‘Til we run out of trees

Nine lives or tails?

Well, today was a lucky escape - had order just below market to sell Amazon at 75.80, it opended at 75.89 higher, didn’t even look back and closed up over 4% on the day, over the 200 day ma.  Now this appears to be an even better place to short it, but, perhaps wait a day or two, see what happens next, when I’m feeling brave again - would have been a loss of £340, but that powder’s still dry and can be used still.

Carnage in the precious metals trading - Silver Wheaton down over 12%, today at $10.50ish (just a few weeks ago it was at $19) - will be buying some for the pension account at these prices nothing like catching a falling knife

The Gold Bugs index ($HUI ticker) is down to 356 - real breakdowns or capitulation in this sectors.  Just the type of action you get before a new upleg, excellent news.

Gold and silver break also.

Coffee up over 140, want to open a trade here, also in cotton - sugar bust over 400 twice now and pulled back significantly,

Commodity breakfast

Big sell off across the board today - silver under $17, softs down and cotton at 67, coffee 136, gold under $900.  The Gold Bugs index is under 380 - and Silver Wheaton a great silver stock at $11.50-$11.70.

Just about all down - except lumber, live cattle and lean hogs - which perhaps shows strength here.

A nice day not to be long commodities.  USD index not up much, to account for the fall, must be general fund liquidations.

Amazon is my next short sale watch.  In fact, looking at the big picture - the VIX and QID are looking to move higher out of recent consolidation ranges - meaning another general market sell off may be approaching.  I’ll take Amazon for 30% down to $50ish as a target.

Friday massive, back up the truck

Interesting day and week really in the markets, bear rally continues in main indices. I am reviewing short opps in internet stock Amazon and long commodities - the softs.

On the commodities first - set the background - oil chart since 2000.

Well, to me, it looks like a spike which could retrace to $80 - though reallistically probably only $100-$110. Even if it does the secular 7 years already uptrend would still remain in place so no real worries there.

On the softs, they are really back to start of the year prices - coffee started the year at around 135.00 and is still there, cotton around 70c and has returned to rest there on support - sugar slightly higher by 10% or so. Silver is up a few dollars. However, you look at it - relative to the US dollar index which has traded sideways and is looking like it will break down from 73 on its next leg down soon - there appears to be plenty of upside in the softs in the medium term - til year end for starters.

See the lower tab in purple open interest - is headed down, previous lows signalled a bottom - the seasonals - well end of July and first couple of weeks of August are the best time of the year to go long coffee. See above chart resting on weekly support - uptrend line from 2006. In fact, my first trade in coffee was in December 2005 at 94c and it is only up 30% since - in nearly 4 years - gold has doubled.

Silver, cotton and sugar are going to be longs from about now.

Now on the gold - if you are a gold bug you’ve been pretty beaten up this year, and in the last trading week, well you could easily have lost 25% of your capital. This is one of those times when I see a chart and think, I am glad to be on the sidelines - but - with The Gold Bugs index (HUI) around 400 support - chart looks like a good contrary long bet. On capital spreads.com this will have to be a proxy using Barrick Gold (ABX) which accounts for 10% of the HUI. In fact I am very bullish on gold stocks - another chart I created shows that relative to gold, gold stocks are best value in years - as long as gold holds over long term support say $880 then the only way is up.

So, here are the charts to trade, Barrick right on 200day ma - can’t really lose much on this with a tightish stop - this looks like a great opportunity.

Often the HUI will fake out on the downside before taking off - this could be one of those times - to capitulate now (the Gold Bugs are a gnarly old lot and don’t give in easily) - so this market doesn’t take any prisoners - but like coffee.

Next two charts - show why you need to be careful shorting! and also show great short opp in Amazon in next few weeks - compare to lower chart which is ETF basket of 10 biggest internet darling stocks - trending down.

Apple update

Now is dangerous time to short - its all too clear from charts - best wait to when rally over/up to 50dma which will be around 175 by my reckoning - if it fails and breaks here - still it would be better to wait until a rally over 50dma to prevent getting shorts run in.

Malcolm Pryor - useful video and book

Malcom Pryor’s book on financial spread betting

Has Apple got vertigo?

Trading has got a lot in common with surfing, I think, they can both be excelled at as solitary pursuits and can be pretty intense, man!

Supercharged silver bull

I had a look around to see if there was a leveraged silver ETC today - and found the ETFS securities 2x silver product. Great time to enter a longer term position here and can be done with pension money too - for those with a longer term time horizon - remember to sell at the next high volume spike though - and then repeat.

Remember though that if the price halves you lose all your money - so don’t buy after a good run up.  Feasibly the price of silver could increase 10x in the next 10 year - at 2x leverage that is a 20x return - that could give you a serious pot of cash if and only if you play it right thought - buy after consolidations and sell at the buying peak - or in those few weeks when prices max upwards.

Inflation fighting with pillows

Fed funds rate futures price in 75bp increase by year end - if none then latest pullback in commodities will be reversed, and then some.

Chump change

Well, this is the first weekly update starting this week and will have a few nice sections to help me keep track of market activity without getting too close to the market action.

Firstly, Apple has indeed turned lower, see 50 day ma, and Fridays action quite bearish. If it does follow through next week to break the 200 mda then I think we can say it is cooked - expect a sharp break lower, if its going to happen then maybe a rally up to the 200 dma which would be the time to enter a new short.

My short position was closed on Tuesday for a profit of £261 net of two losses which I took trying to reenter at a better price - let that be a lesson. I had returned home to find a nice £550 profit waiting to be closed out - but I tried to play it a few times and gave some back. The reason I closed was I though the main indices were going to rally - which they did from Wednesday - now the interesting thing is Apple has not responded in kind - signalling weakness? probably. Its not too late to get into this trade (Buy to close shows it was a short position). It would of course be worth around £1,000 as of today - but I chose to limit the risk as my account is too small for volatiliy of this stock.

Corn - well, down to 606 and the short I opened at 737 was about right - but crucially I closed out for a smallish loss (£220 remember) - who knows how high it could have gone. But on the short side even Wednesday when it had truly broken would have been a good short - so theres nothing wrong with catching only the middle of a move.

Other metals and softs got hit this week in sympathy to oil, I think. But the dollar chart looks really sick now - if it breaks below 70 which is v.possible then game on again for the softs. August could be a great time for bargain hunting here. In fact, I am feeling positive about the second half in terms of gold and gold stocks, cotton and coffee and also sugar - and will look to get a core position in these - silver also isn’t looking like it will go below $16.

My profit target for the first quarter this year was £20k (USD$40K) though this was optimistic in the end I did produce £4K profit starting with just under £2K (tripled the account size). The target to year will be £10K (USD$20K). Starting with say £1,500 (USD$3,000). This is quite possible with my method we just need some trends.

IF the dollar does decline then the commodities are likely to take off in short order.

Note on Apple below: The Maginot line is at around $165 - look out below. This is a new theory or strategy of mine using the bollinger bands - when the lower is flat and the stock is in downtrend and there have been a few hits and this support has held then it can be traded off - for example, when it breaks below decisively on volume then it will likely continue.

On the S&P - read main indices looks like it could head back up to 1,325 level and find overhead resistance.

This is a classic textbook bullish hammer candlestick - looking for upside followthrough.

Nikkei short trade looking overcooked since global indices now in semi-rally mode time to take profits. Remember short trade off top bollinger band in mid June.

Finally, a note on UK housebuilder - suckers rally mode - may be worth a play next week for a quick profit before selling them off resistance - worth 20% on the upside maybe.

Important articles

Volume and price and open interest

Apples with apples

Apples relative performance versus main competitors on weekly charts - its been treading water.

Jim Rogers on Youtube.com

Shooting star?

I have been looking closely at the Apple chart on the daily and weekly basis. It is certainly a risky place to enter a short sale - is there any other? - with the trend still showing as up. However, the main market averages are looking still very weak - though will be due a bounce at some point - bear market rally. In my opinion if the price of Apple cannot make higher ground with the worldwide blitz on PR with the iphone 3G launch then it is headed lower. Don’t get me wrong, this is strictly from a trading viewpoint - I think the iphone is a great device and will get one if this thing works out.

Out of interest I looked up the weekly candlestick shape and it is a ’shooting star’ a warning of lower prices when found in an uptrend (ie recent uptrend since touching 200d ma).

On the plus side - There are four big volume “distribution” days in mid May and early June - the 50 day ma may constrain price below $180.

One the negative side - China mobile and Apple.

Stop is at $182 but will close before if looking like it will get taken out - for a maximum loss of about £700 - but now have some in hand as a buffer with Fridays action. Looking for a “tenner” - $10 down day, that’ll cement my conviction to stay in the trade for a target of $130 or below.

Interestingly, RIMM the main competitor in pushemail handsets of Blackberry fame - see chart break.

What holding up the main stock averages - oil, miners and resource stocks - if they break or oil comes back down to retest $100 barrel then perhaps this will be the catalyst for a major ‘event’ to take prices down to new lows and this could happen sooner rather than later - if there is no Iran incident wildcard event.

Corn trading at about 680 - missed the move here - was about 10 days too early. Lesson not to try and catch a top.

ipocalypse

Couple if items to note

Morgan Stanleys “catastrophic event“

RBS says “global stock crash“

Apple short sale £246 in profit.

Short sale watch - Apple

Ags takedown

Today was not a good day to be long, coffee, sugar, soybeans or corn, or a few other ag commodities.

Perhaps the start of a short term correction again in commodities? Fortunately I was not in the market - especially coffee which I was dubious about anyway - this sold off 5% and was down 10c at one point. Soybean and sugar could have further to fall. I will wait for a long signal I think.

Watching Apple AAPL today - it was up a nice amount, so no short position on, but it is facing a lot of overhead resistance in the 180s and at 200. New iPhone out on Friday so, big news week this week - could be the straw that breaks this market if sales are slow. Looking back, if you had bought the share on 1 January 2004 you would have increased your money 15 fold as it was selling for under $11 per share then.

Time is short

After some rumination on the state of the markets, my prognosis on the terminal condition of the stocks markets has not changed since the start of the year. In this Sunday update, a memo to self to try and catch a move in the equity markets to the downside and precious metals to the upside.

Firstly, since targeting a short sale on the Nikkei a couple weeks back it has fallen off 9%, half the expected move - the US markets have revisited their lows, Nikkei have some way to go, another 1,200 index points or so.

Although the US markets, being oversold, I would suggest that in fact we are prone for an anomalous market event in the next week or two - the reason being that although deeply oversold, the indicators for some of the leading stocks in the run up since’03 are only showing an RSI of 50, or neutral. Apple and RIMM, althogh selling off are just at key levels of support. I see Apple below $100 a share and RIMM below $50 sooner rather than later. These companies sell products that are discretionary purchases however you look at it.

Next looking at Gold stocks - do they all follow the general markets - the answer is no. GDX the gold ETF is on key support and is looking like a great buy. Last bear market in 2002, saw a massive run up in the Gold Bugs index, this could easily happen again taking the GDX up 50% or more.

I have opened 1/5 in silver - as a long term position - it could test $15, but I think upside is more likely scenario - a position to build over time in this market to catch the next upleg.

Here are some charts which I’ll comment on soon.

Thinking different - thinking shorting Apple around this point.

Taming the inflationary monster

Mmm… $200 oil, that should do it, plus a couple of 0.25ml shots in the arm. Full size picture courtesy of Satzinger & Hardenberg

Razor’s edge

This is a great book, I picked up this moth eaten copy on Gili Trawangan a few years back, an English Great Gatsby but good for some perspective on life and the markets.

Gains close… losses closer.

My trading approach - initial position, watch like a hawk, small gain, ease slightly, bigger gain, relax somewhat, look for trendlines. Small loss, finger on trigger, increasing loss, close out position.

Room with a view

There is an urban myth that goes more than 90% of spread betters lose money - well, this is possible of course, but that means the 10% is getting the other side of all those losses, just a thought.

Food security

Looking around for more trading opportunities, there is an obvious one waiting on the sidelines which is meat futures!  This is not an area I have ever traded, however, even a cursory look at the monthly charts for Feeder cattle and Lean hogs shows up a clear trading opportunity when / if price breaks through the upper resistance line 120 for cattle and 82 or so for Hogs.

With input prices at 300% or so increase this decade the price of the meat futures have traded sideways - perhaps it is that supply is being brought to market early to save costs, hence bringing forward supply.

Using monthly data that goes back to 1970, the inflation-adjusted high for hogs is 334% above the 2004 nominal highs.  And this makes sense since hog prices at the farm and wholesale levels are at the same nominal prices today as they were in the 1970s.

How about that - an investment that costs literally (nominally) as 30 years ago.  One to watch.

Monumental opportunities

Again I have a feeling that the good times are about to roll.  Nikkei a good short a week or so back when it was at 14,550, now lumbering around 13,500 - further to fall.

Now attention back on dollar short - commodities long game, after the rally in the USD, possibly now over.

Gold/silver typically have quiet summers but have ramped up higher in the final quarter for most years this decade.  They appear to have finished a consolidation/pause and are remaining strong.  Any weakening in USD will propel them higher - can you think of a safer place to put your money at this time?

Banks - Citicorp and Deutschbank.  I am looking to short these, the charts are  pointed down.

Hard grain - corn shook me out, but I got away with a £220 exit fee - not to bad but still feel this market is toppy.  Too costly to short though.

Cotton - looking nice bargain wise - it has lowest acreage for 30 years this year - prices can only rise on balance - unlikely we will see below 60c.

Will the real interest rate please stand up

Talk of interest rates heading higher, well its about time.  The only question is how far under the real inflation rate that they will be held and for how long.

Silver seems to have corrected nicely, bounced off the 200 dma a couple of times now, may move down to $15 briefly, silver seems to fake out on the downside before taking off higher usually.  May open a 1/5 soon on a longer term spread trade, looking for over $30 ounce in the next year or two.

Coffee is at 14800 broken out of trading range to the upside - interesting market, but not inclined to open position for some reason.

Trader Vic on cutting losses:  “When you make a trading decision you should feel absolutely confident that you are right, but you must also recognise that the market can prove you wrong.” Conviction

“at what point will the market prove I am wrong?  once you establish that point nothing should stop you from closing out when the market hits it.” Discipline

Silver, Cotton, Sugar and Coffee

These commodities have two things in common, which are great for traders, they are price inelastic - per your economics 101 - demand will not change in line with supply shortages leading to price spike potential.

The second is that they are in the lower end of their 30-40 year trading ranges.  So, looks like plenty of upside for the medium term speculator.  In fact, opening a “core” position could be fruitful in these.  Besides my trading I have a longer term holding in the softs ETF traded in London and it would be worth having an exposure in SLV, though in fact a small longer term position as a silver spread trade could work out from these prices, $17 silver ain’t going to last long.

Corn position

Sell order was activated on Friday at the asked for price, £64 in profit (64 points). Early in session tested over 750, but poor finish does not bode well for Monday (for the long side). Looking at the chart - break of trendline and on monthly, this month bar is largest in years - could even extend higher to 800-900 - but feel that in near term short side is a good bet, though will be guided by market action next week.

Two stories out yesterday, 1/ More land for corn and 2/ pressure to reduce subsidies.

Corn Oil

Short corn from 738 - order in, with stop at 745, I think at this point the risk reward look good, order is as close to market as I dare.

Did Crude oil put in a contract high on the 16th? Closed at low of recent trading range, either will stay in range or if breaks down likely headed much lower - corn broke uptrend today.

X-ray specs

Nikkei has rallied up and touched the daily top Bollinger band at 14,550, price got to 14,553 before reversing lower, its been 3 months since touching the lower Bollinger band - and there is a volatility ’squeeze’ on the daily chart.  A fast move approaching soon?

Here is a great resource of market commentary for you to put on your favourites Frank Barbara archive

Slow burn or non-linearity candlesticks?

I experienced a minor disturbance today, of a financial nature, it made me reflect on the value of money.

Between 6-7pm I traded Crude oil on the short side, nothing special about that, just that this is not a market I have traded much in the past. Today looked like a reversal day, possible bull trap above overhead resistance on the daily chart. A quick $2 decline was caught on the downside, but held on a little too long to settle for a £119 gain in around 10 minutes. This reminded me how unpleasant day trading is - watching a price chart, stress, no thanks. Considering there was only £170 on margin at the time I suppose this was sailing a bit close to the wind, but, there’s plenty more in reserves if needed. Keeping a small balance keeps you focussed on cutting losses.

Now, what if, say, Crude sells off back to $100ish? Would corn and sugar sell off? Corn looks overcooked, outsize wide ranging day today. Short sell order below the market to catch sudden fall off in price, could be a fast move.

Nikkei wants to go higher in next day or two, next week or two, maybe fast move down. Waiting.

‘Non-linearity’ I’ll develop this soon.