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  • Tag Archives AA

  • 28 Oct 11

    Posted on October 28, 2011 by Administrator

    1. Made a nice profit yesterday. When the market gaps up like yesterday, it statistically tends to extend the rally .62% over the first half-hour trade. This is according to Bespoke. The market eventually made further gains than this but I liquidated AA at about exactly this point for an excellent profit. Most analysts see AA hitting 12 in the next year, and so I’m not sure there is a lot more room for AA to move unless we see a good pull-back, in which case I will re-enter.

    2. Toward the end of the day, sold my GE calls and bought Mar 21 calls @.10. This rolling locked in my profits and purchased cheaper calls with the profits.

    3. BAC was not performing at all and eventually sold the options at a small loss. BAC later started to perform a bit. I have since reassessed BAC and Buffett’s deal was @7.13… now the exact value of BAC is becoming difficult to determine and I decided Buffet probably knew what he was doing, so I’m taking BAC off the board.

    4. I’m now all cash except for the cheaper GE options and some worthless Dec C calls I bought back in March which I have long ago written off as a loss. This is because I anticipate a small pullback, might even fill the gap, before the uptrend resumes.

    5. I really should have entered gold or silver a few days ago when I started talking about it but didn’t do anything about it… will buy on a pullback, certainly.

    6. Still very bullish and, as I mentioned before, GE is actually my cheap proxy for the SPX. My target window for the GE calls is Dec and I think I should see a good rise to 20 or so by then. My options will net a nice profit by then (bought a lot of ‘em).

    This entry was posted in AA, BAC, C, GE, gold, silver, SPX and tagged , , , , . Bookmark the permalink.

  • 25 Oct 11 #2

    Posted on October 25, 2011 by Administrator

    1. RE: GE seeking alpha reports:

    Monday 2:39 PM A unit of General Electric (GE +0.7%) purchases a 58% stake in Lightfoot Capital Partners in a move it says will allow it to expand into petroleum product terminals. Lighthouse owns Arc Terminals – a petroleum terminal operator with storage capacity in 8 states.

    2. China’s manufacturing index signaled growth for the 1st time in 4 months, lifting commodity prices. Bullish for AA.

    3. IBD–Caterpillar sees strong 2012 and FedEx (as a leading indicator) sees a 12% jump in transports–bullish.

    4. IBD current outlook: confirmed uptrend.

    5. Ultrabooks? Come on. Don’t see why anybody would buy a Windows machine when you could buy an Air or an iPad.

    6. Copper (as a leading indicator) surging–bullish.

    7. RE: IBD’s editorial today about the US tax code. Hell yeah, let’s reform our hopelessly corrupt tax system. One of the reasons I won a company is to avoid paying taxes, so when I say “hopelessly corrupt,” I know what I’m talking about. (Not that I want to pay taxes…)

    8. The SPX is as usual lagging the NDX, the latter of which is right above its 200 MA. A breakout above the NDX 200MA would be very bullish and the SPX will follow.

    9 60% haircut for Greek bondholders? Not sure why they bought Greek bonds to begin with, we all saw this disaster a mile away… the majority of bonds are held by Greek and Cypriot banks however. What is BAC’s exposure to Greek debt? I do know they have they highest exposure to European debt of American banks…

    10. Gut feeling? Europe and America are entering a Japanese style cycle. Gavyn Davies in today’s FT “Great Recession may cost US economy $5900B” speculates US unemployment will remain 9-10% through 2017. He also reports implied rate of GDP@3.8%PA next 5 yrs~”the outlook for equity markets might be a lot better than many pessimists currently believe” though he cautions the 3.8 rate may well be far too rosy and as with Japan in the 90s, the eventual loss of output and employment could be much higher.

    11. Current danger–market could face a sell-off if European plans fail to meet expectations. However I am not too concerned about the event risk here (knock on wood) as it seems the Europeans are serious about getting their act together. US earnings have been good. Stronger than expected US data last week. Seasonal factors as well.

    This entry was posted in AA, copper, GE, NDX, SPX and tagged , , , , . Bookmark the permalink.

  • 25 Oct 11

    Posted on October 25, 2011 by Administrator

    1. The SPX now has 90% of stocks above their 50MA, which is very bullish, however this is an overbought condition, so we may anticipate some sideways movement in the very least. On the other hand, a lot of money that was on the sidelines is coming back in to the market.

    2. Our AA position is performing quite nicely. The correlation of AA with the SPX has increased to 77% and its inverse correlation with the dollar to 76%. The full stochastic is overbought however. AA is resting right below the current pivot point. Note that the top of AA’s keltner band is about 11.2 and the 50CCI is still below the zero line, which suggests AA has plenty of room to rise. Note that AA broke resistance at 10.26 and 10.47. One the daily, next resistance is 11.54 and on the weekly 11.2 and on the monthly 15.88. Observe that AA is well below the kumo in all timeframes. Very bullish on AA.

    2. GE has been underperforming the market and our position has an irritating loss currently. Note the 50CCI and the full stochastic are overbought though the stochastic is declining. On the daily, GE is in the kumo and has several resistance lines to deal with. We can expect volatility until it breaks out of the kumo. On the weekly, GE has been fighting resistance at 16.63 and is well below the kumo. On the monthly, GE is fighting resistance at 16.59 and is rapidly approaching the kumo.

    3. BAC is has been underperforming the market and our position has a very small loss currently. On the daily, BAC has broken above resistance at 6.61 which will now be support, and next resistance levels are 6.97 and 7.3, the latter of which is also the kumo. The full stochastic is approaching overbought but the 50CCI merely indicates a nice uptrend. Woodie’s CCI is over the 100 level which is bullish. The weekly and monthly Woodie’s are still in downtrends but are moving steadily toward the zero line. On the monthly op-ex candlestick chart note the bottoming candle with high volume.

    4. The Sunday feed of Seeking Alpha market currents writes

    9:43 PM “The 21st Century may be American after all,” writes Ambrose Evans-Pritchard. “Re-inshoring” – the process of jobs lost to China coming back – is a new buzzword as U.S. manufacturing has subtlety become very competitive. Additionally, the country is closer to energy self-sufficiency than commonly believed, and about to get more so. Toss in the best demographics of the major economies and the continuing EU troubles, and it’s advantage America.

    Couldn’t agree more. Buy America and go away.

    5. From a contrarian point of view, the major thing the SPX has going for it is all the fear and negative sentiment, which I think, as I speculated previously, soon disappear.

    6. Nov is seasonally bullish. We have the Europeans on Wednesday and the Fed meeting in early Nov, both of which will probably cause volatility but in the end we should see bullish reactions. The Europeans have no choice but to get their act together and it is seeming increasingly likely that the Fed will do some form of QE with mortgages, both of which should amplify seasonally bullish tendencies.

    7. IWM broke consolidation range–here and with AA, the breakout remains bullish until proven otherwise.

    8. Financials as a whole have had 3 up days in a row. (BAC 1 day.)

    9. Gut feeling? Some consolidation Oct 26-28  to alleviate overbought conditions, however, the overbought conditions might get overwhelmed by money rushing in.

    10. Seriously considering going long GLD…

    This entry was posted in AA, BAC, financials, GE, GLD, IWM, SPX and tagged , , , , , , . Bookmark the permalink.

  • 22 Oct 11

    Posted on October 22, 2011 by Administrator

    1. Had to liquidate my RUT iron condor position at a loss as the RUT made its surprising rally. What’s irritating is the institutions jumped in about 3 hours after I made the play. What’s also irritating is that the whole position… well, the blunt fact is it went against my carefully made trade plans (below) and I got greedy and don’t like sitting on my hands and like an idiot violated my own plan. Mathematically when I made the trade, it was a sound trade, but the end result is I lost my Sept profits. Lesson? STICK TO THE FRAKKIN PLAN.

    2. This week saw institutional follow-through after a brief dip. After the first dip (which I watch for on the CCI), mortgage the farm. We should see a good rally now. Yes indeed, I’m very bullish and I think the Company will make some nice profit…

    3. The Company is now long AA, BAC, C, and GE, all with Mar/Apr options OTM.

    4. GE was purchased primarily because it has almost a 100% correlation with the SPX and so is an economical way to invest in the SPX. The earnings report yesterday generated a drop but I think this is temporary, as the company is sound. Generally the market will have a knee-jerk reaction to news and then, a day or two later, begin moving in the opposite direction. This pattern manifests itself almost universally and I believe it will be the case with GE. If this talk of leverage with GE sparks a sell-off then I will be annoyed an cut my losses, but I doubt this will be the case.

    5.GE S&P profit target 1 yr=24. I’m holding Mar or Apr options (I forget) with the expectation of liquidating mid-Dec unless I see some reason not to. My target is 18-19, which will generate a good profit. GE has about 35% of Company assets.

    6. AA has been on my shopping list for a while. We saw a huge surge in buying one day this week, and there is also one case of insider buying. I’m holding Mar or Apr options (I forget) with the expectation of liquidating mid-Dec unless I see some reason not to. My target is 12. AA has about 50% of the company assets.

    7. BAC has about 15% of the Company assets. I’m holding Mar or Apr options (I forget) with the expectation of liquidating mid-Dec unless I see some reason not to. My target is 8-9. There is all this bad talk about BAC and the tainting touch of Buffett, so is the company’s CEO (me) insane? No, I expect some volatility in the stock and could liquidate at any time with a good profit. But note financials will rise with any rally. If we’re going to see a rally, BAC will rise in sympathy with the SPX. Also note, fair value for the company even in a very bad scenario (which I’m not sure we actually have) is 10-14 depending on how you calculate it. But most importantly, the Fed has demonstrated they will not allow big banks to fail, and has allowed BAC to shift bad Merill derivatives into a shell company. This is a key detail which should not be overlooked. Some idiotic essay on Seeking Alpha said “Is BAC Preparing for Chapter 11?” which I didn’t even bother to read because of the sheer stupidity of the hypothesis. The Fed has shown very clearly that the megga-banks will not be allowed to fail. This is also a key consideration.

    8. Short US$ COT is at a big big high which means the SPX should be having a big big rise.

    9. The Euro… there’s a lot of talk in Europe. It’s what they’re good at. But in the end the euro and European banks will be propped up. That’s just plain obvious. They might jaw about it for a month but there is no other choice but to prop the system up. The question is will there be a dilution of the euro, and would that result in a strengthening of the $, which could blunt an SPX rally.

    10. The Baltic index is up. Bullish, very bullish.

    11. I think the gloom and doom talk is going to evaporate pretty quickly and all the money on the sidelines is going to jump in. Like I said, I have a general plan to liquidate mid-Dec, this is a very high-probability seasonal play.

    12. I’m getting a bit bullish on GLD and SLV primarily because of the drop in the dollar.

    This entry was posted in AA, BAC, dollar, euro, GE, GLD, RUT, SLV, SPX and tagged , , , , , , . Bookmark the permalink.

  • 22 Sept 11

    Posted on September 22, 2011 by Administrator

    1. Liquidated TZA before Bernanke’s speech because I wanted to minimize event risk. You can imagine I’ve thought a few times about how much money I would have made if I’d held it. 9.1% including commissions.

    2. Liquidated EUO today 66.30% profit.

    3. Bought AA, GE, XLF, F, EWG, EWL near the bottom of the trading range today.

    4. My thinking here is that support is being retested but will hold. If it doesn’t, I have reserved enough cash to jump in with TZA to hedge.

    5. These trades may be swing trades or may be long term. Generally after a big news event, the market has a knee-jerk reaction, and then reverses itself. I am thinking the market will do so here. Also with many of these stocks I am thinking they will rise up to fill the gap. Nevertheless these are also stocks I wish to hold long term, at least through January. My fractals and seasonal patterns as well would suggest a good rise mid-Oct to Jan. The question here, of course, is is this bottom going to hold? Impossible to say, but I think so.

    6. I do not think the euro is done with its decline, or the dollar with its rise, however I think the quick profits have been made. There may be some catastrophe in Europe and I’ll kick myself for liquidating EUO, but I doubt it. I think we will see a slow orderly unwinding of the euro and a slow orderly rise of the dollar. Operation Twist notably has no direct increase in the monetary base and people need a liquid safe haven for their money. Funny but it’s turning out to be the dollar.

    7. As remarked previously with EWL and EWG, weaker currency will mean stronger stock markets.

    8. As remarked previously, blue chips AA GE F are my current alternative to gold.

    9. XLF–I have remarked several times that I think the problems of the American financial sector are grossly overstated and certainly pale in comparison to Europe. Indeed our financial sector is in pretty good shape compared to previous years. I see the financials as grossly undervalued.

    10. I would have bought BAC but Warren Buffet seems to have tainted it. The fundamentals don’t matter here; what matters is investor emotion. The last few companies he has “bailed out”… well, it’s been a Midas touch for Buffet anyway.

    This entry was posted in AA, dollar, EUO, euro, EWG, EWL, F, trade system, XLF and tagged , , , , , , , , , . Bookmark the permalink.

  • test #1

    Posted on August 24, 2011 by Administrator

    Back from sunny Thailand.

    RUT/SPX/NDX

    1. We seem to have survived test #1 of Aug lows with our capital more or less in tact. It’s not 1929 and I find much of the hysteria in the financial media to be overblown. Buffet for one is buying and insider buying has increased dramatically. Warren Buffet remarked that he has recently done the most buying in a couple years. I am always inclined to follow Buffet’s lead. Also if you read the prognostications from experts like Faber, etc, they are getting fairly universally gloomy. As a contrarian this is my signal to be bullish… though not quite yet… Buffet’s words of wisdom: “Believe in America.”

    2. As discussed previously, I anticipate1-2 more tests of this same level, or higher lows, through October most likely.

    3. Seasonal patterns suggest a low in Oct. McClellan’s eurodollar fractal supports this. We may have seen lows for the year, however, barring some news event (which is by nature unpredictable).

     

    Gold

    1. The chart at the moment (after hours Tues) looks to have topped, from strictly a charting perspective. However gold has had several fake tops only to bounce higher. Don’t try to chase gold, and as long as real rates remain negative, gold will continue to inevitably appreciate.

    2. I see a sell-off as somewhat inevitable from a contrarian point of view. Everybody, including all the talking heads on CNBC, say buy gold. This should be a topping signal and a signal to sell. Indeed if I was holding gold right now, I would be waiting for one very high volume sell-off day before I liquidate. This is because more of the sheep are starting to move in and naturally I would be keen to fleece them. However once again gold has had too many fake moves, too risky either way.

    3. In place of investing in gold, which is too high risk at the moment, I am looking to acquire cheap blue chips such as AA, XOM, F. Not touching gold with a 10-foot pole. Could crash any day, could continue rising. Who wants uncertainty like that.

     

    BAC

    1.  I find the hysteria surrounding BAC to be completely overblown. As long as they continue to liquidate non-core assets and generate revenue, they are a sound megga-bank.

    2. The financial sector as a whole is in a bit of a hysterical state (eg recent news surrounding GS).

    3. I hope BAC has a big tumble, if so I will buy the stock outright rather than options.

    4. The financial sector is an incredible long-term value play at the moment.

     

    Swiss Franc

    1. The franc’s rise has been halted by the SNB.

    2. Bear flag forming.

    3. Speculation the SNB wants a peg CHF 1.2/EUR. I have not yet had a chance to read today’s Financial Times, there may be news about this, however this may be talk simply to spook traders, which would probably have the desired effect of a roughly CHF 1.2/EUR valuation.

    4. Been holding FXF puts for Sept. My ideal level would be $0.9, my profits would be astronomical then, and this might actually happen if there is sufficient panic, which I think a big leg down could produce. A more conservative profit target would be $1 or $1.1. I will decide how to take profits when I see how the franc behaves. My initial trade plan was to hold through Sept op-ex or $.09 but we’ll see.

     

    Capital Preservation

    1. If the Swiss franc and gold and silver (and certainly not platinum or palladium) are not safe vehicles for capital preservation, then how to hold cash?

    2. PRPFX (permanent portfolio, though note they are exposed to gold)

    3. Canadian dollar? Need to investigate further.

    4. Norwegian or Swedish currency holdings eg FXS. Need to investigate further.

    5. Australia’s dollar is too exposed to the economic whims of China which I see as risky at the moment. Same goes for Singapore, too exposed to China.

    This entry was posted in BAC, FXF, GLD, gold, GS, LIBOR, NDX, palladium, permanent portfolio, platinum, RUT, silver, SPX, Swiss franc and tagged , , , , , , , , . Bookmark the permalink.


  • PLEASE NOTE

    We are not day traders. We trade options with a 1-3 month window. Our discussion here reflects this.

  • The Cloud

    /SI AA BAC Bank of America C Citibank Copper COT CRB dollar EUO euro Eurozone crisis EWG EWL F financials FOMC FXF GE GLD gold GoldMoney GS Hang Seng ichimoku iron condor IWM NDX oil PALL palladium platinum QE3 RUT S Shanghai Composite silver SLV SPX Swiss franc TZA UUP XOM ZSL

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    "I'm a great believer in luck, and I find the harder I work the more I have of it." --Thomas Jefferson

    "Markets are constantly in a state of uncertainty and money is made by discounting the obvious and betting on the unexpected." --George Soros

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    "War was where a brave man found his truest sense of life." --Guy G Kay, Lion of Al Rassan

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  • Philosophy

    Our basic theory of investing is that markets are chaotic, in that prices are not necessarily an efficient reflection of value; rather, prices of assets depend largely on the emotional reactions of traders who buy and sell them.

    We generally trade options to minimize capital risked. Our primary aim is to preserve our capital. We trade with a 1-3 month window generally; we focus on the macro picture and are not interested in hourly movements or short term trades.

    Opportunities can be found by carefully studying value; by this we mean both undervalued (buy calls) or overvalued (buy puts).

    Psychology is predictable and pattern-based. People are very slow to change. Thus in the markets, history often repeats itself, and the market can be predicted by carefully studying past performance, including correlating the performance of other asset classes or other markets; this is the repetitive geometry of markets. Patterns tend to replicate across or between assets, asset classes, and time frames.

    If everybody on Wall Street is saying something, it's probably wrong. We are contrarians.

    We generally advocate heavily concentrated positions in which we are extremely confident, rather than wide diversification.

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