Wednesday, September 28, 2011

What works and what don't (updated 200 am HST)


7:53 am (Hawaii) This market could easily sway one way or another. How it closes would just be a matter of "who has the ball last." It's not like the market ever needs a day like today with light volume and no conviction north or south, but it probably doesn't hurt trader psychology. That is, unless the trader is me and tried to work too hard. 

I've buried the 1-minute chart on FAZ, at least for now, and I'm sticking with the daily chart to keep PERSPECTIVE. You know what? Now I can actually breathe normally and demonstrate adequate patience. Beautiful thing. To those of you who can trade FAZ well on a 1-minute chart, tip of the hat to you. Learning something new every day.

The daily chart of FAZ, which I've been drawing daily for a week or so with my Amateur Issue "pen," continues to work reasonably well with megaphone patterns and flag/pennant patterns. 1) the megaphones are rarely violated on the top and bottom, and when they are, FAZ price returns. A gravitational pull of sorts. 2) The pennant formations, three since late July, are incrementally higher each time. The first had a endpoint of 57. The second, 60. The third is probably two or three days from endpoint, and it looks to be 64 or so. 

FAZ daily chart, 2 hours before the close
Why did I stray and stick my nose into the hyperinsane 1-minute chart?
The daily works just fine.

Nothing is concrete, this I know. I don't dare assume that the chart and any patterns in my fantastical imagination can predict the future. Each time the candlesticks completed a pennant/flag, they resumed higher or lower. Neither time did they stay flat at 57 or 60. After doing my novice version of charting, I should've been viewing entry and exit points far more explicitly through this perspective. 

FAZ is now at 62.95 (8:01 am Hawaii), nearly at the midpoint of its pennant/flag, and leaning more toward the higher trendline of this channel. The trendline above tops at about 68. The next channel above tops at about 82-83. I don't assume that will be reached, either, not with the possibility (probability?) of bailout/TARP programs worth trillions. But if there is no resolution in Europe, the recent high of 81+ won't be a problem for FAZ. And it will touch 100 sooner rather than later. 

If there is resolution in Euroland, FAZ craters to 50, 45, probably 40 (last spring's range). That won't last. Printing more fiat, creating a bubble in the monetary system will just delay the inevitable. 40 would be a steal. 

Dow down 101 points (8:05 am Hawaii). Again, reversal would not be shocking, but there's a lack of conviction from the bulls. Many of them have taken their profits since this three-day rally ran out of steam. My Debt Sprial list (Banksters) is red: 14 down 1.2 to 4.9%. The two greenies are FAZ and NBG.


Update 9:10 am Bummers. Market is rallying and FAZ sank from 63.10 to 62.40 in seconds. I'm not kidding. I looked down to take care of a bill, looked up, and the price dropped instantly right at 9:00 am on the nose. FAZ is roughly at the midpoint of its current range, so there's not much upside here in the very near term, so I got out at 62.15 for a small loss. That's four small losses today and I'm not happy. But I am okay about cutting losses short. That's never a bad habit.

The time to scale in was yesterday below 56 or last week at 53. I didn't do it, and now I literally pay the price. The Dow was at -34 when I sold this last trade. It's now at -29 and I won't be surprised when it clears the field and finishes up for the day.

Gold and silver in the red today. AGQ is down 11.4% to 107+, no surprise considering that candlestick yesterday, indicating a shortage of buyers in the final few hours. DGP is down 5.1% to 51.71, which means I'm glad I didn't buy any yesterday. I'm also glad I didn't buy any physical over the weekend or yesterday. I'm not the only one thinking spot prices could go much lower. I still think 21 for spot silver is a possibility, though I wouldn't really enjoy seeing that happen. But if it does, it would correlate with my rubberband snapback theory from last week. After all, spot silver went from 21 to below 9 not so long ago. It could easily go from 49 to 21, which would be the same percentage pullback. Then boomerang way up.

And FAZ is now at 62.98. Boy I wish I could ignore the minute to minute action. Dow is -75.

Update 9:37 am Back in. Again. At 63.60. Dow is down 135 and sliding. A part of me knows this is going to happen, especially after three big up days for the market, and yet I doubt myself, I doubt my analysis and I doubt what I see in front of me. Think I'll put in a stop order to sell FAZ at 60. Or 55. And walk away from the computer.

FAZ edging closer to the upper trendline of this megaphone range. The flag/pennant near-term pattern still indicates an endpoint of about 63, but that's all just lines and bars on cyberpaper. To think I bought a few shares yesterday at 60.53, FAZ is now 64.23, and I've lost money. Will I learn?

Update 10:11 am Two things happened and neither is particularly good, even though my paper profit is decent right now. 1) I added a few more shares at 65.00 about 8-10 minutes before the closing bell. I almost went big, but talked myself out of it. FAZ's momentum went from 65 to 65.49 like wildfire. 2) Instead of selling part of the position or all before the bell for a decent profit, I decided to wait and possibly sell in afterhours trading. I'd put in that stop sell order just for peace of mind, so I tried to cancel it. No luck. Apparently, it can only be processed and cancelled during market hours if it's a stop order. Did not know this. So here I am with a large (by my standards) position in FAZ, unable to sell a share.

Price has been rattling around at 64.80 to 65.10 or so since the bell. What's done is done. I'm handcuffed to this position whether I like it or not. I only want to sell because chances are somewhat strong that FAZ could sell off tomorrow morning or even today in afterhours. It's moved from 56 to 64 in 24 hours. If I'd been long from 53 or 44, I wouldn't mind being cuffed to it overnight.

Update 1:54 pm Turns out the stop order automatically killed the order. It just took 24 minutes after the bell. FAZ fell from 65.48 to below 65.00 during that time. But that was almost 4 hours ago. With 5 minutes before afterhours trading ends, FAZ is back above 65.30.

All of this is so intertwined with what goes down in Germany tomorrow. Will the Germans back Merkel and give the Greeks all the fiat they need to live life as they know it? Or will she be forced to yield to the will of the German people, who really don't want to pay for everyone else's debts. Can you blame the people?

FAZ now pushing higher again. Bid is 65.45 and ask is 65.50. If Merkel gets her way — as Geithner "advised" recently — more printing of fiat ensues, Greece has a big party, Germany ends up subsidizing all the other Eurozone countries and goes broke within a few years, just as Le Fly penned yesterday.

Me? I'm tempted to sell and get out of this before FAZ makes a move one way or the other.

Update 2:00 pm I'm too late. Was going to sell 2/3rds of my position. That would be the 2/3rds I got at 63.60, not the extra I picked up at 65.00.

Anyway... Tomorrow's scenarios?

a. Merkel gets her way, Timmy gets his way, the banksters get their way and the Greeks go into further debt to ensure a life undisturbed, though at the expense of hard-working, frugal Germans.

b. The German people get their way, Merkel yields and austerity measures paint the day, causing markets to tumble. Greece sets itself on fire, German people celebrate with lots of pints, bratwurst and sauerkraut.

Is there another possibility? 

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