Tuesday, November 1, 2011

FAS vs FAZ - Discipline vs Emotion (updated 3:57 pm HST)

FAZ daily
Another 10+% move, now up roughly 25% in two days.
Note the four boxes. In each of those 3-day time spans,
FAZ volume exploded in similar sequence.
Each time, FAZ sold off drastically after those 3 days.
We're at the end of another of those 3-day boxes.

FAZ daily
I guessed yesterday that the new range would be 36 to 42, the
latter being previous support. Today's candle is not quite bullish,
and though a lot of traders think rising volume is good, sometimes
it indicates a blow-off top. That's been true of FAZ lately.

FAZ daily
This kind of exploding volume, the last 3 days worth,
happens often enough in FAZ. Kind of like a drunkard getting
ready to ralph. Full pukeage tomorrow?

FAS daily
Though FAZ looks about to pass out from fatigue, FAS and
this hanging man candlestick look horrendous. More so with
the conviction of this volume. Then again, there might not be
any sellers left.

FAS daily
Off today's low, just barely. Entering here is only for the brave.
I have no love for the banksters, but I did trade FAS from 11 (or so)
to 11.33 a week or two ago. No way to know where it bottoms
this time.

12:26 pm (Hawaii) My first look at FAZ as a buying opportunity today came after the rise to 44+. I waited for 42.96 as a Fib retrace and possible entry point. I missed it, felt fine. It ran up to 45, came back down and I waited to see if 42.96 would hold. It did not. All the stops and profit-taking kicked in as FAZ sank to below 42.30. I didn't nibble. I went to sleep at around 5:30 am local time.

Near the end of the day, FAZ ran again on yet another intraday dip. The Fib retrace this time was 43.67. Sure enough, FAZ ran from 45+ down below 44 and briefly touched the 43.60s. Again, I didn't step in. FAZ ran above 44, then to 45. What did I do? I chased at 45.15, debated on getting out before the bell at a little above break-even, broke discipline and held it. As usual, FAZ sold off right after the closing bell and remains at just above 44.00 after hours.

This is the difference between knowing and executing, discipline and emotion. I normally refuse to hold FAS or FAZ overnight due to European lunatic behavior. But this time, I intend to walk out and take a small loss strictly because the market has sold off several hundred points on the Dow in two days, and Helicopter Ben is speaking tomorrow. I will not test that tar pit of death. Sure, FAZ will run higher eventually, but it's time for a breather and traders will jump out as they already have late today. If it returns to 40 or 35+, better price.

Maybe Bernanke says nothing tomorrow. Maybe the chatter about Greek default and investor lawsuits against MF Global gets heavier. Maybe it's time for me to establish a longer-term position in FAZ. Too many maybes equal probably not.

Update 3:57 pm If FAS does a 5o% Fib retrace off its recent high, that would bring it to 12.58. It hit a low of 12.72 today. Close enough? Won't surprise me if FAS bounces tomorrow.

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