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    Thursday, December 11, 2008

    3 outlooks

    I'll make a few quick observations, but it's always important to attach an expected time frame with any prediction, otherwise it's totally useless. For example, if a trader is day trade only, and very bullish, he probably means for the next half hour, whereas a position trader is looking out days, weeks, or months. When these two have a discussion, it's common to hear disagreement, when in reality they are just talking about different periods. Here's what I'm seeing now, and how I'm trading it:

    In the very short term, like this morning until about noon, I have almost no bias with regard to stocks. Gold continues to march higher, and I will not be selling any DGP as yet (not buying more unless we get a reaction/pullback). I did buy some SSO etf after the close (partial shares of full intended position), so am long stocks, but it could go either way.

    After that, over the next several hours to several days, the bias is higher for stocks, and I'll continue to buy pullbacks, while being less inclined to sell my longs into rallies, unless they are sharp spikes. We only need one or two good days to make a monthly goal (or even quarterly)! Last week (Friday), into Monday, was one such period. Since then, we've consolidated in a pretty tight range, and have been unable to sustain any severe sell-offs, which is typically a sign of "more to come" in the most recent direction (up). We also have a catalyst in the Consumer Sentiment # tomorrow, so I'd expect t see an extended move in either direction ahead of the #, but with odds favoring higher. In any case, traders need to know the probabilities, and the likelihood of a sustainable decline is increasingly remote. In this time frame, the path of least resistance remains up.

    Long term, we're all screwed. Perhaps we get a 1 yr respite, and I'll trade that move like a pirate from the long side. However, as I've mentioned many, many times, 401(k)'s, IRA's, and other savings should not be invested in equities. I wouldn't sell today, as I already would have exited (check archives), but I'd use rallies to liquidate and get on the sidelines. Stock returns will languish for years to come, and the occasional 20% rallies we get will not stick, so use them wisely. Do not listen to anybody that says we're fairly valued, because they cannot know. If they knew how to time markets, they would have sold last November. I get a kick out of hearing personalities dispense advice, like they know something, and failing to mention they are down 50% this year! By the way, the same can be said to real estate "vultures". Just because prices bottom in the future, does not mean they turn higher, and especially with any velocity. Save your capital for better ideas. Think of a beat up old tennis ball, supposed to bounce, but never the same. To invest in stocks or real estate long term from here, you're playing a game of diminishing returns. Being you'll probably lose your job anyway, why not learn to trade your own money! (caution: paper trade first, until you're "printing" money)

    Yesterday we took our 3pm-4pm setup, via Twitter, with fine results. Unfortunately, we won't have a signal today, due to how the indexes closed. Keep an eye on Twitter around 3pm each day, and I'll share this new setup a "quant" friend of mine discovered.


    Some links I liked:

    -Don't mess with the "Q"

    -Friends of Barry, on gold. I won't buy and hold forever, but this in quite interesting.

    Also, don't forget to take a peek at our "Current positions" page.

    6 Comments:

    Blogger Sean said...

    What think ye of an investment in SMN sometime today?

    Sean

    December 11, 2008 10:38 AM  
    Blogger itrade4real said...

    Although I think the recent dollar weakness is overplayed in the next few days, I might not be a buyer of it yet either (more like a "no play), so I probably wouldn't short commodities either. I'd wait for better risk/reward setup. Naturally, it depends on your time frame, but for today I'd stand aside, or look for a long entry in stock indexes.

    Hope that helps, and good luck.

    December 11, 2008 10:43 AM  
    Blogger Sean said...

    Many thanks. Made some coin on GDX. You convinced me. Thanks for all your selfless contributions.

    Lord, I've so much to learn. I'm more and more convinced, though, that simple analysis is best. Just gotta find the formula that works for me.

    Sean

    December 11, 2008 10:46 AM  
    Blogger itrade4real said...

    Sean,

    Anytime...glad to help. Btw, I can see where the SMN could work, but I just don't see huge upside (combined with very little risk...my favorite).
    Stocks want to go higher, but having difficulty b/c financials weak and fundamentals stink.

    December 11, 2008 10:55 AM  
    Blogger Sean said...

    I just think that deflation is far from solved. The commodities advancement is purely an Obama play. This country has become so shallow that many actually think that his very presence will solve this economic crisis of a lifetime (perhaps two lifetimes). Commodities may run for a time, but they'll be a lot lower before inflation begins to kick in. This market move is bogus -- using the Obama infrastructure play to pad their performance for 2008.

    December 11, 2008 11:00 AM  
    Blogger metta said...

    Can you expand on this 3-4pm signal? Was reading your twitter comments and was interested.

    December 12, 2008 4:31 PM  

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