Monday, May 31, 2010

Europe blah blah blah ...

BP shares in Europe are down more than 13% today, according to Bloomberg TV. Euro banks are slogging through the muck after the ECB said there are major bond and writedown issues.


On with the helmets, everyone. If you're long and haven't hedged your positions, good luck. If you're in 100% cash like I am, you can rest assured, indeedy.

TA vs. T&A

Technical analysis, it's been said of recent market action, is negligible. Doesn't work when the market is a drug addict and going through withdrawl symptoms. Bingeing and barfing, the shakes, cold sweat ... not a lot of logic or reason to intraday swings.

Not all TA has been off-base, however. ChessNwine over at iBankCoin has been dead on with his broad-based perspective, and his recent observations about the multitude of bearish engulfing patterns — many of which include shooting stars (or as I like to call them, upside-down hammers) — that point to another downswing.

It wouldn't shock me to see these candlestick reads miss. This is truly a drugged-out market. But history has set its footprints in these dizzying patterns before, and that bears watching, no pun intended. Any trade in these waters best be with a life preserver on hand and a life raft within reach. Arrogance will be punished more so today than any time, arguably, in trading history.

I expect more murkiness and churning in June, choppy waters for bulls and bears alike. I'd love to see a clear direction that can be traded with some semblance of simplicity, but that isn't going to happen, is it? Probably not. In that light, it's always best to appreciate life's pleasures. Rich or poor, we all need our joy  and fun.

Repeat after me:

I will not bemoan the decline of the market (or Western civilization as we know it)
I will not bemoan the decline of the market (or Western civilization as we know it)
I will not bemoan the decline of the market (or Western civilization as we know it)

Rinse and repeat.

Almost looks fake

But it's real, according to Flickr. This sinkhole is in storm-ravaged Guatelmala.

No denying the bear in me

I'm not historically a bear, not by any stretch. But last week, I really confounded myself by going long VXX without using it as a hedge. That didn't work well at all. The following morning, China denied being bearish on Euro debt and pledged its enduring love and support of all things Euro.

Yeah, right. Today, right on cue (after I sold my VXX shares), the Chinese are voicing their concerns (again) and the markets are struggling, the futures are down, and I'm wondering how I can learn not just to be right, but to be right at the correct time. I sold those VXX shares at a nasty percentage loss, though the position was too small to put a real dent in my account.

About the Chinese — it's not just the Euro they're worried about. People's Bank of China advisor Li Daokui says the housing bubble surpasses the one the US had in 2008-09.

Getting real about Euro debt

China's premier tells the Japanese on Monday that a global double-dip recession is a real concern. You know, a few days ago, Western media pushed hard on the notion that China would continue to support Eurozone debt issues. The markets went positive.

How will they spin this one? He isn't saying anything new, but it'll come across as "negative" by the time markets open on Tuesday.

Gaza means conflict (again)

Israel, Turkey and a lot of pissed off people.

McCullough: France, Italy will crash next

McCullough (Hedgeye) has been dead on about the global debt fiasco. He says France is going to crash in the next quarter. Inevitable.

Last resort?

The nuclear option is upon us, or at least US. Bombing a leak like the one below the Deepwater Horizon in the Gulf might be a necessity. The Russians did it five times in similar scenarios. Four times the action worked, all with "small" nuclear bombs.

Spooky times, indeed, when a nuke is a solution to repair a problem caused by humans. Mother Nature cannot possibly have a good response. But what must be done will be done.

For now, British Petroleum is going to try another method, but really, there's proabably no way to stop this gusher other than the nuke. Isn't it odd and fascinating that we are getting toxic by air (Iceland volcano that I cannot pronounce or spell) and sea (man-made disaster)? The images are somewhat similar, really.

Sunday, May 30, 2010

Main Street Maverick?

Mark Cuban is a polarizer. He also wrote quite a bit about the market in early May. They're still worth the read.

Make it tougher for the financial engineers and you will make it easier for investors to evaluate companies and hold on to shares and maybe even act like owners of those companies.
Regulating agencies should set a trading volume threshold relative to exchange/issue/security volume that when exceeded, the trading entity must “notify” the appropriate agency .
The best analogy for traders? They are hackers.
Cuban writes that he used to be an extensive trader until the past three years. Three years? His thoughts on what the market has become in the past three weeks since he penned these pieces ... must be interesting.

Friday, May 28, 2010

Appleholics Anonymous?

AAPL shares spiked up for two days in a row — including Friday despite a selloff on Wall Street — possibly buoyed by an upgrade by Merrill Lynch, which set a new target of $325.

The numbers for the iPad and upgraded iPhone G4 are going to be enormous, but at what point do those products price into the stock? At 257 today, 325 isn't going to happen overnight, but could definitely happen by Q4 earnings time, if not Q3.

Philip Elmer-DeWitt writes about the eternal rumor regarding Verizon and Apple. Christmas? Hmm...

Meanwhile, the rest of the planet is going ga-ga for Apple. Of all places, Japan is the very one that is so tech-savvy, it leaves the rest of the civilized world in the dust. Yet, somehow, Apple has broken down that wall. Technophiles camped out in Tokyo to get their hands on the iPad. Amazing.

Subdued, but busy in Tokyo.

In Munich, longass lines for the iPad.

More Munich. They really went nuts.

iPad love in London.

Montreal? Crowded, though a bit more subdued.

Netflix: Tipping point in 2013

But really, it'll come quicker than that. If it isn't Netflix delivering streaming entertainment by '13, it'll be a behemoth like Apple or Amazon. Everything is evolving at warp speed, indeed.

For now, though, NFLX is king of delivering movies to your home.

Euro Dominoes: The explanation

Paddy Hirsch explains the Euro economic crisis at its most elementary form. Thank you, Paddy.

Counterparty risk from Marketplace on Vimeo.

Here's the result of all that creative lending and borrowing.

Downgrade was inevitable for Spain

Axel Merk says the measures mean nothing without followthrough by the EU. "This trillion-dollar bailout package buys time," Merk said.

Ackman's plunge into Citi

He's a shrewd, highly successful value investor. So why is Bill Ackman so bullish on Citigroup? He explains his purchase of 1.5 million shares.

Mr. Crystal Ball

There's Meredith Whitney, who has consistently called for the furies of hell to wreak the financial world for its past misdeeds. Then there's James Altucher, one of the biggest bulls of the past year or two, calling for a "checkmark" recovery. That's checkmark, as in bigger than a "V" bounce.

His interpretation of recent statistics in the broader economy is interesting, to say the least, but he certainly has conviction in his belief.

It doesn't end there. Altucher puts the recent correction, including the despicable yet almost predictable Flash Crash, in historical perspective.

If you're not sure what I mean by 'predictable,' I'm a former shareholder in Dendreon. Ask any long-timer in DNDN about strange market manipulation. We're generally paranoid beyond the norm.

BP visuals

There's no moral judgment here on BP or any corporation. Just a collection of visuals as British Petroleum has the world's attention and stage — while in crisis mode. There are environmentalists on one side (Greenpeace, etc.) and profiteers on the other. (Patty Edwards has of Fast Money bought BP on these recent dips and Steve Grasso is also a buyer.)

I don't have their kind of cajones. Going long on BP here ... I'll pass. If anything, there may be more downside, as I surmised earlier.

Credit crisis revisited

This video breaks the crisis down better than anything I've seen.

¿Dónde está el fondo, amigo?

From earlier today, news of six banks in Spain merging* to pool resources. Not an outright merger; they will remain unique entities. However, by pooling, they can retain some balance and flexibility against the rigors of the free market — maybe a measure to nip short sellers in the bud.

This came on the heels of Fitch's downgrade of Spain's rating, which sent the market downward at mid-day.

Spain is no Greece and there should not be the ridiculous level of negativity we saw in the latter. But Spain's debt is immense and unemployment is huge. This will take time, and in the end, the focus will move on to the next Euro nation in dire straits.

España se unirán en breve

Looking ahead

Long weekend ahead and some planning is never a bad idea. Let the ideas churn.

Among the potential plays next week in a market that will be skittish (scaredy cat) at best or possibly cataclysmic (worsening of current crisis/crises or addition of new trouble spot), two stand out: Apple and British Petroleum. Apple's momentum is to the upside thanks to the iPad, which was just launched in Japan to hordes of customers, and the soon-to-be-released iPhone G4. The run from last week's low of 231 has been large for AAPL, which closed at 257 today. With a year-high of 272, AAPL has some room to play with, and if June brings some stability to the market — end of quarter can bring increased inflow that left after the Flash Crash ($9 billion left the market) — it could be the right play.

BP has no solution in sight. They've had vast success over the years with pioneering technology, but eventually, Mother Nature just said no. Now, with BP down to 43 after bouncing from 40 to 45 earlier in the week, where do shares go now? I'm not familiar with shorting individual stocks, but inverse oil/energy ETNs have worked. DUG (ProShares UltraShort Oil & Gas) closed up 4.1% at 69.08 today on decent volume (1.7 million shares). SCO (ProShares UltraShort Crude Oil 2x) rose 1.65% to 15.36.

On April 26, DUG was at 51.71. SCO was at 11.56. BP was 59.91 then, and closed today at 43.07.

Is there still room for gains in DUG and SCO? At this point, with BP a long way from any kind of reliable solution, of course. But most of the "easy" money has been made on the short side, clearly. There are at least two reasons, though, to believe this is far fro over and DUG and SCO are potentially decent plays.

1. Both BP and the White House underestimated — or publicly lowballed — the amount of crude bleeding out. The number may be as large as 19 million gallons per day, far higher than the earlier estimations of 5 or 12 million. This is relatively new info released in the past 24 hours. That impact is not fully felt in the stock of BP just yet.

2. BP has lost nearly $1 billion so far. If this problem isn't rectified for another month, or two, or three ... revenues continue to shrink and costs continue to spiral out of orbit. Worst-case scenario is BP is reduced to shambles and is bought out by another oil conglomerate. Best case is they find a temporary solution, or establish a relief well — the latter won't be ready until August at the earliest.

Whatever the scenario, the market is leaning on BP like never before.

Apple is what I know far, far better, and that's where I'll dip in and out. But as oil proves to be a multi-layered death trap for the US economy, I might try some SCO and DUG now and then. Just not today, and probably not next week.

[Update: Apple launched its iPad in London, too, to much mass indulgence.]

"Industrial Apple" wallpaper art by Stratification.

Flat Friday: Remember the TItans

Dow Jones 10,136.63 -123.36 -1.19%
NASDAQ 2,257.04 -20.64 -0.91%
S&P 500 1,089.41 -13.65 -1.24%

Memorial Day weekend is upon us, always the right time to remember the men and women who have served our nation with honor and fulfilled their legacies as proud Americans — and courageous men and women who aided Uncle Sam in times of distress.

Market fell in the final minutes as traders locked in profits, shorts covered and many in general were risk adverse. A lot can happen over three days. I don't blame anyone taking risk off the table. DJ was down just 50 points in the final half-hour before succumbing to the late selloff. Thin volume turns the market into a waterfall when momentum shifts.

• AAPL (257.19 +3.84 +1.52) rallied toward its intraday high near the close, but ultimately sold back down. Momentum is on Apple's side with the new iPhone close to being announced, iPad sales soaring and stores (at least the one in Honolulu) jam-packed while the rest of the mall is usually so-so drawing crowds. I wanted a drop to 253 by the close to pick up a few shares. Might get that opportunity next week, but if it doesn't happen by Tuesday, the hype for the iPhone G4 and WWDC (June 7) will likely fuel a near-term run.

• BIDU (73.25 -0.24 -0.34%) held its ground fairly well. Nasdaq was down 8% for May, according to CNBC, but BIDU rose 6.3%. I like Baidu long term, but missed my chance to re-enter at 69 early Thursday.

• C (3.96 -0.06 -1.49%) lost most of its gains from Thursday. The Ackman buy (1.5 million shares) and upgrade news are priced in now, and it couldn't hold 4 bucks. Like C, GS (144.26 -0.69 -0.48%) was up today until closing down a bit. FAZ (14.93 +0.77 +5.5%) finished the day up, but overall got hammered in the latter part of the week. I wouldn't touch C unless it dipped below 3.60 again. Generally, C has been a solid buy below 3.80 and a must-sell above 4.10 over the past 18 months.

• FXE (122.37 -0.85 -0.69%) slid while the dollar (UUP 25.21 +0.14 +0.56%) was up. EUO (24.91 +0.35 +1.43%) finished closer to its high than low. I don't like the turmoil in the euro. Germany's deutschemark may be the most stable currency on the continent.

• FXI (39.38 -0.35 -0.88%) took a breather after a solid week on an uptrend. At some point, as one of the leaders of the global rally, FXI is going to double dip or consolidate before resuming the uptrend. Big Brother cooled its overheating economic engine in the nick of time, staving off hyperinflation, and the market there responded as well as can be expected within a 21% plunge. FXP (42.17 (+0.67 +1.61%) gave China bears a few cheers today.

• GLD (118.88 +0.19 +0.16%) closed just 4¢ below its intraday high. SLV (18.03 -0.09 -0.50%) opened down 8¢ and never got back to yesterday's closing price. I like SLV better; the upside is there if price manipulation can be unmasked and rid of.

• GOOG (485.63 -4.83 -0.98%) is giving traders a chance to get in below 500. Between the Android and AdMob, forces are in play to boost shares. As a leader (or co-leader with Apple) in the soon-to-be lucrative mobile advertising market, GOOG has intriguing upside and, aside from Apple, very limited competition. A double dip in the broad market could take GOOG back to its near-term support at 469, but the upside is attractive.

• IMAX (16.95 -0.25 -1.45%) has been dead to me for a few weeks. With disappointing returns on Shrek 4, shares are in yo-yo land. I won't be interested unless they drip below 16 again.

• NBG (2.45 -0.09 -3.54) hasn't impressed any remaining friends by demanding tweaks in the bailout* package. Could shares plummet to 2.25 or even 2.00? It wouldn't shock me. The work ethic and fiscal policy of this nation are questionable at best. Come on ... retirement at 60 with generous pension plans? STD (10.15 -0.28 -2.68%) took a hit today, as well, on Fitch's downgrade. Until then, however, STD was as high as 10.49. Shares continue to remain fairly strong through this crisis. IRE (5.20 -0.21 -3.95%) dipped after a three-day rally.

• TLT (96.50 +0.44 +0.46%) and lightly-traded TMF (39.11 +1.04 +2.73%) were positive as traders put their trust in Treasurys. TMF has been steady since hitting a low of 28.67 on April 7, but has sold off since hitting a 43.28 high on Tuesday when the market finally rallied.

• USO (34.03 -0.27 -0.79%) flat today, while SCO (15.36 +0.25 +1.65%) continues to feed off the depths of crude oil's fall. USO had a nice rally this week as crude lifted above $70 per barrel. Some analysts are calling for $85 oil this year, but the bears see a dip below $60.

[Update: Should add that DUG (PowerShares UltraShort Oil & Gas) had a strong day — up 2.72, +4.1% to 69.08.]

Have a safe and restful weekend, everybody. Aloha!

Stretch run

Good night's rest here with no regrets about taking a pass on today's flat (fractionally negative now) market. I never plan to miss the market, but when the body talks, the brain needs to listen. Going into the close, same approach: unless something shifts dramatically, the thin volume is not able to hold up any stock properly. It's almost a mirage.

AAPL opened above 259, riding momentum from yesterday's close and afterhours trading. AAPL gradually fell to 253 after lunch (Eastern time), then rose to 258 here 30 minutes before the bell. That's interesting range. Volume spiked at 12:30 pm Eastern (downside) and again just after 2 pm to the upside.

With the developers conference (WWDC) on June 7, all indications point to the unveiling of iPhone G4. That's being priced into the stock right now and has been since the precipitous drop to 231 last week. I'm staying out unless there's another drop to 253 or 254 today. It's not just about stock selection. Price can injure a trader easily in this indecisive market. I punt.

[Update: I missed this earlier. Downgrade of Spain. No shock, but it led to the mid-day selloff and temporary decline of the broad market.]

Aloha Friday: 1:09 am

Game plan for today is simple. Memorial Day weekend ahead. Substantial number of traders are gone already for the weekend. Volume today will be lower than yesterday, and yesterday's volume was fairly low. No big reports or news expected today. In addition, most traders are probably exhausted after one of the craziest Mays in market history.

Futures are positive, but all in single digits. Expecting a flat day and no trades in my account. Still 100% cash and happy to be there.

Thursday, May 27, 2010

'Top Kill' is bottoms up

Now that British Petroleum has halted "top kill" ... citizens of Planet Earth are back to that drawn-out headache. The look on President Obama's face says it all.

Global financial crisis. Greed versus Good. Terror- and warmongering state/cult leaders. Three wars that cost trillions of dollars each year. Things could be worse. But they probably won't get better right away. It's no wonder irrational exuberance is easily achieved in the market. Not a whole lot of options for people looking for a place to exercise their optimism, or in many minds, their pessimism.

Yes, the world could use a few more heroes and heroines
Wonder Woman, where are you?

Big bounce: no dead cats here

AAPL, C, GOOG ... they bounced huge today. Compared to some smaller issues, though, they didn't move as big.

• Blockbuster (BBI) ran 18.57% from 0.28 (Wednesday's closing price) to 0.33. I wouldn't touch ol' Blockhead, but it says a lot that a company seemingly destined for bankruptcy could move like this. Maybe it's an indicator that the top is in, at least for the near term.

• FAS up 12.8% and TYH up 10.76%. Financials and techs roared higher today. Volume could've been better, but the bulls win.

• The Governor and Company of the Bank of Ireland (IRE) soared 9.0% to 5.31 and continued its climb after hours (to 5.46).
• Baidu hovered below 70 early in the day and I punted. That hesitation cost me; BIDU ran 8.7% to 73.49. If the market avoids hellish news for a day or two, BIDU might return to 80.
• US Steel (X) hammered the bears and rose 8.29% to 48.86. Big turnaround after days of weakness.

• STD up 5.57% as Euro banks rode the wave. NBG was up, too, by 6.7%.
• Ford (F) raced ahead for a 5.5% gain to 11.99. It was at mid-10 range just days ago.
I haven't caught any bounces this week, but I plan to grab a handful or two before this run is done. Or I'll wait it out and see when the next run hits. Ready to go in either direction.

BP bounce? You can have it

The brave traders who rode BP's bounce from 40 to 45 in the past two days are staying on board, for the most part. BP hit a high of 45.57 today, closed at 45.38 and is at 44.66 after hours.

By tomorrow, British Petroleum is expected to announce whether its "top hat" method is a solution. BP traded 55.9 million shares today (so far). All in all, between the environmental disaster, absurdly incredible technological feats and failure(s) and bottoming of its stock, it's clear that all the pressure BP put on RIG to rush the Deepwater Horizon project (re: 60 Minutes) had everything to do with profits, losses and temporary insanity.

After all, an average Joe like me wouldn't and hasn't traded/invested in BP. Ever. I'd rather buy gold (GLD) or AAPL. Even SCO, an inverse crude oil ETN, has outperformed oil stocks lately. But BP is compelling, the Darth Vader of stocks today. I'd never say never when it comes to profiting from trades. But one question remains: If top hat is successful, even for just the short term, where do BP shares go from here? What's the next catalyst?

Perception is almost everything today. As long as blood spills out of Planet Earth — oil bleeding at the bottom of the Gulf — the video footage will pour wrath upon British Petroleum on a daily basis. My guess is BP tops out tomorrow and trends down again starting next week.

American Bulls, a candlestick charting site, called BP a buy today.

6-month chart (daily)
White Spinning Top pattern (bullish)

BP vs. SCO vs. GLD
3-month chart (daily)
1-year chart (weekly)

Climbing Mt. Google

Just when Google seemed to be stuck in the mud, the AdMob deal was approved by the FTC (last week) and growth prospects were fueled. Now, GOOG is prepared to buy back roughly 1.5 million shares as part of the process of buying out AdMob. In other words, Google has picked up the top mobile ad company on Earth (the same one Apple thought it had its paws on).

Catalyst. Big-time catalyst.

Google also believes shares are cheap below 500, basically.

Long-suffering GOOG shareholders can take a deep breath of relief here. If the market calms down and returns to fundamental perspective (yes, I'm laughing on the inside, too), GOOG will be one of its leaders. Shares opened at 469 last Friday, before the FTC decision was announced. GOOG closed today at 484.86 and is now 490.46 in afterhours trading. Shares are well below the 50-day moving average (535.43) and 200 MA (539.71).

Noteworthy that through this week's tumult, GOOG has held that 469 floor thanks to the AdMob deal. Android and AdMob have turned out to be the pinnacle points for GOOG in the near term. It's not necessarily GOOG vs. AAPL. Both will win. I prefer AAPL, but GOOG will make traders and investors money. Finally.

GOOG's new growth = a first-time chart here
5-day chart (15-minute bars)

FTC approval of AdMob was baked into GOOG. Since the FTC's decision last Friday, AAPL has more than doubled GOOG's recent gain (below).

5-day chart (15-minute bars)

Hammer time! Hammers are known to lie, but at this point in the trend, a hammer can be a tell of directional reversal.

GOOG's weekly chart has a superb hammer forming this week
2-year chart (weekly)

Titillating Thursday

Dow Jones 10,258 +284.54 +2.85%

NASDAQ 2,377.68 +81.80 +3.73%

S&P 500 1,103.06 +35.11 +3.29%

Believers won today. Heretics went without. The masses stampeded to victory. Logicians refused to wear rose-tinted glasses. Dr. McCoy (Bones) laughed heartily. Mr. Spock tried the rose tint. Illogical, he said. Illogical. Printing money does not cure the disease of debt. But the market stomped along.

Slept 4 1/2 hours until the last 45 minutes of the session. The market closed well — no serious selloffs. I've tried to analyze why I refused to buy at the open. It's purely mental. The odds favored bulls and yet I was still bugged out about the loss in VXX. Maybe still shell-shocked from losses in late April and early May on the long side.

I passed on BIDU at 70. It finished at 73.50.

I passed on AAPL at 250. Closed at 253.24. Heavy buying into the closing bell.

I passed on C. Stayed put at 4.02, up 4.15% (16 cents). The retrace levels for today's gain were barely touched. C came down to 3.99 early (I wanted 3.96) and stayed at the 4.01-4.03 level the rest of the day with a brief exception around 1:00 pm Eastern (back to 3.99).

I'll probably delve into AAPL and maybe BIDU, but financials still concern me. Ackman has his 150 million shares of Citi, but he didn't buy at 4.02.

All this aside, the one good thing about today is I knew when I was a step behind and chose not to chase, but to wait for the next opportunity instead. There's no advantage to buying right now ... unless the market becomes overly exuberant (again) or overly bearish (again). I have my dry powder. This is actually not a bad thing; definitely not the worst thing.

• EWY (44.81 +2.72 +6.46%) has recovered significantly since the North Korea scare earlier in the week. Koreaphiles probably knew the North would go silent after the latest threat. Seems to be the pattern. Bark day and night until the big dogs show up.

• FXE (123.22 +1.65 +1.36%) is much healthier today. So many Euro bears out there. I can't see ever going long (or short) this issue.

• FXI (39.73 +1.81 +4.77%) continues to bounce. It started bouncing last week off its bear low (more than 20% correction). Probably a case of TV media jumping on the bear wagon right at the point when the selling was done. As usual.

• GLD (118.69 +0.22 +0.19%) continued to stabilize following a selloff last week. Like FXI, TV's talking heads really started chattering about gold while it was topping. Smart money got out. Late money got stuck as GLD pulled back from 123. This ETF is still much safer than most stocks. Currencies will lose value as governments print more paper which in turn becomes closer in value to Monopoly money.

• SLV (18.12 +0.38 +2.14%) has much less volume than GLD, but will thrive if this run continues.

• GS (144.95 +5.00 +3.57%) is storming ahead as one of the rally's leaders. Was 134 just a couple of days ago.

• VXX (28.48 -2.70 -8.70%) had its worst day in some time. I caught most of that downturn overnight with a small position. FAZ (14.15 -2.11 -13.01) was hit even harder. FAS smoked the bears with a 12.8% gain to 25.55.

My bearish stance the past few weeks had saved me a lot of capital, but it's come back to hurt me the past couple of days in a limited way according to the math. My confidence needs a boost. Repetition, as good coaches know, will build confidence in a player. Repetition here has a lot to do with technical and fundamental analysis, so that's my goal today: to find empirical data to support this change of direction.

Even if the evidence proves otherwise — volume in the S&P 500 was at its lowest since early April — reason will prevail over emotion.

C of love

Bill Ackman is the latest Wall Street shark to take a large bite of Citigroup and make that his own. WSJ reported yesterday after the market closed that Ackman has bought 150 million shares of C.

Citi closed at 3.86 yesterday and is at 4.02 in premarket trading this morning.

With futures in the stratosphere and less-hellish visuals in the media — BP's "top kill" works so far, according to the LA Times, China is saying the right thing about Eurozone debt, etc. — there's not much to knock C and the rest of the market down this morning.

[Update, 3:41 am Hawaii: Fib retrace levels from yesterday's low to this morning's high (4.07) are 3.99 (38.2% retrace), 3.96 (50% retrace) and 3.93 (61.8% retrace).]

A swift kick

In the balls. Deviated from my initial game plan, tried to get too cute and got a swift kick in the nougats this morning. VXX got taken to the woodshed overnight by China, which announced that it still supports EU debt (despite meetings earlier in the week). That turned markets around in Asia, and US futures went ballistic.

I sold at 29.27, a loss of 2.18 per share. It was a small position (11% of my portfolio), but the percentage of the drop (6.9%) is massive. Good that I kept it small. Bad that I started a position at (literally) the last possible minute yesterday with all volatility (late-market selloff) priced in. There was nothing left to boost VXX, but I was convinced the current climate alone was enough to ride it higher.

Would not surprise me to see VXX back over 30 and even 31 later today. But I cut losses sooner rather than later as a rule, and without a chance to get out overnight, the risk was unnecessary. It gapped down before us mortals could sell (starting at 8 am Eastern), which also meant that I couldn't get any shares of AAPL until it had gapped up (now 249.50, up more than 5). If I'd opened a position in AAPL (as a hedge of sorts) yesterday, then it would've had some efficiency.

By and far, the majority of my trades in VXX as a stand-alone rather than a hedge have ended as losses. This may seem like overkill, droning on about a loss that is less than 1% of my account, but I have to learn how and why I lose, as well as win. Always.

The external factors, like China publicly stating the politically correct thing — instead of simply saying that there were meetings, things were discussed, etc. — are par for the course. Sucks, but that's a risk factor I didn't consider.

A swift kick from China

Wednesday, May 26, 2010

Closing time

VXX pulled back nicely before the close of afterhours trading, giving up more than half of its gain after the bell (from 31.90 to 31.45). I opened a small position at 31.45. May add more in the morning or sell it back. Still not the price I wanted (sub 31), but it's a start.

If it opens flat in premarket, might open a position in AAPL as a hedge, strange as that may sound.

11% VXX, 89% Cash.

Another ride with the always dangerous VXXen

Late-day game plan

This goes for tomorrow morning, too.

• All cash, as I have usually been for the past week or two. Flexibility and protection are key, key, key at this point.

• There is very, very little anyone, including Obama, Geitner, Bernanke, LeBron James, Oprah, the Euro Union, Octomom, can do in the next 12 hours to change the current negative sentiment in the market. The only saving grace in the past few days was, really, the extremely oversold level of stocks and overdue bounce. Now that most stocks are not as oversold, reality sets back in.

I didn't have enough optimism to ride the bounce on Friday and Tuesday. But I was paranoid enough to not be long anything that would hurt me significantly.

• Not getting a new position in FAZ and/or VXX in this climate (especially at today's close) is contrary to my playbook, though they are both new pages, to be sure. Not getting VXX late in the day, or even before the bell at 30.99, sucks. But chasing here in after hours would suck worse. VXX reached 31.90 on minor volume, perhaps manipulated to some extent. I've found before that VXX will run like crazy after hours, then pull back over night and give buyers a much better price before the opening bell. Unless it retraces a lot more (currently 31.60), I'll wait until morning.

• If VXX does retrace considerably and I enter a position, I may get a smaller position in AAPL — sort of role-reversal in my hedge pairing of yesterday with these two. That way, if by some minor miracle tomorrow's premarket is rosy and devoid of doomsday omens, I can ride some AAPL up as a hedge against my VXXen.

AAPL is Betty. VXX is Veronica. Apple is Mary Ann. VXX is Ginger. Sometimes it's best to be Mr. Howell and just be content to have cash (and Lovey) at your side.

Veronica and Betty

Mary Ann, Gilligan and Ginger
Lovey and Thurston Howell III

Wandering Wednesday

Dow Jones 9,974.45 -69.30 -0.69%

NASDAQ 2,195.88 -15.07 -0.68%

S&P 500 1,067.95 -6.08 -0.57%

Market closed down after being up most of the day. It was coming sooner or later, not a lot of conviction by the bulls. Not enough inflow. People bailed during and after the Flash Crash and they don't want to mess with this now.

As AAPL slid downhill toward the close, surrendering a gain of almost $7 (at today's high), I moved closer to a re-entry into VXX. I just couldn't pull the trigger, though, concerned that a late-day buy program could throttle me and my little position.

A minute before the closing bell, I wanted VXX at 30.99. (I'd cancelled an earlier buy at 30.44.) But I wouldn't hit the buy button, and VXX closed at 31.03. As soon as afterhours trading began, VXX went up and up, carrying that market momo. At 31.25, I thought again about entering. I had no reason to have doubt at that point. But I didn't want to chase, so I didn't buy. Currently trading at 31.69 on thin volume.

When the day started, I was prepared to trade AAPL in a consistent range, but I never felt comfortable enough with the potential of a sudden selloff, never got confident enough with possible entry points, so I stayed out after the early sell in premarket.

• AAPL 244.10 (-1.11 -0.45%) sold off toward the close, a victim of its success. Everyone's taking their profits to bank them and/or cover losses (in other stocks). I'm glad I got out at 257 a couple of weeks ago, and I'm glad I got out early today with a profit. It's my favorite retail company, but the fantasy of buy-and-hold is long gone. AAPL is also a tool to be used and used up. Currently 242.91 after hours.

• BIDU 67.59 (-1.49 -2.16%) was in a tight range early on, then just faded. Gone are the momentum traders.

• C 3.86 (+0.08 +2.12%) rolled from yesterday's closing 3.78 to a high of 4.19 today on an upgrade. Wild ride on a bank stock. A decade ago, who woulda thunk it?

• EWY 42.09 (-0.11 -0.26%) hanging tough despite tension at the DMZ.

• F 11.39 (+0.37 +3.36%) was below 11 just two days ago. Toyota continues to crumple with recalls and Ford keeps hauling ass ahead of the competition.

• FAZ 16.52 (+0.27 +1.69%) was buried earlier, then rallied from a low of 15.09 to its high of 16.58 near the close.

• FXE 121.57 (-1.41 -1.15%) continues to fall as the Euro's comeback lasts just a couple of days. Cramer says it's because China is rumored to be thinking of selling its European bonds. Something like that.

• GS 140.30 (-2.26 -6.43%) faded again, perhaps on lack of followthrough on a rumor yesterday (again) that there would be a settlement with the SEC.

• IRE 4.87 (+0.18 +3.84%) held on to its gain despite falling from its intraday high (5.15). I saw the price change from 5.11 to 5.03 in the blink of an eye at mid-day. NBG took a hit, too, but STD was ripped with a 4.73% loss despite taking measures to combat its credit crisis.

• USO up 2.32% (finally) as oil bounces. SCO took a 5.12% hit.

• GLD up 1.11 to 118.47, but TLT down 0.28 to 98.57.

• US dollar (UUP) stable today.

Back to 100% cash since premarket. Didn't expect to go tradeless the rest of the day, but dry powder is a good thing these days.

Feel like the market has you in a headlock?

Go cash, young gun, and be free