Monday, March 31, 2014

Jerked Around As The Odds Are Getting Worse For The Bulls

A Bad Tape
Not that any one has been able to predict the market this year, but I believe that the odds are becoming more risky for investors. I do no recall seeing such a convoluted mixed up split tape. Markets are always crazy towards the end of bull runs. But the dichotomy between different groups of stocks is now off the wall.  I disagree with anyone who believes that MSFT, IBM or value stocks are the new leaders that can sustain a bull market. The bursting of bubble type values may be healthy, but a market without growth leaders is not. This type of environment does not auger well for stocks. The crazy thing is that how the S&P 500 appears to have done nothing but levitate for the past three months as the quality of the tape has eroded -see charts below. But as we all know, market tops usually take lots of time:
It is also pathetic when the indexes bounce during the first hour like they did on Friday only to fade for the rest of the day. Just about every breakout seems to fail and every up move is faded:
Great Charts From Zero Hedge Depict The Split Tape

Other than Ed Hyman's ISI, is the best thing out there for economic charts that put things into context. Here are some charts that depict the market's deterioration under the surface as money tries to hide in non growth stocks.Click on the below link to see the charts that tell the story of the 2014 USA stock market:

Yield Curve Flattens More 
The economy still needs fuel and the Fed's strategy is to keep short rates low while deploying a gradual tapering off of QE. The problem is that the bond market is not cooperating. It has given us a flattening yield curve that has the potential to choke the economy and the stock market.  Will the yield curve steepen and get back to a stimulus mode? Does the Fed have the power to do anything about it? Will the economy strengthen enough to push up longer term yields? Right here and the yield curve now it stinks. Here is the chart posted by Charlie Bilello, CMT :

We Need A Free Trading Crises Free World Environment For Nations to Prosper. Things Are Getting Out Of Hand and That Cannot Be God For Stocks
President Obama does not understand the crises laden world that we live in. The Failure of US foreign policy has enormous implications In terms of keeping the world's economies in a safe free trading non disruptive environment. The world's balance of power is shifting and we are greatly to blame because we have left a void to be filled by nations with bad intentions.

I know that I am skating on thin ice when I start talking about foreign policy and the state of the world. However, whether one agrees with me or not, one cannot dispute that the reshuffling of the world's power balance is having an effect on the financial markets. The fact that we have to worry about this dangerous world and think about the consequences of different dangerous war scenarios around the world tells me to worry about the markets. 

In my opinion, we are living through the incumbency of by far the worst president of my lifetime.  This obstinate non strategic thinking President does not understand the difference between getting our troops on the ground involved in dumb wars verses being a strong international power that uses a smart geopolitical strategy deploying the intelligent use of strength in order to avoid wars. Today's world is a much more dangerous place than before President Reagan took office. On second thought, make that Kennedy and Nixon. In fact, in one fell swoop, it seems like all of the strategic foreign policy initiatives of the post WWII era are being undone. 

And to blame our military retreat all on budget cut backs or to avoid the past mistakes of putting troops on the ground is total poppycock. We had a lot less financial strength after WWII than we have now. We were in debt up the wazoo at that time. Also, we do not need to have boots on the ground in order to accomplish our goals. We just need to have will power, smart strategic foreign policy and the integrity to keep our word. Obama is playing a dangerous game with our budget. Entitlements are killing us and the only way to fix them is to acknowledge that life expectancy is much greater now than when FDR was president. We do not have to kick people to the curb in order to make a long term fix. A long term gradual actuarial fix that does not go into effect for say anyone over the age of 50 can do the trick.

- Russia

Yes Putin did call Obama and there is a possibility of a deal. But 80,000 plus troops are now ready to invade The Ukraine and 10,000 Russian troops are conducting nuclear warfare drills. I think that Putin is using Hitler's playbook in order to grab more territory. I do not think that Putin has Hitler's ultimate goals. But whatever the goals are, precedents are being set by Russia for all the world to see. Not that we are not hypocrites. But relationships with or without treaties are being made all over the globe that will cause the dominoes to fall as one superpower defends its allies and the other super powers defend their allies. This leaves the world in a tricky place where any misstep can lead to widespread war. Kennedy famously read Barbara Tuchman's "The Guns Of August" during the Cuban Missile Crises.

Yet all of the index futures are up tonight, probably based upon today's meeting between Kerry and Lavrov, plus Putin's call to Obama as I type this.  

- Iran

Iran is going to get its Atomic bomb and Israel is already getting prepared for war with Iran. The possibility of Israel attacking Iran and the US being forced to back Israel or let Israel hang out to dry to let the chips fall where they may is beyond scary. Russia is going to try and make Obama blink on the Iranian front.

Just to show what a crazy world this is, here are my armchair quarterback fantasy thoughts.  If I was Obama, I would talk tough about Iran and make a deal to back down on Eastern Ukraine in exchange for the Russians backing down on Iran, giving us the green light to surgically destroy the Iranian air force, missiles, and nuclear program. Of course we would need the skills of someone like Henry Kissinger to pull this off and a hard fast line must be preserved in the rest of Eastern Europe, but I digress. Just the fact that I am thinking about all these crazy things means that many other people in high places are gaming this insanity out too.  No matter what side of the issues one is on, all outcomes appear to be bad.

- Israel

Israel will do whatever it takes to destroy Iran's nuclear capability. I take Iran at their word why they repeatedly state that they will annihilate Israel. I believe that the deadline is June first, when our current sanctions "deal" with Iran ends. After that Israel will have no choice but to attack, because unlike Obama, Israel does not mess around with red lines. The problem is very complex because Israel's bunker busters do not have the ability to destroy Iran's underground fortified nuclear facilities. The USA's bunker busters do have that capability. That leaves Obama in the position to shit or get off the pot. No matter what the Russians or Iranians threaten, this is the big one. In my view, Obama has no choice but to shock and awe Iran's nuclear facilities, missiles and air force. It is the lesser of all evils. Yet I do not trust Obama. Israel does not trust Obama and the world has seen Obama blink and lie too many times to believe him.

- Syria

Just another mess, but this one was one of the major starting guns for the bad actors of the world to exploit the USA's weakness. Once the "red line" was crossed and Obama failed to act, bad things were set in motion. Now we read more reports of Al Qaeda making inroads in Syria.

- Saudi Arabia

The Saudis are bad people, but they are stable and on our side in the battle against Iran. They may be one of the keys to solving the Middle East's issues. If we Go after Iran, we can stop a Middle East arms race that will surely start and we can help to form an Israeli Saudi alliance that may help pave the way to Middle East peace.  Strange bedfellows, but the common enemy may just open the door. Obama just traveled to Saudi Arabia at the Saudi's urgent behest. I hope that they can help to make Obama wake up. 

- China

China is patient and is watching. If they see a strong USA, they will not make trouble with Japan, Taiwan, North Korea and so on. If they see us waver, they will be more attuned to have a Laissez-Fu-Yong approach towards any North Korean war mongering. furthermore, Nixon and Kissenger's d├ętente with China may erode further as Russia tries to ally with China by selling them much needed oil and gas.

- North Korea

Kim's haircut mania only needs a mustache to complete the Hitler act. He has become more emboldened recently and has repeatedly had many missile "tests" belligerently threat South Korea, Japan and the USA. Today he announced that more provocative nuclear tests are coming. One day his game of nuclear blackmail in exchange for aide is going to go too far.

With war like things such as NATO defenses being threatened and Financial warfare escalating with Russia we are at a critical juncture. Plus the world's economies are acting poorly and our economy is possibly running out of gas.

My Strategy Is The Same: This Is Not An Investor's Market

I am short C based upon their failure to pass the stress test and the bad yield curve.


I am long BAX because it broke out on Thursday after announcing that they will up the company into two parts.  On Friday afternoon BAX stated that the two parts are worth in the mid $80s - well above Friday's closing price.

One can place odds on any one of the above financial and World Black Swan scenarios. Or one can realize that at this point, investing is dangerous. If one is going to play, my advice is to be nimble by trading small and fast.  I do not intend to hang on BAX or C too long. 

BIG Capital Advisors and Seaview Partners are not responsible for your investment decisions. We believe very strongly in our opinions, but you must perform your own due diligence in making your investment decisions.

Monday, March 24, 2014

Hot Potato - It Ain't Working Part Deux

Investors bottom fish at risk of your own peril. Traders if you must bottom fish, do so quickly into whooshes and sell faster. In my view, this is a very dangerous market. I have been warning people not to invest since the new year began. Now here we go again with another market trouncing in which the Down Jones Industrial Average - the only index that did not make a new high this year - was barely down and the only place to hide today. The NASDAQ 100 was smashed:

During this bull market to date, every big sell off has been met with a "V" shaped rally. The difference this year is that the "V" shaped bounces were not accompanied by sustainable new highs in the major indexes - see circled bounces on chart below. It also feels like the market is rolling over or in the least, is in a new going nowhere reverting to the mean phase. So will this time be different or will we get another "V" bottom? I don't know what the nature of this decline is or will be. Nor do I know if there will be another sharp bounce.

NASDAQ 100 Pierces Support With Mini Head & Shoulders Top:

But I do not have to know the answer in order to know that this market stinks and is strictly for fast day traders. This is not a time to invest. Even if I don't know where the market is going I do not need the aggravation of investing in it. We are in turbulent seas and may go nowhere or may sink if a giant wave hits us broadside. The name of the game is to stay afloat and day trade opportunistically if you know the game. As I said in my March 12, 2014 post: "It Ain't Working."

I have previously posted my special list of reasons why the market stinks. Here are some of the reasons:

1 - From QE to Taper in an unsure and slowing economic environment. This is the worst post WWII economic recovery. Is it ending just as the Fed stops it's ever diminishing returns from QE?

2 - We are not the only ones tapering. China's QE program dwarfed ours, but no one took notice until now. Now China is cutting back and letting financial institutions default on their debt.

3-  Yield Curve Flattening! What idiot is chasing banking stocks now?

4 - Sentiment Stinks! This is all the bounce we get with the $VIX? At least the Put Call Ratio has risen to 1.00.

5 - The new financial cold war may be starting thanks to Russia.

6 - There is a consensus that Obama is a weak leader who has no sense of geopolitics. We are losing the war against Iran, Russia, The Middle East, China, North Korea, and so on. There is an imposing realization that war is close to breaking out with Iran. To wit, Israel's current high alert preparation to get ready for war with Iran.

7 - Follow Through To Friday's Bad Options Expiration may have been at play.

8 - Europe and World's economies are not good. BRIC economies pathetic. China hard landing?

What To Do? Don't Follow Leaders, Watch Your Parking Meters or at least find Ginzberg

But seriously folks....Maybe there will be a whoosh down or a chance to trade the market leaders, but bottoms usually take time. Maybe new leaders will emerge. I would make a list of my favorite companies and wait for the right time to buy them. Here are some charts of stocks I am watching:

FB: I think that this growth spurt will continue, but FB is very high priced and vulnerable. Nevertheless, it is on my list.

GOOG: Greatness, fair valuation and innovation. It should be among the first to come back.

MONIF: Great chart set up. Some short term bad news yesterday about slower growth the next two months and a secondary - plus the good news of MasterCard investment.  But great news today regarding its mobile banking platform and users caused the stock to spike up from today's lows before fading:

PCLN A long term growth machine. Not high priced in terms of PE or PEG.

SGEN: The best of the biotechs not named BIIB, CELG, GILD, REGEN. Has a great pipeline and is growing nicely.

So if one is looking for reasons to be cautious, just ask your self, what is working and what happens to the money spigot when the yield curve flattens? It is time to be cautious and patient. There are great companies out there and the cream will eventually rise to the top before the entire market turns up. Look for strong stocks with great fundamentals or great "stories." Then wait. Your time will come. Now lets see what booby trap tomorrow will bring to screw up my thinking. I covered a small cap short via selling my long TZA this morning and am flat going into tomorrow.

BIG Capital Advisors and Seaview Partners are not responsible for your investment decisions. We believe very strongly in our opinions, but you must perform your own due diligence in making your investment decisions.

Wednesday, March 19, 2014

Oy Vey, Grandma Is Meshuganah!

What can I say to top this one. The Twitter verse was alive today with crazy Grandma Janet jokes. Now we have to deal with a President who has no strategy and a Fed that also has no strategy and may know less about the economy than you or I.

News flash - The Fed is usually behind the curve. Unless your name is Paul Volker Jr, don't bother to apply for the job as Fed "Chair Ma." I always hated Fed day, because there were always two armies of machine traders ready to fire at each other. This resulted in wild ever narrowing up and down swings until a trend finally set in. For years I have called it the propeller pattern. Now we have a new name - The Meshuga pattern. Being that Janet is a member of my tribe, I will defer to the Yiddish vernacular, but please substitute if you wish. Loco in the coco is fine too.

Whatever one calls it, it shook me out of my $SPX short too early today - circled on chart below. Its hard enough to trade on Fed day, but usually the opening statement is enough to trade off of. I figured that Janet had nothing good or new to say, but I did not figure that she would start to come apart in front of the world as the press conference went on. Oh well, I missed the meat of the trade. Anyway, let's hope that Chair Ma is not too constipated from Passover Matzoh when she makes her statement next month.

One may think that Janet Yellin is a great intellectual who now as Fed Chair possesses the power of God. But she did not instill any confidence in us today. Many commentators said that she was flying by the seat of her pants. Something tells me that we already knew that, but we did not know just how shaky the pilot was and to what extent the Fed is in the dark. Also, something tells me that winging it goes with the turf. Milton Friedman famously said that we should abolish the Fed and replace it with a computer.

Lets go back in time to see how we got here:

1 - The great Paul Volker, a career Federal banking bureaucrat, came along at the end of the 70s when we had upwards of 20% inflation. There was no bullshit in this man's vernacular. He did not care what anyone though of him, or his cheap cigars and baggy suits. He only cared about doing what was right - damn the torpedoes! He raised interest rates in big chunks, threw the economy into a recession, and wrung the inflation (that dated back to Lyndon Johnson) out of the economy - along with the courageous President Reagan who killed the unions and their Wage Push inflation when he fired the striking air traffic controllers. After getting inflation out of the system he started to stimulate the economy in 1981. By 1982 the stock market got the message and exploded up when Henry Kaufman gave us all the high sign. The economy prospered for almost 20 years thanks to Volker setting the table. People might have hated Volker at first, but they knew where he was standing and he left the job as a hero.

The Greatest Ever

2 - In 1987 along came Alan Greenspan who used "Green Speak" (A scholarly version of "Stengalize" - a language invented by one Charles Dillon Stengal, another banker who used Stengalize to effectively testify before and mesmerise Congress) to obfuscate us into believing that he knew what he was doing.  He emphatically did not (because he could not conquer his personal demons), but he duped us by trying to abolish the business cycle. He was the main cause of today's economic problems. He was the man who had earlier given us "WIN" buttons (Whip Inflation Now) during the Ford administration. He then gave us the term "Irrational exuberance" in 1996. In both instances he was trying to jawbone the populace to stop inflation. But he was not doing anything about the problem.

Charles Dillon Stengal:

1987 Crash hurts Poor Alan's Scarred Psyche:

You see, Alan was a chicken who got scared by the 1987 Stock Market crash. He misunderstood the difference between a machine driven market crash and an economic driven bear market. Sure there were currency problems and pre crash comments by James Baker that did not help things. But from the day that the market crashed, Greenspan decided not to let the economy fall on his watch. The entire economy was held hostage to one fast talking person's scarred psyche. Greenspan did all the right things to turn things around when the market crashed. But later on when the economy was getting out of control and stocks were getting into bubble territory, he chickened out. Volker would have raised rates, cut back on the money supply and so on. But Greenspan chose to jawbone, charm the idiots in Congress and keep on pumping. Ayn Rand's disciple never learned her philosophy.

The Sleaze Ball Culprit: Howard Roark My Ass!

The pumping lasted through the start of the year 2000. his original reasoning for more pumping was to abolish the business cycle and avoid anything that could tarnish his good name. Added to the good times mix was the Clinton abolishment of the Glass Steagle Act and later the Barney Frank Fannie Mae led housing fiasco. Easy Alan created the speculative environment that led to all the banking system ills and so on.

Y2K And The Housing Bubble:

But I digress to discuss the much feared imaginary Y2K "problem." From 1996 through late 1999, Greenspan had lost all perspective on the economy. By late 1999 he feared that the Y2K computer issue would put us into a recession. So he pumped even more money into the system than ever before. This was like pouring gasoline on a fire and caused the internet bubble to blow off with a bang like nothing we had ever seen before. Then when Greenspan realized that the Y2K problem was not a problem, he lurched back on the monetary reins choking the horse, er economy. The stock market finally went into the dreaded and well deserved bear market that Greenspan had feared so much. Eventually Greenspan figured that the only way to get out of the hole that he dug was to substitute one bubble for another. So he pumped and created the housing bubble, kicking the can further down the road.

Greenspan Sneaks Out the Back Door:

All of Greenspan's policies led to the financial system imploding in 2008. He then quietly retired leaving Bernanke to hold the bag. What a slick operator. To screw up in front of the entire world and not be blamed for it is an amazing act.

3 - Ben Bernanke was a cool plain speaking honest man who did the right thing - albeit too late in 2009. He was welcomed to the job with the ultimate "Baptism of Fire."  At first he did not realize just how bad things were. He was therefore late to react. But when he did act, along with Hank Paulson, he was spot on and absolutely saved the economy. It took time, but Bernanke earned our trust. As a Great Depression scholar, he was correct with his 1937 deflation analogy.

Bernanke's problem was that the cure to the deflationary unraveling of our banking system was like giving a junkie more drugs to get high on. In my opinion he had no choice.  However, given the bad situation, the unwinding of his cure may still kill us or just forestall a 1989 Japan like stagnant economic situation. Anyway, now Bernanke has handed the ball and problems off to Yellin. Unlike Greenspan, at least Bernanke had the courage to start the tapering process in the end, before he retired. And he was transparent and truthful in his endeavors. Whether Bernanke started the taper too late or whether the entire QE process will work is up to history. One thing we know for sure is that he was working all alone without any intelligent fiscal policy effectuated by an ignorant misguided President and an even worse Congress.

What Can We learn From this?

1 -It is now clear that today's problems go all the way back to 1980. Like dominoes, each Fed Chairman is affected by the actions of the prior Fed Chairman.

2 - The clear culprit in this 34 year act is Alan Greenspan. Everyone is just cleaning up the remnants of his mess.

3 - It is also clear that trust in the Fed chairman is a must. In today's transparent live internet world, that is difficult, as today proved. 

4 - By now we should realize that the Fed does not have some magic formula that makes it understand the economy any better than the market place. In many cases the Fed's bureaucratic inertia, or myopic in the Fed bubble thinking, brings it late to the party. Greenspan was a late study to what program trading was doing to our markets and to the inventive ways bankers and insurers used leverage. Bernanke was late to understand just how much trouble the economy was in. Yellin is obviously late in understanding what is going on too. We are constantly amazed by how little the Fed knows.

5 - Doing the right thing like Paul Volker did, takes much foresight and guts. Plus no surprises were laid upon him. The problems he inherited were there for quite some time. 

Yellin stumbled today, but she has time to reestablish her credibility. The problem is that she is in a very difficult position. We really do not know if the economy can make it without the Fed. And the Fed has run out of tools. In its latter stages, QE is a weak potion. And there are problems with the other QE junkies of the world like China.

PS: All of this Fed uncertainty and this lousy market caused me to sell my FSLR way too soon. It was the only bullish game in town today and I sometimes like to kick myself when I get frustrated. That's what happens when nothing is working.

FSLR: I day traded it and sold too early.

GLD: Did gold just hit the wall today?  I'm not sure yet, but it has not made enough of an up move in 2014 to call it anything but a potential base building rally.

BIG Capital Advisors and Seaview Partners are not responsible for your investment decisions. We believe very strongly in our opinions, but you must perform your own due diligence in making your investment decisions.

Bounce Continues As Things Get Worse

Call me a skeptic or call me a realist. Give me a hot market and I can rev it up with the best of them. But when I see things that in the past have marked dangerous territory, I always err on the side of caution. I'm not some portfolio manager looking to just beat the market or offer nice conservative returns. I am looking for killer years while at the same time not looking to lose money. That gives me the flexibility to sit on cash do some day trading and answer to no one.  I may be outperformed for awhile and I may even jump on a rally or two. But I know when something is wrong.  

The stock market bounced for the second day in a row today. Other than MSFT making a new 14 year - but not all time - high and Stocks like GOOG and BIIB nearing their old highs. this market is not offering much to bite at. Of course that could change and the market can pop with slews of stocks setting off my price alerts at new highs. But the odds of that happening right now may be a bit difficult. Janet Yellin and Vlad the "Peacemaker" -choke - may have something to do with that in the short run,

MSFT was the only major stock to break out today. I played the breakout which was based upon the leak that MSFT Office would be announced for AAPL's I-Pad. I get the idea of MSFT getting its act together in the mobile world. But is this news that big a deal? Anyway, I sold the stock as a day trade. tomorrow is another day.

Consider the following:

1 - Technical Indicators Are Deteriorating as the market rises. 

- For instance, Technical Analyst Helene Meisler says that the Put Call Ratio at around .70 "is getting jiggy." It is on the verge of flat out complacency showing a giddiness in the markets at the wrong time.

- Volume is declining as the market bounces.

-  The differential between low small caps and large caps is the highest in years

- Other Sentiment Indicators Are Still Not Scared. For example, the $VIX is still very low.


- I could go on and on, but underneath the surface of the indexes is a lack of decent looking stocks. And many indicators which indicate that there are too many trained to buy the dips bulls.  Having been burned too many times, the bears have thrown in the towel.

2 - In My Opinion The Worldwide QE Mess Will Not Unwind Smoothly.

- The pathetic USA recovery is built upon a fragile QE that has lost power with each round and is now going through an unwinding process who's timing has to traverse an unknown economic background. Is the economy strong enough to stand on its own or is the worn rug being pulled out from under it at just the wrong time? What will Grandma Janet say today?

- Is the European QE unwinding even more fragile than that of the USA's tapering?

- It is becoming more obvious each day that China's QE has dwarfed all others by a magnitude that is relatively greater by a factor of several times. Hence, the unwinding of China's QE will be the hardest to orchestrate. China is now letting institutions fail for the first time without the safety net of a government that has gone too far. We know that China's GDP must grow at some outrageous sounding rate of 9% or so just to stay afloat. We also know that China is not growing at that rate. Official government statistics put their growth rate at 7%, but those numbers are not to be trusted. Many economic insiders believe that real growth is below 4%. That sounds large, but it is a recession no matter how one views it. 

3 - The World Is Becoming More Dangerous as The USA Cedes Its Leadership Role

This is a long term problem that can erupt at any time. The sword of Damocles is hanging over our heads. And it is not getting any better.

President Obama is sadly in way over his naive head when it comes to foreign policy. He does not understand that there is a huge difference between not fighting foreign wars and being strong enough to prevent them. We over reacted after 911 by getting involved in too many costly wars in terms of life and treasure. But just because we fought unpopular wars does not mean that we have to lurch the opposite way and become isolationists or not keep our promises. The end result of not being trustworthy and having an erratic weak foreign policy is to embolden bad people to fill the void left behind by the USA.

We are stuck with a non strategic thinking President for three more dangerous years in which the following situations are evolving. In and of themselves, each situation is dangerous. But the cumulative affect of them all, plus the interaction through treaties or territorial interests makes the situation all the more dangerous. World War One occurred when defense treaty after defense treaty caused many nations to join into wars in order to defend their treaty partners:

 - Iran has been given a green light by Obama during the recent sham negotiations. Putin is now going to dig in and support Iran's nuclear program. My question is when will Israel strike and what will the USA do to support Israel? The negotiating period ends in June. That is Israel's deadline to go for it in my view. 

 - Russia Putin is going to try to annex other former Russian satellite states. Further more, despite the weak Russian economy, he will play the pipeline card. By backing Iran and Syria he has committed to oppose the USA in those areas and more. Also, Obama's gutting of NASA has left us vulnerable to Russia being our only means of getting men into space until Space-X and others get their acts together. 

 - China is biding its time, but now has the incentive to go after the disputed islands and will selectively pick its fights and alliances. One quasi alliance is North Korea. How will China react to the USA finally getting tough with Kim Jon Rodman? 

 - North Korea is becoming more belligerent as the USA falters. Hidden by the Ukraine headlines were more missile firings and threatening posturing towards South Korea.

 - World Terrorism is not done despite Obama's cynical pre-election spin last year. It is getting worse.

 - Israel and the Entire Middle East Mess is a tinderbox ready to explode. Iran is the catalyst and the world isolating Israel over the Palestinians and Syria

4 - Worldwide Trading Entanglements Coupled With Financial Warfare Is A New And Dangerous Mixture.

This is a new battleground. If used too much it is going to effectively become the new Smoot Hawley Tariff IMO. The fact that nations are so tied up is in many ways a counter argument to the basic economic tenet that it pays to trade. An unintended consequence this tenet is that trading partners can be held hostage by their counterparts. To wit, the Russian blackmail o f Eastern Europe (Germany) with the gas pipeline. Or China and Russia starting to call in their loans to the USA.  

And as per Zerohedge, how the hell did Belgium absorb all their debt? Who is the Wizard of OZ behind Belgium's ability to become our third largest creditor. Something rotten is going on and Belgium is the front. Paging Janet Yellin and Obama to tell us what is going on, because this debt accounting slight of hand is going to be exposed and unravel.  

In sum, Markets don't typically turn on a dime, but the above gauntlet is no wall of worry to climb. I hope that I can play some real rallies, but the caution light is on. The only question is when will the Bull Market end? I will let events play out to tell me that.

BIG Capital Advisors and Seaview Partners are not responsible for your investment decisions. We believe very strongly in our opinions, but you must perform your own due diligence in making your investment decisions.

Monday, March 17, 2014

Reversion To The Mean

A non trending whipsaw market is not my favorite environment to trade in. It could and may get worse. I want to see a market with leadership stocks plus many others making new highs. I do not want to consistently see failed breakouts and illiquid trading controlled by the machines. Every time the market rallies it hits the wall and falls back. Every time the market sells off, it gets oversold and some catalyst makes it bounce back. In the end we are right back where we started from 

But as Hyman Roth said to Michael Corleone about Moe Green:"  So when he turned up dead, I let it go. And I said to myself, this is the business we've chosen; I didn't ask who gave the order, because it had nothing to do with business! "

Like Hyman we chose this business and right now things have gone sour.  Also like Hyman, the current foreign affairs environment has nothing to do with out business but it is telling me to trade fast, take advantage of events, know the world's financial situation as best as you can, listen to the smartest foreign policy people you can find and make you list of great stocks to buy. But don't buy them. Rent them and kill them fast.  And don't invest in emerging markets like the BRICS (and Cuba?). We retell the wisdom of the bad guy Hyman because he knows how to go with the flow and do the hard things by staying disciplined.  The key to the market "business" situation in 2014 to date has been to see that it has been a bunch of back and forth whipsaws with stocks going nowhere when all is said and done. So maybe today's bounce will continue a while. The question is when will this pattern be broken?

Today the market finally bounced after several dark days generated by things in Ukraine, and weakness/ troubles in the BRIC economies. I have no clue as to how far this bounce will go except to say that until I see market leaders come to the fore, this is not an investing environment, unless some extraordinary stock comes along. As is typical, rallies usually start with short squeezes. Note how the market went sideways after the opening gap up rally.

I have read as much as I can about the situation in the Ukraine and far more on foreign affairs. My summation is that Obama is a disaster in foreign affairs, but Putin does not have the strength right now to be too much of a threat. It seems that Putin has won in the Ukraine and Obama's after the fact half assed blustering are face saving blusters. It also seems that just like we have a Monroe doctrine in the Western Hemisphere, Putin believes he has the equivalent in the Crimea. And all kinds of yakking by Obama is like the boy who cried Wolf. No one believes him. This latest chapter in Russian adventurism may be over unless Putin overplays his hand and goes for all of Ukraine and its problems.

There are some good foreign policy articles that I read recently. They cover the entire political spectrum. I have re tweeted many. The thoughts of Henry Kissenger, Zbig Bryninski, Tom Friedman, David Ignatious, Charles Krauthammer, Condy Rice,  Jack F. Matlock Jr, and others are great places to start in getting a grip on foreign affairs. I don't agree with all of what any of them have said, but collectively across this group, one can glean enough wisdom and facts to get a grip on what is going on. And in this market, that was enough of an edge to get me to cover my shorts on Friday, but not enough to get me to go long. Although that thought occurred, risk aversion is everything in this market. Following experts like those listed above are all part of the game.

Here are some interesting charts:

GOOG One of the market leaders starts to bounce. how far will the bounce go?

GURE Great news after the close makes this China oil play pop. Trying to break out.

MOBI A strong stock pops a consolidation and then reports great news. I day traded MOBI for a nice win today. May be back in tomorrow.

PCLN Great company sells off with the market and bounces with the market. Great leverage in calls of high priced stocks because they trade like stocks with huge leverage.

YOD Small cap stocking popping from a secondary base?

Of course we can not avoid the macro environment today, so any trades will be day trades. I would avoid holding anything when Yellin speaks. Also, most of the world's major markets are getting beaten up. We seem to be the last one standing. I can not stress enough that until this market phase is over, this is strictly a day traders market for me. There may be follow through that turns many of the above setups into good swing trades or more. But who needs the aggravation of exogenous bombs when one can jump back in the next day? 

BIG Capital Advisors and Seaview Partners are not responsible for your investment decisions. We believe very strongly in our opinions, but you must perform your own due diligence in making your investment decisions.

Wednesday, March 12, 2014

It Ain't Working

These are the days of the "hook." Something happens to hook you into buying a stock. Maybe its a chart breakout. Or its a giant move sparked by great news. Maybe its a hot group that keeps on making amazing moves. Or perhaps its a once great group that has pulled back into what looks like the buying zone. Whatever the "hook" is, it is not working anymore.

The bulls will tell you that we are going through is a healthy market rotation that is working off the froth. The bears have had so much pain that they are afraid to sell short. So they will tell you that stocks may be experiencing short term sell offs.  Asset allocators will give you all kinds of reasons to rebalance your portfolio allocation by overweighing your assets into specific groups that will do well according to what the "play book" says to do at this point in the business cycle. Others will tell you to hide your money in the tried and true safety stocks like BRK which has had a decent but absurd run lately.

While the Major Indexes like the RUT are Struggling. Some words of wisdom from Joe Louis about hiding in BRK may suffice: "He can run, but he can't hide":

I think that the only people who are making money are the ones who are fast enough to play the intraday momentum both ways with precise day trading accuracy. Many of the one day wonders have made huge pre opening moves and big post open gap ups that are then faded. The news reports show stocks that have made tremendous percentage gains for the day. They fail to tell you about all the momentum swing traders who have been sucked into chasing these stocks only to suffer large intraday losses as the sharp day traders fade the pops. Here are some examples of the hook:

1- Leaders Appear To Be Starting The Next Leg Up Only To Rapidly Become Out Of Favor Former Leaders.

Solar Stocks

CSIQ Fake Out breakout. I bought, profited and got out as the break out failed. This is tough stuff. As is the case in today's market, I gave up much of my gains.

SCTY Ditto - another failed break out.



CELG The biotechs led the market in 2013 and leaders like BIIB, CELG  & GILD were safe bets. Now they are all stalling out. One day wonders or stocks with truly great FDA approved drugs may work out well, but to find those stocks before approval is a crap shot. You have to be very fast to buy them after the news and even then it may pay to wait awhile for a pull back.  

2- One or Two Day Wonders. Some of these stocks have made runs, consolidated and then exploded up. Others came out of nowhere. All made money for those who bought them after hours or pre opening on the news and then sold into the opening whoosh up. The momentum chasers who bought hem after the open got hurt.

CDTI Just look ho high CDTI went today before reversing down. Some sharpies shorted this puppy at the highs leaving the folks who chased the stock during regular trading hours with huge losses.

OPTT Same theme as CDTI. It does not pay to chase maniac stocks.

3- Crazy Hot Speculative Groups are fraught with danger. Take today's poster boys, the alternative energy fuel cell/ battery stocks. The maniac hot groups left many people holding the hot potato:

BLDP People got hurt really bad with this group today. Just look at that in your face engulfing pattern.

PLUG Great projected growth and earnings report - if you want to wait until next year before they may earn a dime. I like the TSLA battery factory and Walmart thing, but really?


4 -  Failed Breakouts To New Highs. Last year a break out was the reason to jump on board for the next leg up. Now it is the hook that traps new buyers as big money sellers use the breakouts to get out. Here are some examples:

BIDU China's leading internet stock keeps breaking out and failing.

EJ Great breakout and then a very fast failure. I luckily sold into the pre market gap up yesterday.

PXD Lagging the group with a late break out and eventual failure. I bought the break out but saw lots of my profits disappear before I sold.

SMCI Blow off, consolidation and failure

SPLK Blow off top

SSTK Another failed break out.

UIS They got you with the fake break out

5 - Failing Leaders Like The Banks Hit the Wall  

JPM Fails At Major Resistance. BAC broke out and made me some money, but I sold anyway. I don't trust it.

In sum, all the traders TA tricks are not doing the job. That tells me to be extra careful and trust nothing. Other than some opportunistic reactive day trades, in my view, it is time to stay in cash and do some reactionary day trading shorts. I don't know if this is a topping phase or another consolidation waiting for another "V" shaped surprise rally. All I know is that I am banging my head against the wall right now.

Despite what many people will tell you, technical analysis works in the right environment. Recognizing that this is not the right environment is the key to the preservation of capital. And recognizing that there are lots of very smart money managers out there who know how to orchestrate a chart break out or take advantage of a break out in order to sell into a buying frenzy is all part of the game.

The hardest part of this kind of market is that even when one plays small, one can still die of 1000 small cuts. And human nature is tugging at us to chase the hot stocks. Its time to resist the temptation because something is off here.

BIG Capital Advisors and Seaview Partners are not responsible for your investment decisions. We believe very strongly in our opinions, but you must perform your own due diligence in making your investment decisions.

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