actions, and be sure to consider the possibility that the U.S. indexes could continue downward, yet still trade within their historic ranges.
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Good Stuff--
Cramer made an interesting point about the inefficiencies of tradebot and how the specialists would never have let the sellers drill stocks the way they did.
I know Bruce will magically appear and say "there is no such thing as manipulation."
However, I can tell you this sell off is wholesale bullshit, fucktardery.
Look at the patterns:
They (asshole shorts) have been trying to take this market down since 2004.
Recently, they tried to run the Yes up and spread rumors of "the unraveling of the Yen carry trade."
Didn't work.
Then,they started with the "world will end thanks to sub prime scare."
Didn't work, but they are using it again.
Or how about "Gee, look how high rates are going, Bernanke is going to hike now."
That was bullshit.
Or, "inflation is scary." How about "growth is too strong, sell your Mother and burn your house."
Or, don't forget "oil is too high; no one will ever shop again."
Who could forget "Israel attacked Lebanaon, WWIII has begun."
Or, "Uh, oh, Kerry is up in the polls, sell now or lose it all."
I could go on and on.
The point: This sell off is no different than all the others. It is being over hyped. The big banks have plenty of reserves and have spread their risk, all over the street.
In the near term, identify max pain and live by it. Don't get washed out, thanks to short term drops. Carry some hedges and try to time your buys, with downside risk noted.
Cramer made an interesting point about the inefficiencies of tradebot and how the specialists would never have let the sellers drill stocks the way they did.
I know Bruce will magically appear and say "there is no such thing as manipulation."
However, I can tell you this sell off is wholesale bullshit, fucktardery.
Look at the patterns:
They (asshole shorts) have been trying to take this market down since 2004.
Recently, they tried to run the Yes up and spread rumors of "the unraveling of the Yen carry trade."
Didn't work.
Then,they started with the "world will end thanks to sub prime scare."
Didn't work, but they are using it again.
Or how about "Gee, look how high rates are going, Bernanke is going to hike now."
That was bullshit.
Or, "inflation is scary." How about "growth is too strong, sell your Mother and burn your house."
Or, don't forget "oil is too high; no one will ever shop again."
Who could forget "Israel attacked Lebanaon, WWIII has begun."
Or, "Uh, oh, Kerry is up in the polls, sell now or lose it all."
I could go on and on.
The point: This sell off is no different than all the others. It is being over hyped. The big banks have plenty of reserves and have spread their risk, all over the street.
In the near term, identify max pain and live by it. Don't get washed out, thanks to short term drops. Carry some hedges and try to time your buys, with downside risk noted.
Here is a piece by 'Crammer' that I found interesting though a little hypocritical considering he made his made bed going short back in the day. Plagiarized below in a Ducatiesque sort of way.
"Manipulation. Cheating. Phony numbers. No specialists. No break in the action. A fast market in the last 15 minutes where you couldn't keep up with the prices.
A 15-minute break where the prices were wrong on your screen when it was going down and looked like it was going up.
Sorry. This is about as phony a market as I have ever seen. If there were any refs, they would have stopped play and thrown people out.
Now, look, I understand, if I were short, it would be nirvana. If I were short I would say, "Look, we got there by hook or by crook." I am telling you that much of it was the latter.
It hasn't been since 1987 that I have seen a market so easily overwhelmed by the futures selling.
Except back then we didn't have ETFs that could blast things down. I saw traders buying puts and then blasting down stocks with ETFs where you don't have to wait for a buyer to bring it back up. (Scott Rothbort has done good work on that.)
I saw a total absence of buyers because the speed of the decline was too great. Had there been specialists, I believe they would have halted some trading for order imbalances, so those of us who might have wanted to take advantage of the declines could put money to work.
Nah. It went down, crushed, mutilated, and no one could get in who might have wanted it.
Now here's what has to happen. We need total panic at this point to create any sort of tradeable low. We open up Monday, and I think it could be a joke, a setup.
If we open higher, you actually need to sell what you might have bought when you picked, if you pick like me.
Because without a moment when the sellers are finished or the buyers have had time to find levels and put in orders, we are going to go down a thousand points in a heartbeat.
I never use terms like that wildly. This is a market that is not nearly as healthy as the stocks or the companies underneath it.
In February when we had the glitch, I excused it -- even as it made people make decisions that were hopelessly wrong. The fact that it happened again makes me not trust the system. I believe it might have happened yesterday too, but no one wanted to acknowledge it.
You should be infuriated. I know I am. I am not saying stocks "deserved" to go up; I am not that stupid.
I am simply saying that if they are going down, at least try to make it orderly so we have time to think about what to do and not be stampeded out of the game by endless fear."
"Manipulation. Cheating. Phony numbers. No specialists. No break in the action. A fast market in the last 15 minutes where you couldn't keep up with the prices.
A 15-minute break where the prices were wrong on your screen when it was going down and looked like it was going up.
Sorry. This is about as phony a market as I have ever seen. If there were any refs, they would have stopped play and thrown people out.
Now, look, I understand, if I were short, it would be nirvana. If I were short I would say, "Look, we got there by hook or by crook." I am telling you that much of it was the latter.
It hasn't been since 1987 that I have seen a market so easily overwhelmed by the futures selling.
Except back then we didn't have ETFs that could blast things down. I saw traders buying puts and then blasting down stocks with ETFs where you don't have to wait for a buyer to bring it back up. (Scott Rothbort has done good work on that.)
I saw a total absence of buyers because the speed of the decline was too great. Had there been specialists, I believe they would have halted some trading for order imbalances, so those of us who might have wanted to take advantage of the declines could put money to work.
Nah. It went down, crushed, mutilated, and no one could get in who might have wanted it.
Now here's what has to happen. We need total panic at this point to create any sort of tradeable low. We open up Monday, and I think it could be a joke, a setup.
If we open higher, you actually need to sell what you might have bought when you picked, if you pick like me.
Because without a moment when the sellers are finished or the buyers have had time to find levels and put in orders, we are going to go down a thousand points in a heartbeat.
I never use terms like that wildly. This is a market that is not nearly as healthy as the stocks or the companies underneath it.
In February when we had the glitch, I excused it -- even as it made people make decisions that were hopelessly wrong. The fact that it happened again makes me not trust the system. I believe it might have happened yesterday too, but no one wanted to acknowledge it.
You should be infuriated. I know I am. I am not saying stocks "deserved" to go up; I am not that stupid.
I am simply saying that if they are going down, at least try to make it orderly so we have time to think about what to do and not be stampeded out of the game by endless fear."
# posted by 
: 12:48 AM
: 12:48 AM
Woodshedder knocks it out of the park, it's over. Can someone please clean up the garbage (endless typos, pictures of random idiots and stupid links to "hot ladies" soft porn) littering Fly's blog? Really, the site looks like crap, and I don't want to read Cajun's life story about being raised in the swamps of Louisiana eating nutria. Or whatever. Who cares. Let's stick to the effing "clobberage" and how to make more coin this week. One weekend blogger is plenty and Woodshedder wins.
nice post shed, really, but fly wins with his comment.
my video is intended to be light-hearted--and as I stated--not lead you financially. Figure it out. You will either sell at the lows, or be a genius in your small circle of freinds for months to come. I pick column A.
my video is intended to be light-hearted--and as I stated--not lead you financially. Figure it out. You will either sell at the lows, or be a genius in your small circle of freinds for months to come. I pick column A.
Broker A: I wouldn't say there is no such thing as manipulation. People who can, take advantage of the system/rules & loopholes in place & do manipulate it to their advantage. My only point was the same thing happens on the way up, so to complain about manipulation when the market is going against you is childish. Cramer made a big deal of it Friday but the bears complain of the same thing when the bull is running.
Yea, awesome post Fly- What's up with the double space thing?
Who is CNL. I sense a snake in the grass who comes in way over budget and blows the whole thing up.
Brontops, I disagree-
I spoke with Ferdie Pacheco and he has this thing scored dead even.
Who is CNL. I sense a snake in the grass who comes in way over budget and blows the whole thing up.
Brontops, I disagree-
I spoke with Ferdie Pacheco and he has this thing scored dead even.
There is defintely market manipulation and it has gotten worse over the years with the growth of hedge funds and program trading. There is very little SEC enforcement so instead of complaining I believe a trader can take advantage it. Do you think the last minute before the close tape painting before the MVIS news the next day was pure luck? Do you think the OIH ETF going up or staying unchanged on a day crude falls a couple of dollars (ditto for gold stocks when the physical falls) is a mere coincidence?
How about those unusual heavily traded options a day or two before news or when the market is trashed but an individual stock goes up and then the next day Goldman issues an upgrade of the stock?
Trading (as opposed to investing)is a bullshit game and a trader need to be able to follow the action of a stock or a sector and not ask too many questions. I always believe where there is smoke there is generally fire.
How about those unusual heavily traded options a day or two before news or when the market is trashed but an individual stock goes up and then the next day Goldman issues an upgrade of the stock?
Trading (as opposed to investing)is a bullshit game and a trader need to be able to follow the action of a stock or a sector and not ask too many questions. I always believe where there is smoke there is generally fire.
tradercaddy... agreed
re: goldmans upgrade after some options or whatever - very true . I know from friends who trade for $10 billion hedge funds that they get the wink from someone at BSC, MS, GS, etc that an upgrade is coming. After all they spend millions in commissions to those brokerages. You grease my palm & I'll grease yours.
re: goldmans upgrade after some options or whatever - very true . I know from friends who trade for $10 billion hedge funds that they get the wink from someone at BSC, MS, GS, etc that an upgrade is coming. After all they spend millions in commissions to those brokerages. You grease my palm & I'll grease yours.
Does anyone here have some thoughts on the real reason behind the "clobberage"? It seems to me that all the bad news (subprime/oil/economy) has already been baked into this market and shrugged off. Could there be something new, something deeper and more ominous behind the selloff? A (more or less) orderly withdrawal on huge volume across the board...maybe the big institutions are scared of something new behind the scenes and are bailing out big. Is a major hedge fund about to get "mushroom-clouded" as part of the larger fallout from the subprime mess? Is something like the LTCM debacle, maybe worse, lurking under the surface? What was so different this past week to cause such broad and deep technical damage across the board? I'm not persuaded that it's a cumulative effect of everything or just some summertime profit-taking; this smells different. Does anyone here with eyes/ears/nose closer to the action have some insight? I'm concerned that something really ugly and unexpected is about to break the surface.
Super bullish but a little worried out here.
Super bullish but a little worried out here.
either what the bears have been saying is coming home to roast or there is the unexpected about to be unveiled ... take your pick
Cramer is just upset because he went on air at 2:45 and talked about Kass aying "the bottom is in" or whatever and feels like an idiot because the market melted for the rest of the day.
I've been complaining about the new hybrid market since the beginning. I have no faith that should the market really meltdown that it will be able to manage the market efficently.
If the market really sells off, people will need to throw huge blocks at the market. I think the average trade size since inception of the hybrid is 400 shares... how can a system like that manage real liquidation or large block panic selling?
About the downtick rule... I mean, they tested pilot stocks for well over a year and said that the downtick rule didn't substantially change the way the stocks traded. If anything, I think it made the squeezes that much worse because it was much easier to get short. I imagine the same will be true here when the selling finally subsides... stocks will spring back so fast it will be hard to get in.
-DT
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I've been complaining about the new hybrid market since the beginning. I have no faith that should the market really meltdown that it will be able to manage the market efficently.
If the market really sells off, people will need to throw huge blocks at the market. I think the average trade size since inception of the hybrid is 400 shares... how can a system like that manage real liquidation or large block panic selling?
About the downtick rule... I mean, they tested pilot stocks for well over a year and said that the downtick rule didn't substantially change the way the stocks traded. If anything, I think it made the squeezes that much worse because it was much easier to get short. I imagine the same will be true here when the selling finally subsides... stocks will spring back so fast it will be hard to get in.
-DT
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