Alchemy Of Trading, LLC

'Round Midnight: Don't Trust, Absolutely Verify 11/13/2008 11:35 PM

It looks like we had a Lowry's 90% Upsde Day on the NYSE today, possibly not on the Nasdaq. I am guessing because Paul Desmond is the authority on this, but in general it looked similar to the few dozen 300-900 point DJIA rallies we've seen throughout this stage of the bear market. 

 

Breadth was good, but not spectacular.

Who are the new leaders? Those Education stocks really lagged, and the beaten up garbage -- Oil & Gas/Materials -- ramped.

So yes, I think we've seen this before, and I am staying cautious although I'd like to get on-board a multi-day rally if it's feasible.

If you feel like an idiot for missing a 600 point move, you're not alone. Timing these things is hard as hell and just think of the people who were short and got flogged to pieces

Tonight in Charts Of Interest we have Weekly charts, so take a look, and I'll see you before Friday's open.

Stephen

Excerpted From Alchemy Live Real-Time Feed 11/12/08

Might As Well Trades

I'm going to mention something again for the benefit of new subscribers that I've talked about before -- let's say that you decided to make a low risk probe for a bottom by buying a few out of the money calls on the Spiders, QQQQs, or whatever. If you lose 50% of the premium you'd better get out because there is a very high probability that you'll lose it all. You will hang on waiting for a bounce and then it becomes a Might As Well Trade -- "Might As Well Hang On To These Things Until Expiration Because They'Re Basically Worthless Anyway"

 

Sick Of It 11/12/2008  11:50 AM

So much for the idea of a bounce over lunch.

There is just massive liquidation of positions still going on, and we've never seen anything like this. 

Hedge funds and many other people are still too leveraged, and this has to end at some point, but impossible to know where.

Anthony From Brooklyn has talked about a "7" handle on the S&P 500 eventually and maybe that's going t be true.

I'm sick of it....you're sick of it....everyone is sick and tired of it.

Going to lunch and hope you are faring well.

Stephen

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11:28  I could see the bulls making a last stand over lunch period based on premise that it's "close enough"  to another retest. Then you also have the dumbest prominent person in the history of the markets, the evil fade, hanging black crepe paper

11:17  Sold the rest of the SDS's.....back to 100% in cash

11:08  Anthony From Brooklyn was just saying that there's another giant hedge fund in liquidation right now, not Gendell/Tontine Partners which we all know about already

11:00  Ken Heebner's CGM Focus Fund will probably be down 50% YTD after today, and the curious thing is that he has more power to do the things any hedge fund would do -- sell short as much as he wants, go to 100% cash, etc.....it tells you how the madness of crowds has infected even him. He apparently believes that the companies he owns are so cheap that you can't afford not to own them. A huge mistake that Jeff Gendell and so many others have made

 

10:38  I'm going to sell a third of those UltraShort Proshares

10:25  There is no oscillator, no indicator of any sort that can forecast when a bottom will be reached because this is the highest Tail Risk in 75 years, possibly ever....having said that the next key point are those old lows

 

 

10:12  The right trade is to be short, the market internals among other things saying so....the worst that can happen is that I get stopped out of those SDS's at a small loss

9:45  That Sell TDST on 5 Minute is at 88.95.....at 6 on Buy Setup now

9:37  Another break of the Sell TDST on Spiders and I bought the UltraShort Proshares S&P 500 (SDS).....30% of equity including leverage

Faint Praise 11/11/08 9:00 AM

Saturday's Art Of The Chart: Monthly NYSE Comp

'Round Midnight: You're The Casino 11/6/2008 9:00 PM

I completely forgot about the Jobs Number tomorrow until hearing the news of that in my car this evening.

It used to assume so much importance, but we know it's going to be a smoldering pile of garbage tomorrow, indicating how strung out this country's economy really is.

Anthony From Brooklyn made the point tonight that the 44th President could possibly inherit an economy that is in the bottoming stages, and he may not even have to break a sweat before the market starts to acknowledge the magnificent job he did. 

But I don't care who gets the credit, I really don't. Just getting through these terrible days, to resurface on the other side, to look back and say -- "It's Over"....that's what I want.

Then we can go back to making money in a much easier fashion, hopefully lots of money, and it will seem so easy in comparison to what the last 18 months have been like that you'll think it's a rigged game, and you're the casino. 

The beginning of a new bull market forgives almost all mistakes. When will the new bull start? I don't know.

Meantime, no matter how hellacious that Payroll print is, I can see a Buy The News bounce kicking in. 

Buy The News, Sell The News, Buy The Rumor, Sell The Fact, etc etc.....these trades have been around for hundreds of years, and they still work.

It's all sentiment and "art", and the reason they work is that so many people -- the public plus many so-called "professionals" -- get aligned on the wrong side.

So, for example, the wrongway types got heavily short today because it looked so murderous and ugly, and they have a good chance of getting knee-capped tomorrow.

Stephen

Weekly Banks 11/5/08

2:10  I mentioned last week that Banks would only really get interesting to me when they took out the DeMark Buy TDSTs on Weekly charts.....so I'm really not very interested

   

'Round Midnight: Into The Courts Or On To The Streets 11/3/2008 11:30 PM

Despite global doom and gloom the former UBS, Morgan Stanley, Bear Stearns and Sanyo banker, who has led UBP since 1998, remains confident in the future of the hedge fund industry, which accounted for 45 per cent of the bank’s asset under management as of June. “The hedge fund industry is the most talented people who have come together to manage money. When they don’t achieve they disappear. There is a Darwinian process that we don’t really see in the long-only world,” he says. “There is a re-engineering process that is feasible in hedge funds. That is appealing. If you think [the hedge fund industry] will not survive that is like saying that talented people will never come back, which is odd.” -- WSJ 11/4/08

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So where are we?

Well, we're in a market that feels like it wants to rally hard if it can come up with a good reason, yet there are almost no good looking charts from the perspective of someone like me who like to buy stocks at new highs.

If you want to do your "patriotic" duty and load up as Buffett suggests, you can also justify that act based on the advice of countless value mavens, almost all who have lost 30-50% YTD.

You also have Leuthold saying the same thing, and he became a bull back in August, "early" in his timing.

I don't know whay the market has calmed down, could be the calm before a newer, more vicious storm, but we got through October and now we look right in the face of this Election.

If we get another day like this tomorrow -- somewhat narrow range -- we will explode like the mother of all bombs Wednesday when we learn who the next President will be.

Whether it's a landslide or a small margin victory for someone, whether it is thrown into the courts or on to the streets. I think an explosive move -- could be in either direction-- is comng.

Note in Right Sidebar that Pivot Ranges are very narrow, a harbinger of a large trend move.

Also parts of the market have consecutive streaks  -- IWMs, Up 5 Straight, Spiders, Up 3 Straight, TLTs, Down 5 Straight -- underway.

Take a look at Charts Of Interest and I'll see you before Tuesday's open.

Stephen

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STRA: Part Of A Strong Group 11/2/08

 

Saturday's Art Of The Chart 11/1/08

 

Excerpted From Alchemy Real-Time Live Feed 10/30/08 2:30 PM

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2:29  This is very good action, rallying late in the day like this if it holds

2:25  This is the problem with letting losses get out of hand -- it's enormously difficult to come back from the depths. Look -- there is plenty of time to get into new stocks, positions that can be held for weeks and months....why would anyone hold Magellan any longer?