Tag Archives: Stock market

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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Due Propers

It has been around two months since I started really interacting with the greater community of traders that use the excellent social media gathering spots available for the industry veteran and market enthusiast alike.

In that time I have come to truly understand and appreciate the wealth of talent and spirit of community out there. I am glad to call many of you my friends. Some of you may even feel the same way about me, and the thought of that warms my heart as well.

It has been a joy to interact with you all, and many knowingly or unknowingly have either provided wisdom, perspective, and guidance, doses of reality or differing opinion.

When I started writing posts for Price is Truth I did so coming from a place of pain and disappointment. At first, this blog was going to be a way to expunge my bad experiences, and to hopefully find and reach some souls who could benefit in some way from reading about my past failures.

As this project is progressing, I am finding that my reasons for wanting to write are changing and what started as catharsis is now giving way to something else. I enjoy the sense of community out there. I am learning from all of you and want to give back, to pay it forward. Also in my heart is the need to give acknowledgement to those who have generously bestowed their knowledge and humor to me when I have most needed it.

To have that feeling of “getting it” with something as vast and complex as the financial markets is fucking amazing. It comes after years of striving and searching for some semblance of truth and frankly the process has damn near ruined me. Even now, I am one bad move away from losing my greatest and most cherished possession in this mortal world or beyond. That is my beloved wife, and her love for me.

The amount of patience and loyalty that she has shown me proves that the power of love is THE greatest energy in the Universe and is the true secret to getting all that you desire in life. I have not reached my goals YET, but that is not from ANY lack of support that my wife has shown me over the last four years.

Some of the other people that come to mind when I think back over my experiences loom large. Then there are some that are mere whiffs of something that added to the flavor of the stew. All were crucial however to my development in their own way and all are appreciated by me.

One of the first, a guy I met when I used to try to get info from Yahoo message boards is DaveBugs.  As most serious traders or investors know, such message boards are real dens of iniquity. The odds of finding real information, never mind making a lasting connection with a real individual who happens to be a kick ass trader (and part time mentor) is like 100 million to one.

But that is what I found in DaveBugs – This guy is a solid and one of the best investors I know. I met Dave on the KLIC board years ago. DaveBugs’ motto is “scale in, scale out – online commissions are cheap” and he understands seasonality and rotation better than most. If I can be half the investor that Dave is, I will be satisfied. Oh, and the guy barely looks at charts, which proves that there are a million ways to play the game.

Then how about Cheri1? She reminded me that the energy that you project is the energy you get back. A few weeks ago Cheri recommended a book to me that provided me with words and specific concepts about the power of positive thinking and the law of attraction.

I was then able to apply this perspective to a specific life-changing experience that actually happened to me personally several months ago. The clarity of purpose that this awareness has provided to me I give her credit for, because even though she and I barely know each other she has given me a gift that I will never forget.

How about Day Trader Rock Star? Rock Star for short. If you have never checked his show out, he is an amazing trader and a fantastic talent for providing entertainment and information to his viewers and listeners. Over a number of years I learned VAST amounts of information from him and the many fine and experienced traders that contribute to the public section of the site.  He provides his members with great value. He cares about his product and is not a shill. Johnny, we never met, but a hearty thank you is in order for what you bring to the trading community.

Another man I respect very much for his courage to speak the truth, as well as his trading perspective, and kick ass T/A, is Shanky from Shanky’s Tech Blog. Shanky taught me patience and the art of playing defense. In order to win the war, you need to survive the battles in between.

Shanky never asks for a dime, but brings it daily with great market commentary and some of the sharpest regular contributors around. If you want to mix it up with some smart guys, hang out there some afternoon.

Part of my learning process is to try to sponge knowledge from more accomplished or well-rounded traders. I am trying to expose myself to traders or market thinkers with perspective, with discipline and success on their resume. One of these is Stef540. Stef is an awesome trader, and a great and funny individual.  Her timeframe is shorter than mine, but I am still in awe of the way she pairs her book daily. Stef always enters and exits trades with precision and ease. From watching her operate I realize that a good trader can hardly help but to win in the end. They will never get themselves into big trouble knowingly and will always fold their hand when the odds stack against them.

Then there is a pro that I have come to know only in the last few months who is a real eye opener. This guy calls a hell of a market in his daily videos, which I personally think are the best free daily market videos out there. Of course I am talking about chessNwine from ibankcoin. The guy is mad talented, and funny as well. His frequent intraday posts are educational and often entertaining. Chess has a depth to his analysis with an understandable approach that is balanced and deadly accurate.

Even the faceless, nameless ones who took my money on the other side of trades gone wrong provide a perspective and wisdom.  They made me realize that every time you take a position there is somebody on the on the other side taking the exact opposite position and only ONE of you can win.  Trading and the markets are a zero sum game.

To make it in the markets every speculator needs to pay their dues. Nobody just wakes up a gifted trader or investor. Everyone requires the guidance and help of mentor, teacher or friend at one point or another to get them over the hump, or to show the way forward. Every single one of you who have been in the game long enough could make a similar list to the one I just made and point to a group of people to honor, and give their Due Propers.

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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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Edge

Today is a good example of what keeps me under the water. Today is an example of my messed up karma. Now don’t think I am bitching or crying here because I am not and I am far past that point anyhow. And I am actually thinking that my karma is improving of late although today does not help my argument, I grant you that.

We are not really going to go into details about today right now…all things in their time and plus the wounds are too fresh to really poke around much without a bunch of pain coming to the surface and I don’t really feel like punishing myself today.

I did some positive things today, I went for a jog and lifted weights and I am even writing something here and that is a positive as well.  But I still feel like a piece of gum on the bottom of your shoe at the moment because I HAD the right trade and I backed the wrong horse AGAIN!

Man it is tiring to be so bad for so long. It is literally just a fucking beat down. Losing begets losing. Loser mentality leads to loser trades and loser results.

But again this is not me trying to cry a fucking river here. This is me talking about how you can be right and wrong at the same time and how if you have no edge you have no trade. That’s right no edge no trade. I thought I had an edge on one play and actually I did have one until a few days ago but as of this morning my edge was gone and I should have faced that fact and dealt with it properly but instead I let my bias screw me when I had another perfectly good trade in the bag and did not take it.

I backed the wrong fucking horse…again.

The trade I did not take was a stock I actually have good trading karma with and the other I have suffered and wrestled with for years. Another one of those corpses I talked about a few posts ago. Did I mention I even had an edge on the good one?

If you don’t trade you really have no idea what I am speaking about when I say I had an edge. Let me explain. At any given moment a stock can either go up, down, or trade flat or sideways. At any given moment of time you could literally flip a coin because even though I am a firm believer in charts and technical analysis in the short run anything can happen.

But an edge is like a little sliver of something you can lean against. Something you can hold onto when things seem to be going against you because after all, you have an edge. Something not everybody is aware of or something that not everybody even knows exists.

Take the example of blackjack. Say you are sitting in the anchor position at the table – commonly called third base or the position to the dealer’s right hand.  Third base is the most important player at the table since he is the last to act before the dealer.

Now say that the table is full of players and as I mentioned everybody acts on their hands before you get to act since the dealer goes from their left to right as the order of play. The dealer is showing a 10 value card up and needs to check if she has blackjack so she takes a peek underneath the face down card. She ends up without a 21 so play continues.

The first few guys bust and then let’s say the next couple of players hit their hands a few times but don’t bust and stand at some total. Now play comes to you and you are sitting on a marginal hand, say it’s a 12 which in most cases is a tough one to sit on and not that great to hit either since any 10 card and you bust. But in this instance you happened to have accidently caught a peek at the dealer’s hole card when she was checking earlier and you know she is sitting on a 6 in the hole.

That, my friends, is called an edge. It does NOT guarantee that you will win the hand. After all if you hit you might bust and if you stay the dealer can still out draw your hand but what you have is knowledge of something that nobody else knows (besides the dealer of course) and you can use that knowledge to shape how you play the hand.

In this example, especially with a few players sitting on their draws the correct play knowing the dealer has 16, is to stand and let the dealer try to improve since she must hit that 16. If you did not know what she held underneath, the temptation would be great to hit the 12 to try to improve the hand at least marginally, since a 12 won’t beat anything but a bust.

And the odds would be against you. But since you know you stand pat and take your chances with the dealers draw.

With an edge the odds are suddenly tilted just a little bit more in your favor. And I had an edge on a trade today and I took another one and lost and the one I had an edge on would have paid nicely. C’est la vie I guess but it chaps my hide to be a dumbass and not learn and not progress. It is a beat down and as a trader the most important currency besides a bankroll is to keep your confidence high. The only way you do this is to make winning trades or cutting losing one’s when it is the right thing to do.  See, it’s not even about always making money on a trade but in making the right trade at the right time. That keeps your self-confidence where it needs to be to able to play and to win in the caged death match we call the market.

I’ll recover but today is a setback, I won’t lie to you. Today was a little setback to my psyche.  I told you I am not healed yet, I am a work in progress. I will give you the good with the bad. I am human after all and if you were looking for the super trader dude who always wins and is cocky and gloats about how fucking smart he is that is not me. Go read any number of trading sites that will only tell you about how they always win and go jerk off to it because that is fantasy like porn is a fantasy. I am more like the fat chick at the party that has a great personality but nobody wants anything to do with.

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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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Swine Flu

Just a bit ago I was doing what I always do seemingly all day every day, that is checking charts when I noticed that Novavax was up like fucking 25% or 30% from the last time I had seen the chart and that couldn’t have been more than three or four days ago. That always happens with that frigging name, shitty price action for months and then if you stop paying attention for a few days its WHAM! 30% in your face asshole, where were you? Missed the Swine Flu train again?

Anyhow, that reminded me of a story from way back about NVAX when I was still a widdle biddy guppy in the big bad ocean. From before I had even lost anything really and I was just full of piss and vinegar.

So I have no idea how I even found the ticker that day but I think it was on some list of daily % gainers or some such thing on Yahoo Finance. This was back in ’09 around June or July come to think of it so pay attention here because this could be a similar story coming to a theater near you soon. Anyway, Novavax was having one of those weeks at the time just like it is having this week, big moves on volume, acting all frisky and shit like something was up with it and somehow I got involved with a few thousand shares at $3.40. I remember the price well…$3.40 and I chased it, of that I am sure. I even think my cousin who was my stockbroker may have tried to sway me away from the flavor o’ the day pump and dump and he may have warned me against chasing it after such a move.

At the time I wasn’t even trading my own account, my cousin was handling my wife and my retirement savings or what was left of them after I yanked all my money out of Ameriprise Financial at the end of ’08 (yes, of course near the bottom, could it be any other way for me?) after Lehman and TARP and all that good stuff and my Ameriprise broker at the time was trying to tell me that dollar cost averaging was going to make me rich from the sell off. I called bullshit and transferred my accounts to my Financial Adviser cousin post haste. I was not going to let some uncaring, order taking sumbitch squander away the MP family fortune. No fucking way, I would be the master of my destiny, I would show Troy the douche bag broker from Ameriprise that I was smarter than the market. Blood is thicker than water and all that crap, cuz would not steer me wrong.

Little did I know that if I had kept my money with that horrible Americrime with it’s horrible front end loaded crap that woefully underperformed any benchmark you could care to use I would have been 1000% better off four years later. Troy I am so sorry.

Little did I know that I should have fired my cousin soon after this little episode with Novavax commenced, that it should have served as fair warning that no profit was too great to let slip away and no loss that was small would be ever be cut quickly and moved on from. The “drag dead money along for years” precedent was established I believe with this very NVAX campaign. I still have a few corpses lying around to this very day.

So in I was for a few thousand shares at $3.40 and life was full of promise. The next day I woke up to a 12% gap down or some shit cause all I remember was within no more than two trading sessions it went down below $3.00 to like $2.80 or some horror-show. Now, to my credit I was a guppy but I had not developed bad habits yet and I cut half of the position down right around $3.00 on a bounce so now maybe I was in for a thousand shares and had taken a $400 loss. So far things had not gotten too horrible, right?

So now the fun starts. Within a few days NVAX starts going absolutely bat shit crazy to the upside. I mean I think within a week it was trading above $5.00 per share and I was making money. I think it finished the week under $5.00 but at that point I was playing with some house money and my balls started getting lower and that Novavax looked like a winner and I was starting to look smarter by the day and I was already thinking about how I could make a living doing this and fuck working again for the man……

Now keep in mind at this point Novavax was like way in debt, no product approval, no chance in hell of actually getting anything awarded to them any time soon – in fact they are just fucking now in 2013 just starting to look like a decent upside trade but I digress. So NVAX had gone from the $3’s up into the 5’s and now it some rumor pops and this thing goes parabolic with a HUGE gap up on unbelievable volume to over $7.00 a share.  Had I been scaling profits along the way? Did I take this moment to lock in my original investment and let the rest ride? Did I take full profits and buy upside calls to replace my stock and reduce my risk? No, No and No. Did I do anything? No. I was the smartest guy and I knew what I was doing right? I mean didn’t everyone get doubles in a month?

The next day THE gap down happened. At the time I thought the two candles up above separated from the rest of the chart seemed oddly ominous but I could not put my finger on why or be sure that this was not just another of the famous Novavax head fakes that I had gotten very used to. I was no technical analyst at that point and anything as esoteric as an “Island Gap” Japanese candlestick pattern would have escaped me completely.

As it turned out, Novavax has yet to revisit those prices from the day of the island gap over four years later. I believe I sold the last of my shares from the remaining Thousand at a price of $2.00 back in July of ’12 and at the time I remember feeling like I got a great price on my exit since shares had traded as low as $1.10 and I had held out from selling at the lows.

After all, I had learned a thing or two about Novavax and about the markets in the subsequent years of dragging its dead carcass along with me hadn’t I? Yes that is correct, I never sold. Not at six dollars or five dollars or four dollars or even at three dollars when I was back to a loss.

NVAX got back to $3.00 and under within a few months of its climax and I not only did NOT sell with profit I dragged that fucking carcass along for three fucking years before I dumped those last shares and price never got above $3.50 the whole time…that is dead fucking money people.

As it turned out the $2.00 fill I sold out at was near high tick for another few months and I felt pretty good that I had rid myself of the curse but sure enough as these things are wont to do in the markets a few months later after I had sold my final shares the chart started firming up again and now the company is starting to hit milestones and get grants and now the chart shows promise and now I have been stalking it for a legitimate trade again since I always kind of had a warm spot for that old dog. But I ain’t gonna chase it this time. I ain’t gonna chase it.

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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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