Tag Archives: stock charts

BTFD

You all already know where I think this market is headed. However, the twitter streams are full of folks that are ready to declare yet another rally to new higher plateaus. Most investors don’t seem overly concerned about things. I certainly have not detected any real panic in either the sentiment readings or in the price action of the market.

There are still some pretty serious technical issues afflicting the market that have not been alleviated by the recent pullback. A myriad of indicators such as Put/Call ratios, Bullish Percentage indicators, volume studies, et cetera, are indicating weakness to come. I believe that the path of least resistance is to lower prices, and that the process has begun. Those are my personal opinions however, and that plus $3.50 will get you a Grande Soy Latte at Starbucks.

Anything is possible short term in this era of daily Central Bank injections of “monetary morphine” in the form of POMO. This stock market “crack” is in essence creating yet another asset bubble, this time through mispriced risk premiums in both equities and bonds. The chase for yield in a lower bound interest rate environment is the catalyst, but that is not the topic of today’s post.

You see, bubbles can go on for longer than even the most stubborn contrarian may be able to wait. Timing such reversals is treacherous at best and suicidal at worst. That’s not my point either. My topic du jour is of the incredibly obvious, yet to-date not talked about fact that the Fed’s open market operations since 2009 have created a unique moral hazard. This will act as dry tinder to the next real correction in the markets, whenever that may happen – and it WILL happen.

In the study of Psychology there is a theory of operant conditioning that was formulated by B.F. Skinner. Skinner’s theories were based on principles such as reinforcement, punishment, and extinction. Skinner created experiments using rats that would provide positive and negative stimuli creating learned behavior responses.  His Law of Effect was in essence that responses producing a satisfying effect in a particular situation become more likely to occur again, and responses producing a discomforting effect become less likely to occur again.

I would argue that the Fed has done the same with us folks in the investor class. Just like rats we are conditioned that buying any dip no matter how small will be rewarded with profits. Conversely, selling stock short or betting on stock prices to fall will be punished with severe losses. This keeps the herd moving in the same direction, but it inflates the bubble higher and higher. This learned behavior response is manifested in two phenomena currently observable in today’s financial markets: BTFD and Pavlovian Short Covering (let’s call it PSC for shorthand). Unless you have been underneath a rock in the fetal position since 2009 then you already know what BTFD stands for, but if not I’ll tell you here.

BTFD stands for Buy the Fucking Dip. The first time I saw it referenced was in a YouTube video that appeared at least a few years ago. Since then, BTFD has become somewhat of an accepted truth. After all, anybody that has bought ANY dip of ANY size over the last 4 years has made money with very few exceptions. BTFD has certainly made many of its disciples very rich and that is one of the strongest positive reinforcements a human can receive. Not only does it reinforce the behavior in the initial participants, but it has created a tractor beam of groupthink. As more and more people have benefited from the learned behavior, the strength of belief has spread far and wide and its practitioners have been emboldened.

The flip side of the reinforced behavioral response is Pavlovian Short Covering. This is the act of reflexively covering short positions at the first sign of a return of strength to the bull side. This learned behavior is based on negative stimulus exerted upon bears time after time over the last 4 years. The tactics used to elicit this PSC is mainly through extreme, and some would say purposeful, manufactured violent short squeezes. Often these bear traps are sprung in the dead of night. Index futures rise in overnight trading creating a rush to cover short positions into the opening bell. Other times at key moments when the market is threatening to roll-over, there is an almost “magical” news item that comes out creating the squeeze. Sometimes, there’s no news at all, but a certain mysterious “hand of the Patron Saint of Bulltards” comes in and ramps the futures from certain failure. This hand of God typically lifts price up and past key areas where bears generally cover their short bets to avoid further and certain excruciating pain.

Any and all of these scenarios trigger PSC, and once it begins, a feedback loop comprised of weak handed short sellers and conditioned dip buyers combine into a glorious symphony of Federal Reserve operant conditioned rats.

Now this is all fine and good until somebody pokes an eye out. This conditioning is based on experience and results that have been extremely effective in the bull-run off the 2009 S&P lows. At SOME POINT however, (I would say that point has already arrived, but some will disagree) the trend changes, and the great Bernanke Bubble pops.

When this happens, the extreme conditioning response cultivated over the past 4+ years will serve to exacerbate the eventual declines. Initially bulls will not sell their positions when the market weakens and may instead continue to aggressively buy the dip. After all this has worked like a charm in the past – why change now? Bears on the other hand, gun shy and wary of all of the relentless traps, will not be eager to short, thus creating no fuel for squeezes.

Combine all this with the fact that there are currently many crowded trades due to the narrowing participation of stocks to the recent rally (see Market Halitosis for more on this). If things turn south the low volume on the exchanges will make declines more severe. Also, there is the very real possibility that if things get really ugly then the High Frequency bid will evaporate, further lowering liquidity. Thus the unique set of stimuli creating these learned responses will eventually be the fuel that enables real conflagration to erupt. This will be the point that everyone realizes that the new phrase to learn is STFR or Sell the Fucking Rip.

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Market Halitosis

I did not create this Price Is Truth blog to specifically talk about stocks or Technical Analysis although I have many thoughts on the subject.

From time to time however, I may post thoughts about current market conditions if they can illustrate a point or if I feel it is worthwhile. This is one of those times.

You see, in a strongly trending market- up or down – certain technical indicators are rendered useless and others take on additional import. One long term indicator I have been watching since November of 2012 (yes – that is a long time to wait for a trigger) is the Ratio Adjusted Summation Index (RASI) which you can pull up on Stockcharts.com as $NYSI.

This is an adaptation of the standard and widely watched market breadth indicator, the McClellan Oscillator ($NYMO) and the Summation Index ($NYSIT) developed in 1969 by Sherman and Marian McClellan. If you wish to read more about this  – click here for information found on the most excellent McClellan Financial Publications website.

Anyhow back in November 2012 they put out a weekly Chart in Focus article that basically stated that most significant tops in the market could not come without a divergence between new highs and the RASI failing to hold the +500 level.

At the time the article came out the RASI had dipped below the 0 line and had bottomed and Tom McClellan (editor of both The McClellan Market Report and son of Sherman and the late Marian McClellan) speculated that the summation index would show a “neat trick” and provide the indication of fresh liquidity to fuel the market advance to new highs. He was proven correct.

However the end of the article provided another bit of advice (emphasis mine):

It is at the moment when the RASI cannot climb back up +500 that its other big magic trick becomes evident“….”Thus far, we have not seen such a failure yet.  It is really not typical for the stock market to see an important top at a really high Summation Index level, like the raw value high of +3689 seen back on Sep. 21, 2012 (RASI equivalent: +888).  A much more normal resolution is to see a dip down toward neutral like what we have just seen, and then a failing attempt for the RASI to climb back up above +500If we see that unfold in the next few weeks, with a failure by the RASI to climb back up above +500, then we’ll know that the typical weakness of the first year of a new presidential term is playing out according to the normal script.”

As it turned out, the RASI briefly stalled out at the +500 level but the next week powered higher and this indeed was the exact beginning of the 20%+ rally we have experienced since late November.

We are now in a situation that seems to suggest the long awaited divergence is coming to fruition and that this absolutely massive rally (and possibly even the longer 4+ year rally off the 666 SPX lows) may be showing it is ready to give up the ghost.

To wit, please see the most succinct and excellent chart by Jackdamn on Stocktwits that appeared yesterday:

nysi - nya

As you can plainly see, the $NYSI has failed at the +500 level after the $NYA has made marginal new highs. While this looks less than significant to the untrained eye, I encourage you to look at the July 2011 time frame to the left of the chart at the other time that this setup showed itself (although the NYSE did not make all time highs that time).

Please note that the NYSE fell from 8500 to 6500 in +/- 40 trading sessions (~25% drawdown). With the NYSE up 48% ($SPX up 59%) from those Oct 2011 lows we are now at a very tenuous moment.

This bad breadth could be a real nail in the coffin for the 2009-2013 bull run or it could just be one more indicator or divergence that gets blown away by POMO injections of liquidity and Central Bank largesse.

Time will tell, but I will wind down this post with a comment that Tom McClellan just wrote in his most recent Chart in Focus article that I take as a bit of a warning and a bookend to his Nov 2012 article:

“One of the topics that we have covered recently in our McClellan Market Report newsletter and our Daily Edition is the way that the NYSE’s A-D Line is finally showing divergences relative to prices.  And that message is getting amplified by seeing the Ratio-Adjusted Summation Index (RASI) turning down at the +500 level, which is a sign that the push to marginally higher price highs does not have liquidity behind it.  There are really useful messages that one can take from market breadth data, when sophisticated indicators and proper interpretation are applied. ”

His understated tone belies what I believe is the true import of this signal. I waited 9 months for it, but most impulsive BTFD bulls would not understand this type of patience and would probably chuckle at my conclusions.

I respond to that thought with an old saying: Revenge is a dish best served cold.

Don’t say you were not warned.

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Red Skies

As I have been traveling over the past few weeks there have been a number of days that I have not had the occasion or opportunity to watch the tickers. This has not been an issue for me currently, since I don’t have positions active that require my immediate attention quite like I did back in the spring of 2010.

Back then I had accumulated a rather large clutch of call options in that Wildcatter ATP Oil &Gas I mentioned previously. After my initial success with options I had started to fancy myself as an astute speculator and decided to up my position size by many orders of magnitude.

Soon after, some bad news had hit the wires about one of their deep-water wells and the stock had immediately slumped from $18 down to $12 in one month. This left me withstanding a rather shocking and large drawdown in their value. However in late February of that year the stock (along with the broad market) had come roaring back and I had been made whole again by early May.

There is an old nautical saying that goes like this: “Red skies at night a sailor’s delight, red skies at morning sailors take warning”. It is based on practical seafaring experience that guides seamen to be prepared for an incoming storm if the early morning sky is infused with a reddish hue.

I mention this because on the morning of May 5th my bags were packed and my wife and I were about to leave for the airport for a long awaited trip to Maui, Hawaii. Before we left for the airport I wanted to take one last look at the tickers. In recent days I had seen the value of my positions swell greatly in value as ATPG and the rest of the market had enjoyed a bull rally. It appeared in most every respect as if our travels were coming at a time of smooth sailing for the markets.

This particular morning however had started off with a bit of a different tone, with many names and issues showing a decidedly negative action in the morning session. I rubbed my eyes and looked over the quotes again a bit quizzically trying to decipher why they had been so active and positive in the days prior, but were now acting in a manner that suggested urgent liquidation was the order of the day.

Stock after stock I quoted indicated that something was amiss that morning, yet I was leaving in mere minutes for the airport. There was not really time to do anything, unless I was prepared to take immediate and decisive action.

A portion of the call options I held for ATP Oil & Gas were June expiration and a portion were even further out in time, and as of that morning all were now solidly in the money, I felt no sense of immediacy. Furthermore the stock had just broken out above important prior resistance at $20 per share only days before. All indications were that this new higher plateau was certain to be maintained, short of any company specific news that could change its fortunes.

Off on our trip we went and my wife and I landed safely on our version of paradise some five hours later. After emerging from the baggage claim to the scent of tropical flowers and the views of palm trees gently bending with the constant trade winds, any thoughts of the stock market were far from my mind. That is until my phone rang while I was waiting outside the car rental terminal.

It was my cousin/broker calling, he told me that the tone of the session had deteriorated as the day went on and had ended even rougher. ATP Oil & Gas had slid under the $20 level it had broken above just days before, into the closing prints.

He wanted to know if he should sell out of my June calls the next day at a modest profit. This would ensure that if any further softness were to overtake the market in the coming sessions we could at least guarantee that we locked in some immediate gains, as the Junes were due to expire in six or seven weeks.

We decided that Cuz would watch the market and especially my wildcatter closely the next day. He would call me if things continued to deteriorate and I would make a decision at that time. If the day’s action was an isolated incident then I would continue to hold my position with the prospect of selling a good portion at yet higher prices in a week or so, when I returned from my trip. I hung up the phone and resumed my tropical adventure immediately.

The next day was glorious and I was certainly not thinking at all about stocks or anything much beyond the incredible view from our lanai and whether to book a morning or evening golf round when my phone rang and yet again it was my broker.

“MP, have you been watching what is happening on CNBC?” Cuz inquired.

“No, are the markets down again today? How is ATP doing?” I asked.

Breathlessly he went on to describe how the markets had been up on the open and our positions had started to recover from the previous day’s weakness so he had not felt any need to bother me.

He went on to say that then something unusual had happened on the exchanges. The Dow had dropped over one thousand points in mere minutes. Talking heads were blaming it on a glitch or some fat fingered trade. I flipped on CNBC and watched in shock as I saw the huge gash in the intraday chart and my head started spinning.

As my cousin and I were talking, the markets were coming back from the lows and it seemed that it all might be much ado about nothing. Although he mentioned that ATP had dropped to as low as $12 per share and was now trading at $16 and change. It went without saying that I was taking a large beating on my call options.

I decided that since this seemed a bit of an outlier event, maybe it was best to take a measured approach and not make a rash decision. I didn’t want to dump at a moment of extreme illiquidity and into panic selling. Option pricing was very spotty and the spread between bid and ask was as wide as the Grand Canyon. The reason, as you may have already surmised, was that the 2010 “flash crash” was going on at that very moment.

Over the next few days I checked in periodically with Cuz just to make sure that things were not getting materially worse, but as it happened to work out prices seemed to stabilize over the remainder of my week in Hawaii. Cuz assuaged my fears and I decided to deal with things decisively upon my return.

Back home the next week, I rolled up my sleeves and surveyed the carnage. The markets which had shown a bit of resilience in the days following the great crash seemed to now be sagging back towards lower levels that had been breached on that day of extremes.

There was no doubt that my positions had taken on a significant bit of water and now as I returned back to the helm of my financial frigate, I had choices to make. Scanning the news I noted that there was no company specific reason that my little meal ticket should have slumped so hard and not returned back to fair value as had many other issues. For some reason ATP Oil & Gas could not seem to get off the mat and was trading around the $16 level.

At this moment I made a fatal error in judgment.  I did not decide to close out my positions, not even the June contracts. I say this was a fatal error because around this time the BP oil spill happened and President Obama closed the Gulf of Mexico to drilling.

Since my wildcatter was heavily leveraged, it was relying on the production from its new Gulf of Mexico wells to meet some crucial debt covenants. This was a real crusher. Within days ATPG’s share price went over Niagara Falls and in my slack-jawed amazement I witnessed a sub $10 print and daily close at a little over eight dollars. ATPG had lost over half its value in two weeks and my call options were destroyed.

There is no need to bore you with all of the gory details, but suffice to say I was cleaned out long before President Obama opened the Gulf up for drilling again that October or November. And even though ATPG eventually made a gamely effort at rebounding into 2011, the warning shot that I did not heed on that fateful day in May was the deciding blow.

I could have salvaged a good portion of my capital if I had sold out when ATPG broke below $20, or even when I returned back home from Hawaii, and that would have been the correct thing to do. But I fell in love with the story, fell in love with the stock and my emotions and bias prevented me from jumping overboard at the first sign of trouble.

Like the Captain of the good ship ATPG, I ended up going down with the wreck as it was dashed violently against the rocks. If only I had paid heed to the old seaman’s credo, I may not have ended up in Davy Jones’ locker.

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Waves

This is just a real quick one here. I wanted to show you a chart that somebody on TradingView posted that I thought was pretty cool. The members name is  mantasg to give full credit. This chart is of the Australian Dollar / US Dollar forex cross and is a five minute chart.

The author has made the actual price invisible and instead has put the moving averages in a regular interval to create this ribbon or almost 3/D image of price action.

The first thing that I notice is how much this looks like “space/time fabric” or something sci-fi like that. It looks less like a price chart than an image or some mapping software.

wave energy in price movement

wave energy in price movement

The reason I like charts like this one is they show you the hidden energy behind price movement. Charts like these prove that the stock market is a waveform energy like everything in the Universe.

I have studied the intricacies of price at a granular level over the last 4 years and what you are seeing here is part of the “truth” of the market and of price, that I have come to know. There are interplays that factor into price movement and you can see plainly how areas that were prior resistance zones then create clusters of moving average support.

Also you can see the way the ma’s cluster and bunch together when they are getting ready to make a large move or change direction from an downtrend to an uptrend in this example.

Think of it like a steamship that needs to turn around. Such a large mass can not be forced to shift direction on a dime but needs instead to slow down and gather itself  before orchestrating the maneuver.

What other observations can YOU make by studying this chart?

Thoughts, comments or observations about this subject, or anything else are certainly welcome in the comment section below or you can email me as well. I want to keep the topics varied here so I hope that if one day it’s not your cup of tea that you will try again another day.

This one is a bit geeky I admit but thanks for humoring me.
Cheers, MP

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Ice Cube

I had been bearish on the markets and caught short, as many were, in the rally that began in earnest the Monday after Thanksgiving week in late 2011.

After all, the Eurozone had seemed destined for a melt-down, Greece was visibly cracking and the US markets had been in a funk of their own after the Debt Downgrade waterfall ride that summer. Looking at the chart, I had imagined that the end was nigh for the entire bear market rally off the 2009 lows.

But in a stick save move, both European and U.S markets were soon jolted out of their stupor with another robust bout of can-kicking, and boy did markets love can-kicking back then! So off we went and an absolute ripper to the upside was born.

All of this information is irrelevant except to tell you that I had blown out most of my speculative funds by September of 2012 by betting foolishly on tops that never arrived via SPY puts and other such Weapons of Mass Financial Destruction.

You see, back in 2011 I had opened up a day-trading account all on my own, separate from my accounts with Cuz the Broker (see this post if you are not caught up with that arrangement) and had blown through it until I was under the $25k limit and of course I ended up getting locked out of making more trades for like 3 months due to a horrible trap for little fish like me called the Pattern Day-trading rules.

It was an awful time, and by the end of that ordeal and after the massive rally I described above, I had gutted my bankroll pretty good and was less a speculator than a spectator and gun shy to make any more parlor bets.

I was still holding a few core positions (aka corpses) including a horrible short position in Chipotle that I had been wrestling with for a while. It was cramping both my style and my buying strength badly going into Q1 earnings, but then the fever broke on the burrito and things calmed down a bit for me and gave me some breathing room.

I had been doing a whole lot of stalking and not much trading as I mentioned, since I was pretty broke but one of the names that had intrigued me was Google.  I had the eagle eye on her that summer, that’s for sure.

That stock had been a real mover for a while both long and short. What I had initially noticed with GOOG is that once it cleared above $600 in July it REALLY started punishing those few shorts still bearish enough to be left in the name after its recent declines. I had been there and done that with CMG and knew the signs.  What I saw in the price action convinced me that Google had made lows and was going to go much higher than $600 and so I sat on my hands and waited for her to flash me a sign that it was time to fade the move.

Day after day it was a relentless march higher. Little by little, slowly squeezing and I could not honestly tell you why I did not just go long of Google as that trade seemed a dead lock cinch, and it was, for what seemed like ages. But it just kind of hypnotized me and I sat and watched and waited for my chance to pounce on the short trade.

Weeks and months went by and that stock teased and taunted the bears, often feigning weakness one day just to gap above on the next and start the squeeze all over again to new high after new high. Many times and many days I was tempted to initiate a short position but I told myself that I could not afford to guess, I had to have a good reason to short, I needed an edge and unless I had one I had to be willing and prepared to miss the trade. Basically I had one shot to be right, and I was going to err on the side of caution. Plus by all accounts the prospects for the company seemed sound, and a rule of speculating states that if there is no catalyst there is no trade.

Every time that I mentally noted a potential shorting area, the next day I would invariably be glad I did not take the bait. GOOG was rending the bears with vicious gashes daily and I wanted no part in that.

Eight, nine, then ten then eleven weeks in a row Google finished at higher prices. The weekly chart seemed like the very Stairway to Heaven itself with its erect ascent. By this time I was positively foaming at the mouth but it was almost a Zen discipline at that point for me to wait out the momentum. With a patience and quiet focus and calm attitude I just observed and watched for the change in character.

After waiting monk-like for the news flow to change and the catalyst to emerge I noticed something on a Saturday morning that piqued my interest.  Insiders had been selling in large amounts and they had cut their holdings by over 45% going into earnings in only a few weeks. While that is something worthwhile to note it is far from a smoking gun.

The next week I was watching GOOG even more closely and I noticed it start stalling out over 770 and I made a mental note about this. I was scanning the news feeds and read an article detailing a negative impact on current earnings due to some one-time charges.  Another noted potential catalyst.

Finally, the cherry on top for me was on the first Friday in October I read an online Investor’s Business Daily article that came out near the end of the trading session. The article about Google had a simple premise. It was bringing attention to the fact that Google was about to break it’s all time consecutive weekly gain streak .The article went on to mention that the record weekly win streak had previously been back when Google made its previous all-time high price per share back in November 2007.

Now here I am staring at this simple article and I got a feeling in my gut. Investor’s Business Daily usually did not peddle in such mediocre “news” and I took this as a contrary sign that sentiment was at or near peak levels for the stock. This combined with the other little clues gave me my edge.

Just then I look at the chart. GOOG made all-time highs near $775 and then all of a sudden as I am watching, it reverses off its record highs to trade under $770. I checked the clock and I had 30 minutes left in the session and the week and something told me that this was THE DAY.

Quickly I scanned the daily chart for clues on the right trade to take. No way could I short the common since I had no margin left due to my CMG position. I had to take an option trade but since earnings were coming up in a few weeks they were expensive.

I had to not only be right on the trade, but I had to pick the right way to express my bearish view using overpriced options due to upcoming earnings. That is not a recipe for success.

But I looked at the chart and my eyes saw it instantly. My eyes saw the pattern all at once and in an instant I just knew in my heart that Google was going to head down to at least $700, over $70 below where it was trading at that moment.

Now I had an end point but what trade to take? The 740×700 October put spread was pricing out at a grand and change and it gave me two weeks for the trade to hit. Suckers bet.

I called my Cuz (remember I had blown out my trading account) and told him what I wanted to do and told him to get the trade on no matter what. I hung up the phone and watched Google trade the last 5 minutes of the session.

Like a sign from the heavens, the overall markets rolled over at that moment and Google dropped at least five bucks in the last five minutes and closed the day at $767 and change.

Monday came and the market opened to a big gap down, and Google opened up down six dollars per share right off the bat at $761. I never took even one penny of heat on the trade. Over the next week or so Google chopped up the late to the party shorts. My spread fluctuated in profit, but my entry was too good to touch and by the day before earnings Google closed at $755. This encouraged me but by no means was anything certain.

The day of earnings I was a bit nervous. Not only was this the day of reckoning for my crazy option gambit to either make me money or turn to mush, but my other major deal Chipotle just happened to be reporting the same day at the same time.

I had a ton of nervous energy that morning and I needed to blow off some steam. It would drive mef crazy if I watched price all day so I went for a jog during the lunchtime doldrums.

During my jog I felt a little sense of peace wash over me.  After all, I had been calculating, patient, observant and purposeful in stalking the trade. Some clues had emerged that I was on the right track and the trade had gone my way immediately. So as I returned back to the house I had buzz in my head, but I was anticipating something good was about to happen.

Once inside, I quickly checked the screen to see how Google was trading. It was down from the price I had left it at, another positive sign. After a few minutes of watching, something happened that made me audibly yell. In an instant GOOG dropped like a stone on HUGE volume, $750 then $730 then $710 then $695 then $685!!!! What the FUCK? What just HAPPENED? Earnings were not for over an hour still to come, and all of a sudden the stock had dropped over $80 in mere seconds.

What had happened was that somebody had released GOOG’s earnings report before the bell. It was a fat finger “mistake”. I have found in life that there are few, if any coincidences, but in any event here I was sitting on a huge gain on my spread.

I immediately called my cousin and had him buy me a weekly 740 call for a hundy or so as a hedge, in case this was a huge mistake and we got a reversal. By doing this, I had locked in some type of gain and it bought me time for price to possibly keep falling, and to let the option pricing settle down so I could get the best exit possible.

Soon after that, the market closed and CMG reported a down quarter. The stock immediately tanked hard. Five minutes and $50 down later and I was looking at Aces over Kings. Slowly I walked over to the liquor cabinet and poured myself a whisky on the rocks and settled down into my chair to await the CMG conference call.  I remember the feeling well. How the planets had aligned perfectly and the sun had shined on me for that one day. How the Google trade had needed to be perfect and it was just that. The perfect trade. As I savored my drink in silence I had a thought and pulled up a song by Ice Cube on YouTube and blasted it.

After all, I thought to myself that today was one for the ages. Today was a good day. I didn’t even have to use my A.K.

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GDX looks good here

Some of the most popular posters on Stocktwits seem to do little more than draw a simple trend line and say something like: “GDX looks good here” or “HAL looks good” or “SPY looks ready to move” and there are like 5 likes and 350 views and it’s just the most stupid inane shit I have ever seen in my life.  And these folks have like 862 followers and I just wonder what the deal is.

Everyone looks smart in bull markets as long as you are bullish, but how about something original please? There is no award for originality or going against the grain right now. If you are not a raging bull you are shunned like a leper.

Even my charts only get a tepid response compared to individuals that don’t seem to say much or offer anything new at all.

My conclusion is that the average person out there is enamored with success, with confidence and with a narrative that is inspiring and uplifting. Most do not want to wallow in the gutter with Bowery bums, or spend a week with a career criminal, or heaven forbid a bear in the markets.

It is the same reason the overall bias for stocks is to the upside and most investors and traders (including some of the most intelligent individuals that I have come to know in the investing community) are dyed in the wool bulls. Some never short stocks and would not consider it, even in a crushing bear market for the Dow.

Come to think of it, if things had progressed differently in life for me over the past few years I probably would be more in that camp as well. Why spend precious time in life dwelling in negativity?

One of my followers on Stocktwits this week suggested a book for me to read that focuses on the power of positive thinking as a guiding force in changing one’s life and fortunes. I believe there is merit to this overarching philosophy, so I ordered it yesterday and will be reading it soon. I’ll let you know my thoughts once I have a chance.

Going forward, I will give an honest effort not to dwell in negatives excessively since part of my growth will come from putting my past behind me.

I still feel passionately that some of the stories I have to tell, while seemingly depressing or negative can be used as a positive for somebody to learn from without having to endure my hardships. Just don’t expect Price is Truth to all of a sudden turn into sunshine and unicorns and rainbows because that is not me.

Last week I had a little bit of a pity party for myself about taking the CMG short into earnings and passing on the GOOG short that I felt I had an edge on. There was even a commenter that felt that what was missing from my post was an explanation of WHY I had forgone the trade with an edge, and instead went with one that had none.

He brought up a valid point and comment (and by the way I would love to get more comments and feedback.

If there are others out there who can relate to my experiences in some ways, or who have their own stories or perspectives that they would be willing to tell, I WOULD WELCOME HEARING FROM YOU in the comments section (or you can contact me privately via my email as well – see my bio).

Nothing would make me feel better about my efforts than creating a community of individuals that support each other. My goal with this blog is to find ways to overcome barriers to personal success and learn effective ways to harness the incredible powers of the Universe.

OK, enough of that – I have a feel good story coming up next. I’ll try to post it tonight. It involves the same stocks from last week GOOG and CMG and it was one of the best trading days of my life. Stay tuned…

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INTP

So a few months ago my wife and I started marriage counseling. We love each other deeply and there is really no issue in our marriage besides the fact that I don’t have a job and basically would rather look at the market all day and stock charts all night than bother to find a respectable career. That has to end because it’s not fair to her and she gave me my shot already and I blew it.

So anyhow we start marriage counseling which is kind of funny because I cannot stand doctors in general and shrinks in particular. But we have this nice British lady and she’s actually not that bad, and really she might be helping me in some ways actually, but I digress.

Within a few weeks the shrink can tell that I am the problem and she asks if I would be willing to take a personality test called Myers – Briggs. The test consisted of questions that you had to answer in a range of strongly disagree to strongly agree and somehow the way you answered the questions was supposed to say something about your personality. I reluctantly agreed since I knew that my wife would never let that one go if I refused.

The cool thing is that once you are finished answering all of the questions you find out at the end based on your score a specific personality profile that uses four letters – mine was INTP for example.

So here I was at home, having taken the test and graded it and I had my four letter profile “code” of sorts. Of course I had to go online to try to figure out what that meant so I Googled it and this is what I found on a few sites ( Keirsey.com  (K)/ 16personalities.com (16))

“INTP – Introverted, Intuitive, Thinking Perceiving – the Architect”

“For Architects, the world exists primarily to be analyzed, understood, explained – and re-designed. What is important for Architects is that they grasp fundamental principles and natural laws, and that their designs are elegant, that is, efficient and coherent.” – K

Ok, after reading the first part above I start getting interested in this a little. The part about fundamental principles and laws and elegant design sort of sounded right…

“Architects are rare – maybe one percent of the population – and show the greatest precision in thought and speech of all the types. They tend to see distinctions and inconsistencies instantaneously, and can detect contradictions no matter when or where they were made. It is difficult for an Architect to listen to nonsense, even in a casual conversation, without pointing out the speaker’s error. “ – K

I have been accused of “going there” with people unnecessarily, of not having a filter in my comments to people and suddenly this test was telling me that there were others like me out there in the world. Now I was reading intently…

 “Authority derived from office, credential, or celebrity does not impress them. Architects also become obsessed with analysis, and this can seem to shut others out. Once caught up in a thought process, Architects close off and persevere until they comprehend the issue in all its complexity.” – K

Truth told I had become obsessed. Obsession with the markets, with charts, with trying to find the ONE secret that would allow me to make up for all of the fuckups, for all of the stupid gambles, the miss-managed trades and miss-managed discipline from when I had no idea what the heck I was doing.

I decided to click over to a different site:

“INTPs cannot stand routine work – they would much rather tackle a difficult theoretical problem. INTP personalities really have no limits when it comes to theoretical riddles – if there is no easy solution and the topic is interesting enough, an INTP can spend ages trying to come up with a solution.  -16

That in a nutshell describes what trading means to me, describes the markets, describes technical analysis, and explains why I have such a burning desire to UNDERSTAND the workings of such a complex thing.  Probably describes, as a matter of fact, why I am a better analyst than trader by a mile. Those who can do, those who can’t chart or something like that.

And I was like holy shit this test works- this is how I am but more importantly this is NOT how OTHERS see me but how I see myself. Remember, I was in sales so I can schmooze with the best of them but I did not always feel comfortable in my skin.

“INTPs love theories and believe that everything can be analyzed and improved. They are not that concerned about the real world and practical things – from the INTPs’ perspective, it is often less exciting than ideas and intellectual pursuits. People with this personality type have no difficulties noticing patterns where others cannot – this makes them brilliant theorists and analysts.” – 16

BOOM went my head. I quickly re-read the last sentence:  “People with this personality type have no difficulties noticing patterns where others cannot”….AH-FUCKING-HA! This is all making so much sense now…That last sentance is totally me. I see patterns nested in patterns nested in patterns and that is just when I am lying on the grass in the park.

Don’t get me started on patterns. This was officially getting weird, it was almost like I was reading about myself (except for all the brilliant theorist stuff which sounded more like my genius brother who had like a 1385 score on his SAT exam or some shit like that. Perfect score on the English and one or two wrong on the math.) Bro read the Hobbit at age 5 (seriously he did), was writing poetry by 6 and ended up having a breakdown before he hit college and was later diagnosed bi-polar. He is doing ok now but his tortured genius led him to organized religion because he needed structure and ballast for his incredible mind.

But you know what I am starting to realize these days? Religious Zealot Bi-Polar genius or INTP Shitty Trader genius we are all just trying to figure out the meaning of it all, you know?

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Price is Truth

First off I need to get it out there right off the bat.  I am a net loser in the markets. I have already lost so much money that on paper it will take an act of God to ever get on the green side of the ledger. I have blown up several trading accounts and am currently short-stacked.

It is a terrible feeling because just as I have tapped my resources my knowledge and wisdom have grown exponentially.

Why do I even care about the markets at this point?  Really I should hate them – they should revolt me. But they don’t.  Each day is like a new puzzle waiting to be solved. Each day is a day that my thesis du jour gets tested and proved to be right or wrong.

How do I know if I am right or wrong?

Price is Truth

This is a powerful lesson that I had to learn. That I am still learning.

One of many lessons that I have learned in the last four years of my life since I was laid off from a great Advertising sales job in 2009 because of the credit bubble popping. That is the moment that I stumbled upon what I now consider to be my great passion, the financial markets.  If I had known then the road I would take when I started paying attention to the market there is no way I would have gotten involved in this den of vipers but here I am and I cannot shake its gravitational pull.

The market is a harsh teacher and critic and takes no prisoners and does not respond to any one person’s hope or desire.

The market is on her own schedule and rhythm and if you align yourself properly to her energies you can surf the wave with great success and seemingly with little efforts but if you take for granted the sheer power of the forces that you are tapping into you are putting yourself at risk for mortal peril.

The only thing that can be used to judge success is price.

It’s really a simple concept but some people never do ever truly grasp the significance of that concept and forever are in search of the holy grail of investing and the secret to long-term wealth from the markets.

But I am convinced the secret is somewhere in the price action.

Why am I writing this? Well partially I feel the compulsion to write about my experiences to get them on paper so as not to forget the really important lessons.  This is partially a self-journey, a healing process if you will.

Not that I can really ever truly forget what I have done since many of my choices ended up costing me hard earned money and confidence. Costing me trust from my wife that I love and the wife that put her faith in me. Costing me years of time spent on a losing proposition – putting me at great risk of future gainful employment in the middle of arguably the toughest economy since the Great Depression.

In other words I fucked up big time. I gambled and I lost and it hurts like hell.  I have nobody to blame but myself and I take full credit and responsibility for my gains and losses.

That was another lesson I had to learn.

I have seemingly made every possible mistake there is to be made in the markets and I still make them.  But I am in the process of working on my faults one by one. Desperately searching for the discipline to conquer my inner demons.

I have learned incredible things along the way. I feel I have something to offer to those who are looking for a different perspective and a story to tell the world about how the game is played even though I never worked in the Investment industry and don’t have any licenses to offer investment advice and frankly if you came here to get any of that you were always going to go away sorely disappointed and that is fine because that is not what I am doing here.

Do I think I have the skills to pay the bills? Fuck yes, in fact I believe in my skills to the ends of the earth. Why? Because of the sheer amount of time I have put into my craft. I have a passion for it, plus a natural gift for seeing subtle differences that others miss.

But only through actual time spent watching price tick by tick, year by year and observing and understanding all of the interactions do I now feel that I function on an almost unconscious level when I look at a chart.  I am a bit of a charting savant and spend way too much time daily looking at charts. Call me a chart geek and I probably would not argue the point.

That in itself means NOTHING. That in itself is NOT any big fucking deal. There are a ton of great chartists and everyone is looking at the same thing. I am not patting myself on the back here in fact I am saying that it really does not matter except that I want you all to know that you can be really good at one piece of the puzzle but to be successful in life or in the markets the end result is what really matters. Scoreboard bitches!

If only I knew then what I know now – If only…but you cannot roll back the clock and there are no do-overs in the markets or in life. I am short stacked and now I need to play small ball until I can build myself back to where I need to be to fully utilize my talents and hard earned wisdom and that is all on me.

Despite the pain and misery and suffering the markets have bestowed on me I will not quit. I feel in my soul that the tuition paid in my blood will eventually come back to me and that there is a reason for my twisted and wicked path to date. There needed to be the pain first in order to get to the pleasure later when it will really matter.

I invite you to join me on my journey and maybe in the process we can all learn something important about the markets and more importantly about life and about the infinite wisdom of the Universe.

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