The Trend Bends

Damn, I feel much better after today's action. We got confirmation today- the trend has bended, and it seems likely that there will be another leg down. See, unlike Vick, I don't really have a dog in this fight, (well, maybe a small dog) and so if the market falls, it does not destroy my account. Since I have about 70% cash, I can watch the action and remain fairly detached. I have to admit my stress level is declining, and I'm getting my goals met at work. Also, I like it when I paint a scenario and it actually plays out the way I paint it.

Let's look at a chart of the Nasdaq. You might wonder why I prefer the Nasdaq over the SPY or Dow. Well, many believe the Nasdaq leads in and out of rallies and corrections.

It is clear that today was a HUGE reversal today. That is one UGLY candle. However, the market internals from today were not as bad as one might think. I do not think it was a capitulation day. Based on the MACD and the RSI, the capitulation day may come tomorrow. Be careful though, as this trend is shaping up to be strong, and may need some time to work off the downward momentum.

Another 100 point decline will give the Nasdaq the 10% correction that the bears are rooting for. Honestly, what is another 100 points after last week's clobberage?

I still think this is a difficult market to trade. I'm staying away from individual stocks (unless one just screams to be traded) and sticking with the inverse ETFs. Today I picked up 200 QID and paid around $45.50 for it. If I can even squeeze a couple of points out of it, I'll be happy. After all, if one can preserve capital during these corrections, and then employ that capital on the rebound, he or she will do well. Any money made on the drop will be icing.

The key points here are that most indicators are showing a market that is near oversold. However, the volume and overall strength of this move could keep the market in oversold territory for some time before a tradeable bounce occurs.

Today I also closed out my ANAD position. I bought 200 more shares on the dip, in case the day turned out to be a buying opportunity. When it became obvious that the market would reverse, I sold all 500 shares for a small loss. I also bought and sold 200 SWHC for a wash.

The Best Offense Is....

You did not really think I would finish that cliche aphorism in the first line of this post, did you?

Although, I do think that playing the market defensively is appropriate in the near term.

It is too early to go short. Traders are likely to get whipsawed doing so. It is also too early to be buying aggressively, as I feel more downside is possible. Therefore, I will stick with a large cash position, while nibbling gingerly on a few carefully selected issues.

Whether the consumer is broke, or whether the CDO issue will blow up accounts across the globe is really just impossible to determine with any certainty. Why try to figure out how a host of variables, all of which seemed to be inextricably linked (but truly are not), will affect the markets? By the time everything is truly understood (if ever), it will be too late.

Instead, I think it makes sense to watch carefully to see if the current leadership is maintained, or if new leaders begin to emerge. Also, if one has a strong feeling the market is going to move one direction or another, but is having trouble determining leaders to buy or short, I might suggest getting long or short an index, such as the QLD or QID. The moves will not be as large, but one is less likely to miss out entirely while trying to cherry pick good stocks. Hat tip to Bill Rempel for that simple trick.

Finally, it should be noted that my time horizon is not very long- typically I do not want to hold a stock for more than 2 months. If your time horizon is much longer, this is probably a huge buying opportunity.

Today, I picked up 300 shares of ANAD. As I am currently playing things very carefully, I did not establish a large initial position. I will add more shares if the stock continues to hold its ground. What I'm looking for here is a quick percentage move which will allow me to book some gains while the market figures out where it is going.

ANAD had a nice move up after a good earnings report last week. With earnings as a catalyst, and the large volume gap up from a sound base, I feel this one may keep moving.

Blogging In Flydom

Just in case you missed the news, we've got a weekend blogfest going on over at Fly's Place. That's where my posts will be.

Check it out!

Oversold Short Covering Rally

It appears we will get an oversold / short covering rally today. My money will still stay on the sidelines. If I were at home, I might try to play the bounce, but at work, it is a recipe for disaster.

However, I'm inclined to believe that it will be time to start initiating some short positions once this rally stalls- probably Monday or Tuesday.

Good luck to those with the intestinal fortitude to trade this volatility.

Slumming

Sometimes, I admit, when things get crazy in the market, I have to go slummin'. It's never as good as I think it might be. However, on this occasion, I was rewarded by discovering a sweet little gem.

Here she is.

And for those of you who are scared to take a link, below is what interests me, but you'll have to visit the link above to get the links that were originally included in the message below.

This deal is a lot bigger than MOT only (MXC platforms)
(10 Ratings) 25-Jul-07 01:44 pm

Motorola uses their own designed chip sets in their phones and portable devices. (Duuhh!!!)The chipsets are called MXC Mobile Extreme Convergence and comes in many flavors. Now manufactured by Freescale of course, the semi spinoff from MOT. The MXC platform is used by Motorola, Nokia, Symbian, Sony/Ericsson and many other mobile device providers. Designing an ASIC and an Interface for this platform opens the way for embedding the PicoP in a multitude of other OEM mobile devices.

Companies using Symbian, supported by the MXC/iMX platforms from Freescale/MOT.

<<<<>>>>The following Symbian OS licensees have Symbian OS-based mobile phones in production and/ordevelopment: Arima, BenQ, Fujitsu for NTT DoCoMo, Lenovo, LG Electronics, Mitsubishi for NTTDoCoMo, Motorola, Nokia, Panasonic, Samsung, Sharp, Siemens and Sony Ericsson.<<<<>>>>

Jinx! You Owe Me 10 Large

Well after countin' my chickens before they hatched (rather loud counting, I might add), I probably should have known that today would bring punishment. I feel I must recap for my own sanity. Nassim Nicholas Taleb talks about how humans often need to create narratives in order to bring order and sense to events which are truly of a random nature, have no definitive start or end, and no definable cause. Such a narrative is probably what you are about to read.

After waiting 6 months for the MVIS contract announcement, I happened to have a meeting today, scheduled in a location with no ready computer access, and absolutely no way to observe any real-time action. Talk about rotten, stinking luck. Before leaving for the meeting, sometime around 8:35 a.m., I put 2K shares up in the pre-market, limit-sell at $6.80. It didn't hit, so I started moving my ask down in .5 increments. By 8:40, the ask was dropping more quickly than I could keep up with my limit-sells, and I absolutely had to leave for the meeting. No big deal. I felt certain the stock would open above $6.00 and run towards $7.00.

I called my wife around 10:40 and she checked Yahoo and said it was trading in the 5.80s. Ouch I thought. Also, she busted my balls a little for not selling in the pre-market. Double ouch. See, she really wants that property in the mountains. Anyway, I didn't spend a lot of time dwelling on it since there was really nothing I could do except wait until I get home.

Anyway, you know the ending. MVIS traded lower throughout most of the afternoon. By the time I got home, it was trading at $5.53. In the end, before the close, I sold only 1K shares, at $5.40. I decided that the stock is probably less risky now than before the contract announcement, and I've held it for so long, what the hell. I think it will go higher.

In other news, during the market meltdown today, I sold everything, literally everything else. I took a huge loss on GIGM. It is senseless that I allowed myself to take over a 2K hit. There were many techical sell-signals, and I chose not to act on them. From the analysis of my 2Q trades, I know that keeping losses small is what keeps me profitable. I should have cut GIGM loose 2 days ago.

ALVR and SWHC were both up on the day, but I sold them anyway. These were profitable trades.

PFWD was sold as well, for a small loss. PFWD was reporting earnings tonight, and I suddenly had a feeling I was gambling. Turns out that the earnings were good and the stock traded up after-hours.

The singular, overall reason that I liquidated everything is that I suspect the markets might be entering a phase of correction or consolidation. Secondarily, my stress level at home and work has been building, and I need a break for my health and sanity. If you somewhat follow how I trade, you know that when market meltdowns occur while I'm stressed out at work and at home, I typically sell everything. I'm not bragging about this or recommending it as a strategy. It is just what I do. Howver, pausing at this point will leave me up 14% YTD. I'm not really proud of that, but the year is not over.

Here is the breakdown.
100 NTRI @ $63.90
100 LZ @ $66.32
500 PFWD @ $16.40
1500 GIGM @ $11.75
1000 ALVR @ $10.64
1000 SWHC @ $18.00

I'm Fucking Rich!

Off to buy a bunch of stuff.

No, seriously, I have a meeting, out of the office, until 2:30. I have my Dad manning the account to handle the MVIS news.

Woohoooooooo!

***3:00 Update***

Wow, I'm finally back from my meeting. Turns out, I'm not so rich. When I wrote that message, MVIS was at $6.80 in the pre-market. Now I find out it is trading much lower, GIGM had its kneecaps busted, NTRI is puking on itself, and LZ is down as well. Crappola.

I've sold my small NTRI position, but not before losing like 700.00 bucks on it. I also sold LZ. I should probably sell GIGM as well, but it is sooooo oversold, I feel certain I will sell at the low. Long story short, if it weren't for MVIS, my account would be in really bad shape. What started out as a great day has turned to turds because I couldn't be on the computer to sell stuff when it needed to be sold.

I do not yet know if I will sell any MVIS.

GIGM Reaches 200 Day Moving Average

Holy moly will any of you out there please buy some GIGM? This is a winner of a company with a .52 PEG, 14.5 forward PE, and growing earnings at 40%.

It is now approaching its 200 day average. I have a full position in it, and am losing money hand over fist. I am willing to give it some wiggle room at these levels, but can't take much more pain.

This is about as "safe" an entry as I think one can find, if one doesn't mind trying to catch a falling knife.

Floyd County & Chateau Morissette

This past weekend, the Woodshedder family took off to Floyd County, Virginia to look at some property. We ended up looking at 9 different pieces of land. I'm not sure that we were really impressed by any of them. Land is getting expensive around that area as it is becoming well known for its music and artisans. Also, it is a quick 20 minute drive to Virginia Tech.

On Sunday, we drove over to Chateau Morissette. This winery, the largest in Virginia (if I remember correctly from the tour), makes my wife's favorite wine, The Black Dog. We enjoyed checking out the grounds and having a nice lunch outside. While we were eating lunch, the actual Black Dog, which is featured on the home page, was making his way about the small groups of people. There was another family who had brough their dog, an Austrian Shepherd, I believe, and The Black Dog and the Shepherd begain to sniff about each other. After a few short seconds, The Black Dog suddenly opened a can of whoop-ass on the the Shepherd. The owner of the Shepherd tried to pull the two apart, but his leash snapped. There were various odd screams from other onlookers. One would guess that these types never guessed a good dog fight would get in the way of their mediocre live jazz or their Chardonnay and Sangria. Anyway, after the fight, it was very funny to watch the various groups of people discuss the fight. The guy whose dogged got whooped mentioned something about "killing" the other dog. At that point, I don't think he realized it was The Black Dog that his dog scrapped with. I should note that neither dog was seriously injured.

All this prompted me to think that Chateau Morissette should make a t-shirt proclaiming "I visited Chateau Morissette and all I got was my dog's ass whooped."

I tell all this because I really have nothing else to write about. I did no research over the weekend, for the reasons above. Also, a few of my stocks are getting squashed, for whatever reason, and I just needed to recount the weekend's events and have a good laugh.

Will the Dip Be Bought?

Now normally, on a day like today, I would have sold off almost everything I own. However, I didn't do that this morning because typically I just end up buying everything back higher. A better strategy has been to wait out these pullbacks, or even try to add shares to winners. Will the dip be bought this time?

Further aggravation of today's sell-off has got to be caused by options expiration. I think that many would prefer to wait for Monday to make some new bets.

I think that today I will just hang on to what I have, and let the weekend sort things out. The momentum that has driven the market to these levels will not stop on a dime.

I should add that our network has been having problems today, and my network guru is out sick. Every time the network comes back up, my stocks are down another dime. I think I'm going to get out of the office and go find a cigarette.

Spent Almost All My Cash

Yesterday, I bought 250 shares of GIGM, SWHC, and ALVR.

Also, I picked up 100 NTRI and 100 LZ.

Check my Stockalicious account for more information in terms of prices.

It looks like ALVR may run today due to the CLWR deal. You all may remember I was in CLWR, but like an idiot, sold too early.

MVIS Started at Buy: 7 Dollar Target

*DJ Microvision Started At Buy, $7 Tgt At Canaccord >MVIS.

(END) Dow Jones Newswires

July 18, 2007 11:12 ET (15:12 GMT)

Copyright (c) 2007 Dow Jones & Company, Inc.- - 11 12 AM EDT 07-18-07

Evening Wrap Up

Well I ended up buying higher. Not a lot, just a little GIGM, 250 @ 13.3475.

Although I'm beginning to wonder why I'm waiting for a little pullback, as the strength in the Nasdaq was incredible, with the volume swelling. All this on a July day, and an options expiration week.

I'm likely to take Boone's advice and just start pulling the trigger on stocks offering good entries.

One I really like is Lubrizol. Fly has offered it as his "gun to the head" pick. The chart is really nice, and the name is sexy. They report next Friday.

Nasdaq Index to Go Shanghai?

Making guesses about what an index will do in the short term is foolhardy. However, because I really do not care about being right, and am truly more concerned about what is probable, I will undertake the foolhardy task.

As noted in the chart, I will be a buyer or will add to existing positions should the Nasdaq pull back to the area of 2650s. If it doesn't pull back, I will still be a buyer, but at much higher levels...yuk yuk. I am expecting some weakness in the short-term due to options expiration, summer doldrums, and digesting of recent gains.

Based on the chart, should the Nasdaq continue up from here, it seems it might go Shanghai. I find a pullback to be more probable this week.

It Works Until It Doesn't

It Works Until It Doesn't

If I had a dime for every time I've seen perma-bears, conspiracy theorists, and severely mentally depressed gloom-and-doomers (that's right, they are all the same, at least they all seem to hang together) say "It Works Until It Doesn't," I'd probably have more money than all the bears out there poo-pooing the current state of the market.

"It works until it doesn't" is their fav explanation for just about everything. When asked why the market keeps going up in the face of the CDO blow-ups, when asked why global liquidity is any different than U.S. liquidity, when asked why the American consumer still has money even though the housing market needs bed sheets, all of these guys like to say, "It works until it doesn't."

What the hell? What kind of asinine response is that?

Let's examine the true value of the aphorism.

Some common items that we use daily, that will work, until they do not work, are cell phones, cars, marriages, and airplanes. Obviously, when a cell phone quits working, its an inconvenience. When your car breaks down on you, typically it can cost you some time and money. What about a marriage? A bad breakup may cost you time, money, and emotional stress. However, when your plane quits working, assuming mid-flight, the cost may be more than can be weathered by a mortal soul.

Looking at the saying "It works until it doesn't work," in terms of the hypothetical situations described above, it becomes very clear that it is absurd and ridiculous to rely on this phrase to flesh out an argument or challenge a thesis about a market conundrum.

How many of these same people are married? How many fly regularly to their business meetings? How many jump in a cab and use their cell phone on the way to a hotel? Does the fact that any of these items are working, but may suddenly stop working, keep them from taking a cab, or getting married in the first place? Or do they take a boat to their honeymoon?

Likely, when one encounters this aphorism, the true meaning of the insidious phrase is "I really have no clue what is happening in the market, but I need to always be right, so I'll say something that can not be proven wrong."

Please, when you find someone using the "It works until it doesn't" routine, refer them to this post.

Ugh. Back to the Real World

Vacation was very nice. I am hating being back at work today. My children are hating it too, after spending a week with all their cousins and Grandparents, and being at the beach all day, everyday.

I took pictures with my cell phone of where we were staying, as it seems from my comments section that some of you doubted the poshness of the Woodshedder family's vacation digs. Problem is, I can't figure out how to get the pictures from the cell phone to the computer. You see, I just got a cell phone when the dog went missing, so folks could call us while we were out of town. Yep. You read that right. My family did not have a cell phone until a couple of weeks ago. To tell you the truth, I can not stand people who are on the damn cell phone all the time.

While I was gone, my positions did well, but it seems I missed a huge rally while having a lot of cash. Such is my luck. I really wanted to make a nice post with charts and stuff, and my plan for this week, but I fell asleep unexpectedly, so this post will have to do.

From what I see, I am extremely bullish, but am likely to wait for a bit of a pullback before putting the rest of my cash to work. What I would like to see is the Naz re-test its breakout level. When/if that happens, I will likely add to some of my currents positions, especially SWHC. I will also be scanning this week for some breakout opportunities, and some pullback plays.

Hellgate FTW

I just found this advertisement for GIGM's much awaited release of Hellgate, London.

A Shout Out!

Haven't forgotten about the blogosphere. We're still enjoying vacation. Internet access is limited, and has to be pirated from the crappy Holiday Inn, which is luckily situated close to a bar, close enough for me to get their wi-fi, sometimes. It looks like right now I've got a strong signal.

Anyway, just wanted to give "It's Not the Economy, Stupid"at the bears and shorts....I've been having a good chuckle at what must be transpiring in the blogosphere during this huge short-crushing rally.

We'll be back Saturday night. Until then, good trading.

Summertime Blahs

Blah blah blahs.

I have to say congratulations to the Bulls who were saying to buy this last dip. Admittedly, I didn't, and in fact, I picked up some QID (although I got rid of it the next day). Nice work folks.

I didn't make any trades today. We are leaving for vacation on Saturday, so I'm trying to keep in cash since my access to the internets will be limited.

Nasdaq Closes 2 Points from 52 Week High

However, the volume on the $COMP looks to come in tepid, at best. Maybe the bears headed out today to buy some fireworks? I think there is nothing more American than our Technology Index hitting new highs as we go to the holiday celebrating our independence. Hmmmm..... When I put it in those terms, it almost makes it un-American to be a bear. That just goes to show how easy it is prove just about anything using eloquent rhetoric and deductive fallacies.

Today, for the first time in a few days, I made some trades. I just couldn't resist with the market plowing on upward.

I bought 500 ALVR as a breakout play @ $9.62, then added 250 at the close @ $9.87.

I also picked up 500 PFWD, another breakout play, @ $16.92. I've traded this one before. It looks like it is done consolidating.

Then, I added 250 shares of GIGM @ $13.70

I still have 41% of my portfolio in cash.

Today MVIS retraced some of Friday's gains, on about 2/3rds of Friday's volume. This is normal, and to be expected. There are still warrants to be liquidated, and there are likely to be many shenanigans to be witnessed as some of the 5 million shorts begin wondering if they are going to stay short and chance a contract announcement or gamble that one will not come as planned.

Q2 2007 Discretionary Trading System Results

I apologize for the size of the table below. I couldn't get things to cooperate tonight. Clicking on it should give you a bigger view.

• The data is generated from 102 closed trades, which were fully executed between April 1st and June 29th, 2007. There are a variety of types of trades represented (breakout, bottom-feeder, volatility squeeze, etc.) represented within.
• To calculate R (risk), I used an initial risk of $500.00 per trade. I used this figure as that is typically my max pain level. The results show that most of the time I'm risking much less.
• The statistics show that my average loss was much smaller than my initial risk of $500.00. I used Tharp's suggestion of taking the average profit per trade ($140.00) and dividing it by the average loss ($157.44) to develop my Expectancy of 0.89R. If I would have used my average loss of -$157.44 for my R calculations, they would be roughly 3x larger than represented in the table.

Some thoughts on the performance:

• I really like that the standard deviation of my losses is smaller than my average loss. This shows that I kept my losers within a tight range in terms of how much I loss before I sold.
• The standard deviation of my winners show that the results vary widely, meaning I could have very small winners and very big winners. I would like to increase the size of the average winner and decrease the standard deviation of win size. I have a feeling to do that will require a better system for exiting.
• My average win was almost twice the size of my average loss.
• This system was underwater from April 11th to May 17.

If you want to peruse the spreadsheet with all the trades and statistics, you can check it out here: Q2 2007 Discretionary Trading System Results

As always, comments, questions, and suggestions are encouraged.