Friday, June 22, 2007

Poetry in Motion

I've got a riddle for you.

What well-known Jewish personality made a bundle of money on Wall Street today and needs to have their back hair waxed? If your answer is Abby Joseph Cohen, you are technically correct, but the answer I was seeking was Stephen A. Schwarzman of Blackstone.

OK, here's the second part of the riddle (isn't this fun, kids?)

What percentage of public investors have profits on newly-minted Blackstone Group (BX) today, now that the trading day is through? The answer: basically zero. Oh, I'm not talking about the midget founder of the place. He's doing just fine with his billions, thanks for asking.

I'm talking about the poor schlubs who thought they could get inside the club by buying into this stock. Virtually every single share bought is in a losing position. Nice going, folks.


Yesterday, if you'll recall, I wrote:

But tomorrow is - at last - the big day. That's right - it's Blackstone day. Apparently the demand for shares in BX is about seven-fold oversubscribed. Nothing would be more poetic than the market taking a fall tomorrow.

Well. Down 189 more points. Nice.

I actually had a great day, making money both on the short side and - for the brief bounce of the day - on the long as well. I remain cautious and humble in the face of a massively moronic and gullible public that could be coaxed into buying again. Thus I tighten my stops every day.


The Russell has been stronger (relatively) than I'd like to see. But it remains attractive to me largely due to its reasonable bid/ask spread on the options. I remain dumbfounded at the complete rip-off represented by the S&P 500 options market. It's just criminal.


Oh, speaking of the S&P - - - in spite of the recent fall in equities, we remain absolutely sky-high. Dare I even say grotesquely overvalued. Oh, well. It'll take years to sort out. Long story short, don't be fooled with the tiny inching down we've been doing. It's nothing compared to the radical overvaluation still present. Trillions of dollars of equity need to be destroyed before we are at interesting values again. Whether the top has passed it totally unknown. And it doesn't matter to me, as long as I manage and maintain these stops responsibly.


Symbol ALB bounced up to a perfect retracement, thus permitting me to re-enter the position which I closed profitably just a couple of days ago.


Symbol CAH isn't doing badly for me either. I own puts on this.


Although Cigna (CI) is too big to simply collapse, it's got a cute little H and S pattern whose neckline was broken today.


A new short I think I'll enter next week is - again - Malaysia (EWM).


I've got to hand it to Google (on which I have not had a position in a while) - - they seem to be doing everything right. This is a gorgeous bullish pattern - just beautiful - particularly in light of today's market action. Poor old Yahoo is just a mess. Why anyone ever used Yahoo in the first place - - I thought they sucked in 1996 when I first tried them - - is beyond me.


Goldman Sachs (GS) suffered some today, so my puts prospered. This isn't a big fall by any stretch. I guess maybe the lame-o BX reaction hurt them? I don't know.


I continue to hold my JC Penney (JCP) puts, which push a little higher into the green each day. This is a dynamite pattern. Never has polyester clothing been so good to me!


I haven't shown Meritage (MTH) in a long time, but I just want to use this to illustrate the kind of slow grinding death equities can go through. I think this is a good proxy for just about the entire stock market, although housing got a head start on the rest of us.


It's been a good week. Particularly since the detractors are too sheepish to show their faces around here during down days. So let's celebrate:

59 comments:

b.healed said...

fun day!

poor BX buyers...

i'm kinda nervous with aapl not having much movement despite the large market drop. is that just iphone anticipation do you think?

Doji Girl said...

I think it is (finally) time to short CROX...

http://tinyurl.com/2e4b74

Tim Knight said...

The only brand of shoes I own - Ecco - are God's own shoes. Crox look like Crap. It's a fad. I've unsuccessfully tried to profit from puts on this sucker. I stay away at this point. It's hard to know when fads are going to flop. To me, this is the pet rock of shoes.

Of course, we'll probably hear about the COT report on the stock now.

Doji Girl said...

Tim,
Did you look at the link? This has nothing to do with the god-aweful shoes. When Dubbya is photographed wearing them, it's time to short the stock.

Jack Stevison said...

Crox = Earth Shoes circa 1970s. It won't be long.

http://www.time.com/time/magazine/article/0,9171,1101950501-134101,00.html

On the Road said...

I like peanut butter, maybe Dubbya does too - he is still substandard - I love my 3 pair of Croxs - different colors for my different attitudes. Crocs were a brilliant idea. I also own Ecco Boots. Love them both. Crocs just came out with "flip-flops" ya know the between you toe "things" Well, they will be a sensation - Crocs are just like the Ipod - gota have em! OK, "flip-flops
the between the toe things" - look at my picture up to the right - do I look like I belong here? I just came back from going down the Colorado River thru the Grand Canyon for 9 days - all the guests had specialized water shoes with exotic names - the 5 River Drivers and hosts wore YES, Flip-Flops - those between the toe things - and there proved to be an excellent reason for wearing them....take the trip - find the answer - Since I'm a contrarian by nature I will not yell "Buy Crocks!" But I certainly would yell Sell Financial Institutions before I would yell sell Crocs.

Leisa said...

Crox are crap. They are not real shoes. If you want real shoes, buy Quarks. I bought Quarks after dying for a about 4 days post T-giving prep on a ceramic floor (my kitchen). My step mom had some Crox....no support, no real structure. Why bother?

Toshi, your assessment of BX is spot on. Why bother with Bx the same way why bother with CROX? BX is to stock ownership as CROX is to a shoe. No relation.

JakeGint said...

People, learn how to construct a link before you tool on the the POTUS for being a geek.... geez.

Here's an easy primer.

_____________

And Tim, while I happen to agree with your take on Crocs, I don't know where you get this vindictive delusion about "detractors" not showing up on down days. I'm a detractor, I'm here every day. New Equity's a detractor, he's here every day. Gary's a very polite detractor (despite your teasing him about the COT on a consistent basis), and he's here every day. Even Annoying as all get out Tom the Badger is often a detractor, but here (annoyingly) every day.

What? Beannie didn't show up today?

I just thought we had said we were going to take the edge of this thing, that's all.

JakeGint said...

BTW -- I didn't buy any of that BX precisely because it was not a good deal, and for no othter eaosn. But my other holdings in similar structured investments (GAIN, CODI, etc.) all went up today, so I have no quarrel with the homunculus, Schwartzman.

tommy t said...

"I've got a riddle for you.

What well-known Jewish personality made a bundle of money on Wall Street today and needs to have their back hair waxed? If your answer is Abby Joseph Cohen, you are technically correct, but the answer I was seeking was Stephen A. Schwarzman of Blackstone."

Thats hilarious Tim...glad to see you are makin some dough ray me!

Gary said...

Been out of town all day. I commented yesterday on the Lauriston letter that I thought too many people were expecting another up Friday. Too many people on the same side of the boat. When everyone is thinking the same thing then nobody is thinking. BTW the COT is the most bullish it's been in over 7 years. For anyone who cares.

Tim Knight said...

"BTW the COT is the most bullish it's been in over 7 years. "

Well, God knows the institutional money is never wrong. Is that why the vast majority of professional traders significantly UNDERPERFORM the indexes?

Gary said...

The COT strategy has most definitely outperformed the market for 21 years. It kept an investoer long for almost the entire bull market from 86 to 00. It caught the crash in 87 and it was short all the way from summer 00 to Mar. 03 and its signalled every intermediate bottom and intermediate top so far in this 5 year bull. What more can you ask from a system?

d333gs said...

Interesting statements about overvaluation, for those of us who don't use margin , any thoughts on short and ultra short ETFs?

2sweeties said...

Let’s debunk the COT myth with a series of examples showing us that there is no evident correlation between the COT report and the market trend.

This is a boring read, but if any of you is thinking to follow the COT to trade options, first read this, I have made the research job for you.

14 mar 2000
S&P 500 close at 1359
NET COT for 14 mar 2000 reads 5.05, it should be very bullish.
Let's see if the market goes UP.

24 mar 2000
S&P 500 close at 1527 (UP 12% since 14 mar 2000).
Looks like the COT is the Holy Grail of trading! But wait, read on…

17 jun 2003
S&P 500 close at 1011
NET COT for 17 jun 2003 reads 4.66, again it should be very bullish.
Let's see if the market goes UP.

1 jul 2003
S&P 500 close at 982 (DOWN -2.86% since 17 jun 2003)

2 sept 2003
S&P 500 close at 1021 (the first close above the 1011 peak since 17 june 2003 - if we would have followed the bullish COT report we would have been DOWN underwater for almost 3 months: 17 june to 2 september 2003)

20 jan 2004
S&P 500 close at 1138
NET COT for 20 jan 2004 reads 4.13, again very bullish.
Let's see if the market goes UP.

5 mar 2004
S&P 500 closes at 1156 (a mere 1.58% in 1 month and a half and is the highest top since 20th jan)

13 aug 2004
S&P 500 closes at 1064 (DOWN -6.5% since the 20th jan)

4 nov 2004
S&P 500 closes at 1161 (UP 2% after almost 10 months since 20 jan 2004 – basically the market has been FLAT the whole year even though the COT were so bullish on the 5 of march…not a very useful trading tool)

Now, if you are a BUY & HOLD investor, maybe you can use the COT to get an idea of what the ‘Smart Money’ is doing in the long term. Maybe.

But if you trade options with leverage, please forget about the COT, you are going to be wiped away before the COT tells you that the market has changed. It’s a report made on Tuesday published on Friday, would you trade with informations from the last week?

There may be cases in which the COT predicts an UP move, like technical analysis can, but you can also flip a coin, if you want, it’s the same.

Enough with this COT story.

downosedive said...

gary
I am amazed to read your 2 brief posts here ref the COT update. Incredible! You say the COT is at its most bullish and yet we had Fridays plunge. I know how highly you rate this indicator and that many times you have warned that it doesnt indicate very short term plunges, but does indicate the medium/long term trend. And you have confirmed the underlying trend is strongly up. Although Im a bear, I took your past advice recently and as you may remember from my panic posts, I went long just as the DJA started to fall a couple of weeks ago (the indicies was 13658 when I converted). So although Im a bear at heart, at least it now looks that my descision to stick with mu long positions may be the right one. Just a question of how much longer this donw phrase will last and more importantly how much further it will fall before bottom is reached. I know the COT will not answer this, but at least the indicator is still very much up. Perhaps then, these unstable series of down days are indeed just a natural market correction in an otherwise strong bull market. Hummm, this certainly has my attention all the time. Thanks for the update. Do share any thoughts with us. Bears as well as bulls can benefit from your COT updates, so that they remember to close there shorts each time the market bouces up, otherwise they will just end up with a massive short position in a bull market and loosing heaps of money because of it. The only thing that I would ask you is - does Fridays plunge represent a repositioning to shorts by the 'big boys'? Just a thought in case they have decided to turn fully bearish yesterday. Presume you wont be able to answer that until next Fridays publication, by which time it may be too late if further heavy plunges have taken place because of their taking out short positions

downosedive said...

gary
Ive now read above post by 2sweeties, ref the COT. What is your answer to the negative examples given? The post has quite some detail - is it right or wrong?

bmbull said...

It all depends on how you want to trade. If you're going to follow the COT, you'd best trade what the COT tracks, that being the major indices. However, if you 'follow' the COT and you've been trading housing, REITs, and/or utilities, you've gotten trashed.

Same goes for any other 'system'. You don't use monthly charts for day-trading, for instance.

You can look at the major indices right now, and they're still near the highs. But the percentage of stocks above the 50-day on both the Nasdaq and S&P has fallen below 50 percent. That doesn't seem like a real solid base to work from. Regardless of what the major indices are telling us, the "market" is getting wobbly here.

Market Speculator said...

"Well, God knows the institutional money is never wrong. Is that why the vast majority of professional traders significantly UNDERPERFORM the indexes?"

No, but they do help move stocks in either direction. Its like saying an elephant doesn't splash through water.

I agree, overall performance they suck but when signalling out a stock who doesn't have any institutional support to getting some...price will more than likely be on the upswing.

Market Speculator said...

Follow up with Tim's yearly price change...

From 1928 - Thursday

Dow Jones closed higher than the previous day 52% of the time. It also closed higher than its open 52% of the time.

Just thought I'd do a daily analysis as it seems most are focused on daily moves.

Thomas said...

cantdrive55--lighten up. Take a lude. Or better yet...shut your mouth. A dedicated bear is just as useful as your hero: Abby Joseph Cohen (she's a man, baby!). Perhaps moreso. Whether or not Tim is right on the direction of the market may have no bearing on his ability to make money. Puuuhhllleeeze. You should know this. But then again, you probably don't trade all that much. You're an "investor." In for the long haul. Go flame somewhere else or at least put something useful on the board.

Long PRGO--acting healthy in this downturn. Bang on near-term support. Measures to $22 near-term and $32 long term.

Short AMGN--press this puppy. We should know very quickly if it's going to $50. High probability trade on the short side. Set a tight stop. You'll keep getting chances to short this one throughout the whole year.

Retail shorts BEBE and Gap stores. With Tim on the legacy airlines. UAUA and AMR. World of pain there. JBLU is a great long as well and likely to be taken over by Virgin (but that's not a technical indicator, couldn't help myself).

Oh, and cantdrive55; you're a fag.

Edwardo said...

What's Mr. Schwarzman's Jewish heritage have to do with anything, Tim? Why bother mentioning it?

Gary said...

Dive,
The market is down 1.92%. "Oh my god the sky is falling" As long as you aren't leveraged 1.92% is nothing. I answered 2sweeties post over at the smart money tracker if you want to look at it. The COT is just never going to be very good at catching these little pullbacks. If your attention span is too short to trade the intermediate time frame then I suggest you find something other than the COT to give you an edge. As of Friday's report it looks like this correction is going to be another buying opportunity. This may all change next week since the data is for Tuesday and the market didn't decline until Friday so we will have to wait and see what happens next week. I will add that it's not normal for the Commercials to go from a blees rating of 100 which is the most bullish to 0 in one week. It has happened but only very, very rarely.

downosedive said...

Gary
I will look at your blog ref reply to 2sweeties. I agree the % pullback so far is tiny. However since last Tuesday the DJA has behaved rather oddly. Bear in mind the fall and recovery we had 2 weeks ago and now this. You have pointed out that the COT didn’t alter at all during that fall 2 weeks ago and that is a fine and valid observation. But then the latest fall has behaved differently down 146 on Weds, a very weak 55 (ish) point rise on Weds (and even that was a real struggle – I watched the indicies non stop for 4 hours) and then the big plunge of 176 points on Friday and that actually gained pace at the latter end of the day - no sign of buying the dips by the big boys in last weeks trading. If COT remains as bullish next Friday (based on Tues data), it would certainly appear to indicate the big boys are ignoring all this and that the trend will continue upwards. However Im very jumpy of the COT timelag under these wild movements. For all we know it might actually be the COT boys that are causing the recent falls as a reaction to their repositioning in a bearish stance. In that case by the time the data comes out next Friday, Christ knows how much further the market may have fallen. We will then be the suckers left with the long positions and no prospect of a pick up in the foreseeable future, based on COT trading. So the issue is not so much whether COT is a good indicator, but more whether the timing of the data provides enough of a warning when/if there is a fundamental change of direction. Right now Im starting to get close to the level that I closed some of my overloaded plus positions at 2 weeks ago. There may be a distinct possibility of actually being able to buy them back cheaper – but I ask myself …..would I do that? Or would I be likely to now close my remaining long positions with the intention of buying back cheaper latter on? If enough people thought like that, including COT traders, then that’s all that’s needed for a heck of a crash…………

JakeGint said...

Ed-- I had similar question. Also, what's he got against short guys? Lol.

downosedive said...

bmbull
Thanks for the comments. Yes it is only the DJA as an indicies that we are talking about using COT. Youve summed the lastest up by saying the markets are wobbly - yes very very, there is a real sense of tension in the live movements. I cant help thinking that is the Asian markets fall heavilt next week, that could well trigger major falls in USA and Europe because of the curent nervouness. Hummmm, really difficult to know what to do

JakeGint said...

Dive,

If it's any solace, the unsure feeling you are getting right now should be a contrary indicator in itself. Lol.

Seriously, if you are nervous, take a couple of days off. Risk only what you can lose, and wait for the signal to go bear (or bull).

Remember Lord Rothschild's admonition about never catching a top or a bottom... he made his money in the middle.

bmbull said...

dive,

I agree - I think markets are indeed on edge right now, and who knows what could happen if the fears in the CDO market start to escalate.

Where the major indices are concerned, the areas I will be keeping a close eye on are the 50-day MAs and, as Tim has mentioned, the early June lows.

beanie11111 said...

Darn folks, are you sure you really want the Beanie to show up everyday here and spewing forth the virtue of investing in solar stocks? By the way, solar stocks are en fuego! FSLR blow the shorts brains out. Same with SPWR (what i believe is the next JDSU of the 1990's, only bigger this time). Same with TSL, which sports a very beautiful chart if you like bottom fishing.

The low of two thursday's ago has not been taken out. So the bulls are still winning, and winning big. I'll be more humble if that low breaks.

Meanwhile, good luck bears, for you will need it.

Tim Knight said...

"What's Mr. Schwarzman's Jewish heritage have to do with anything, Tim? Why bother mentioning it?"

Because it's a necessary element for the setup to the joke. The setup requires more than one similarity between Mssrs. Cohen and Schwarzman. That's what makes it a little funny.

Now, if I said BX buyers had the heeby-jeebies, that would be taking things too far, even for me.

Gary said...

Dive,
I wouldn't worry to much about a big move against you. The market rarely move more than 1-2% in any one week. So unless you are trading too large again. What's 1-2% nothing really. Remember again that no one ever made money by panicking. When everone else is panicking it just means an opportunity is in the making. The opportunity may not pay off the very next day but it will pay off in the long run. Don't you wish you had bought on Feb. 27th now? I guarantee there were cool heads who did and they are patting themselves on the back right now.

Gary said...

BTW has anyone else noticed that generally the hardest thing to do is usually the right thing to do. Is it any wonder that at market extremes the commercials are generally taking the opposite side of the "easy" trade.

b.healed said...

so i am looking at 2 weekly chart for aapl and i am coming into first hand experience now with the dramatic difference between log and normal scale charts. how on earth do you know which one to use? open to hear from anybody

b.healed said...

"phat" is now part of the dictionary!
http://www.m-w.com/spell/phat.htm

Gary said...

Now you see why I don't pay that much attention to charts and patterns. You can make them say just about whatever you want by just changing the x and y axis.

Tim Knight said...

"Now you see why I don't pay that much attention to charts and patterns. "

Then why on earth are you here several times a day? Honestly, I don't get it. This blog is dedicated to nothing except charts and patterns!

You are welcome as the flowers in spring, of course, but what you are doing is the equivalent of me hanging out at the Culture Club Fan Site all day long. It doesn't make any sense.

Tim Knight said...

"so i am looking at 2 weekly chart for aapl and i am coming into first hand experience now with the dramatic difference between log and normal scale charts. how on earth do you know which one to use? open to hear from anybody"

My opinion - - and this will make it simple - - log graphs all the time, period. There is never a reason - ever - to use arithmetic scaling (except for newspaper publishers that want to show scary or dramatic price moves).

bmbull said...

"Is it any wonder that at market extremes the commercials are generally taking the opposite side of the "easy" trade."

Gary, you've told the group for weeks on end that trading with the commercials, ie, trading with the uptrend, has been the 'easy' trade, and questioning why others chose to try to fight it. Why now is the long side suddenly no longer considered the 'easy' trade? What's changed? According to you and the COT, nothing at all. And why, with the continued bullishness in the commercials, would you then term this a market 'extreme'? What's extreme about it?

Tim Knight said...

I want to jump in and say that I appreciate Gary's information and opinions, and I'm not trying to make this into a cot-bashing fest.

Gary is - and I'm serious - one of the more thoughtful and intelligent posters to this board. And he stands his ground, which I respect, for obvious reasons. Someone who can stand up for a thoughtful position, even if I don't agree with it, is welcome on this board.

My own beef, which I expressed above, is at someone's dismissal of charting on a site that is dedicated to charting. Unless you are trying to get people to "convert" away from chartism to cotism, I'm not sure why you are wasting your time.

But, just to beat this point into the ground, people like Gary who want to express contrary points of view or other styles of trading are extremely welcome here.

People who post for no other reason than to perform ad hominem attacks are not.

bmbull said...

At least from my perspective, I'm not trying to bash Gary and/or the COT. I was just asking for a little clarification on what seemed to be a confusing and/or inconsistent statement to me.

I didn't intend for it to taken as anything more than that.

bmbull said...

And Tim, if you have personal experience with AJC's back hair, well, I pity you.

Tim Knight said...

"And Tim, if you have personal experience with AJC's back hair, well, I pity you."

Happily, you need not. What I offered about AJC was, as with most things on this board, speculation based on applied reasoning.

bmbull said...

Whew.

But contrary to many things on this board, it sounds like that analysis may be more fundamental in nature, rather than technical.

No matter. I'm really not interested in taking that trade...

b.healed said...

wow, what is up with SLB that shot up $1.30 in the last two minutes of the trading day on friday?

bmbull said...

b.healed,

Best guess is that SLB was involved in the Russell index rebalancing.

Gary said...

Tim,
I come to the site for the interesting debate not for the charts. Obviously I've found a system that works for me and I've learned my lesson enough times not to try and second guess it. I guess my goal per se for commenting is not only to answer questions that some of the other posters ask about the COT and other issues...if I know the answer. I don't neccesarily want to convert people to the COT. I would like to convert the permabears to a more rational trading strategy that can take advantage of both the ups and downs in the market. I realize that most people are very stubborn in their beliefs and won't change no matter what I or anyone else says. A few however do from time to time have an open mind and are willing to look at the oppostie view. I have once or twice let my emotions get the best of me and posted comments that were not worthy of myself directed at yourself and several other bears. My apologies. I assure you it won't happen again.

Bmbull,
I would have to disagree. The easy trade would be to short the market because of the obvious double top pattern. Also the short interest on the NYSE is at all time highs so I think there are way to many people trying to call a top in this market. For anybody who has been long this market you know how hard it is to ride the bull and not get shaken off. Staying long in an overbought bull market is anything but easy.

kaige said...

Gary,

I noticed the latest COT(June 19) on S&P500, Dow are extreme bullish, that is, commercials increased longs (in S&P500) and changed from shorts to longs (Dow); and large spec did extact the opposite. Both are in large scale. And we had two more than 1% down day on Wed. and Fri. Is that possible this time large Spec got it right?

Gary said...

Well they certainly got it right for the last 3 days. However I don't trade for daily moves. I wouldn't know when to book profits. Entries are easy exits are tough. That's why I use the COT it gives me a clear exit. If the market consolidates and then heads higher then yes maybe the specs won the battle but usually the commercials will win the war. History says they win the war about 75% of the time.

bmbull said...

"For anybody who has been long this market you know how hard it is to ride the bull and not get shaken off. Staying long in an overbought bull market is anything but easy."

Gary, I would agree - but the shorts could just as easily make the claim that it hasn't been an easy market to short either. A lot has depended upon where you were long, and where you were short.

As of right now, I just don't think you can really generalize about "the market". The major indices might be holding up, but under the surface, the tape is quite split. Energies, commodities, defense, some tech still doing well - for now - but many areas are rolling over, like housing, REITs, utilities, health care, and even the banks.

It should be an interesting summer.

Gary said...

Bmbull,
Yes I do believe it will be an interesting summer. I do think this bull is coming to an end. I'm just not willing to try and pick a top until I get the big money on my side. Look what happened in 99 to investors who tried to pick a top. Yikes

Market Speculator said...

Ummm...CROX RS Line hitting new highs...downside volume pales in comparison to the upside volume....
Sheesh Dgirl, patience.

Market Speculator said...

Gotta side with Gary, picking tops is a game that VERY FEW win...I'd be willing that less the 1% of 1% actually get the top. I'd rather catch 80% of a move to confirm my thinking is correct. Meaning I make sure that my opinion is confirmed by price movement before I act. If it is, yippee if not...cut my losses and move on.

I need another dose of Beanie11111 bull riding 101...

LOL

Addison said...

Hey, I recently added a news widget from www.widgetmate.com to my blog. It shows the latest news, and just took a copy and paste to implement. Might interest you too.

bmbull said...

mspec,

My point is that everybody's 'top' isn't the same, and not all stocks top at the same time. If you were long housing stocks, you'd have better recognized that your 'top' was nearly two years ago - you can't afford to wait for the Dow or S&P to signal a top while your individual stocks are rolling over.

It all depends upon how and what you trade, and not everyone trades the same way. Nor should they, for then there would be no market.

Gary said...

Bmbull,
yes but 3/4 of all stocks follow the general market trend. Might as well get as many odds on your side as you can. If the general market trend is down the odds of hitting your stops are a lot less even if you are trading a weak sector. Heck the housing sector bounced over 30% from July last year to Feb of this year. If you were short then the general market uptrend would have caused you to hit your stops and resulted in losing trades even though you were correct on your call. Shorting is tough I like to get as many odds on my side as possible before jumping to the dark side. LOL

Market Speculator said...

Its funny, why is shorting so hard when the market only closes higher 52% of the time (on the dow)???

Interesting study...for one to do.

bmbull said...

Gary,

Agreed - there is nothing wrong with getting all of the odds on your side, if that's the way you choose to play it. For others, at times like this, they may be able to make money on both sides of the market at the same time. For instance, I'm still long energy but short the REITs. I don't look at the market as one big "market" - I see it as many different groups, some of which are in bull and/or bear markets all their own at different times. And I think that's why those who want to short stocks in this environment can be successful doing so, as long as they're smart about it - regardless of how the commercials are positioned in the major indices. There's always more than just one game in town, and that's why I believe it's up to every investor to find their own style and/or system and be comfortable with it. Take Tim, for instance - I suspect he's pretty capable of taking care of himself pretty well!

mspec,

Shorting can be hard because the market doesn't go down the same way it goes up. The declines tend to be steeper and more abrupt, and picking entry points in that environment is difficult - and I'm not saying I'm any good at it! On top of that, you are always fighting the longer-term push for stocks to go higher, since many more investors play the long side as opposed to the short side (and we won't even get into the effects of monetary policy, money supply, inflation, etc., that help to push up asset prices). Some of that may change with the advent of the inverse ETFs, as now folks can go 'short' by going 'long'.

Gary said...

I'll give you an example of why shorting is so hard. Lets say XYZ co. falls from $50 to $25. If you were short you made a 50% return on your investment. However if I wait until XYZ hits $25 and I buy instead and it goes back up to test the highs then I made 100% on my investment. The most a short can go down is 100%. But stocks can go up many 100's of %. The % are working against you when shorting. I did a little article on the smart money tracker on shorting a few weeks back.
http://garyscommonsense.blogspot.com/2007/06/to-short-or-not-to-short-that-is.html

bmbull said...

And a long can only lose 100%, while in theory, a short position can lose an infinite amount...

Gary - and please don't take this as a jab, I don't mean it that way at all. You say you don't use TA or charts, but isn't watching the COT report just another form of 'chart watching'?? I mean, aren't you really watching the 'chart' of the commercials' positions, rather than watching stock prices? I don't think you can fairly view it as 'fundamental' analysis, can you? Just curious as to what your thoughts might be, looking at it from that perspective.