Trading Is A Mind Game

"Without a proper mental approach to trading, someone trading a “Holy Grail” system could produce mediocre results or even large losses." - Van K Tharp

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Looking Forward To This One.

As you know I am a Ferrarista but I have to say...I love this Porsche Carrera too. And it has a plus, its a 2+2 seats so I will be able to "fit" Enzo in when he is 6 or 7. :)

I am in that SUV, Jeep, big family car phase of my life. But I am looking forward. Again.

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The Difficulty In Trading Lies Not In The Concepts But In Their Application

Human emotion is both the source of opportunity in trading and the greatest challenge. Master it and you will succeed. Ignore it t your peril. - in Way Of The Turtle

If you want to learn a thing or two about trading or how to be a trader this is a book for you. I will be exploring and discussing it here over the next few days. The difficulty in trading lies not in the concepts but in their application. It is not too difficult to learn what to do when trading. The hard part is to really apply those lessons in actual trading while dollars are coming in and out of your trading account.

Have a great day!

PS: I am eyeing American Express (AXP) and Electronic Arts (ERTS) to short some calls. I think the upside is limited but they may not roll over completely;

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American Express (AXP) Looks A Bit Exhausted

American Express (AXP) has rallied for 7 straight sessions and hit resistance on the 50-day SMA:

It may be an interesting play for a naked short Calls trade as I see limited upside from here.

Have a great day!

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Quality Defined By Henry Ford

It seems like its Henry Ford`s day here. Another fantastic quote,

"Quality means doing it right when no one is looking." - Henry Ford

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Quote Of The Day: Henry Ford

Failure is simply the opportunity to begin again, this time more intelligently. - Henry Ford

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Self-Discipline.

A particular useful quote for traders:

"If I want to be great I have to win the victory over myself... Self discipline." -Harry S Truman

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Commodity Prices Seem Much Too High As Economic Growth Is Slowing

“Commodity prices seem much too high as economic growth is slowing. Over the past three years, all commodities have touched historical highs. The most recent high seen for Gold, in August, was sparked by forex fears. Oil prices used to be very sensitive to US growth, but things are different this time, as emerging market demand partly outpaces that of the US, maintaining global oil demand at high levels. But, now the surge in Gold suggests that markets are looking for safe haven investments, as was the case in the 1930s and the 1970s. Hence, financial markets begin to doubt that the current forecast for global growth of 4% pa is sustainable, thus, commodity prices seem much too high at this stage of the economic cycle.” - in a Societe Generale strategic note

Related: United States Oil Fund (USO), SPDR Gold ETF (GLD)

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A Greek Bank Run In Slow Motion

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Funny Pic: Stock Market Rollercoaster

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Do Americans Care About The Stock Market?

Here`s a provocative thought/ fact:

"Basically 51 percent of Americans own 0 dollars in stocks. That already is a majority. However, if you factor in those that own equity worth 1-10,000 dollars, the amount of people with little/no Stock exposure or ownership jumps to over 68 percent! That my friends is a super-majority. And dont forget, these stats are from 2007 which was obviously before the 2008 Market Crash, 2010 Flash Crash, and 2011 Debt Crises, which we all know helped scare out more people from the markets." - in TheArmoTrader

Related: General Electric (GE), Citigroup (C), Bank Of America (BAC), Wal-mart (WMT), Ford (F), Apple (AAPL)

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Hurricane`s Impact On Prices Is Minimal

"The hurricane's impact...appears to be minimal. Gasoline and distillates stocks were in good position to handle whatever Irene had in store for the market." - in the Schork Report

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Is Natural Gas Making A Bottom?

Natural Gas futures have been trading down for the last few months to new lows. Nymex Natural Gas Futures (DEC) are trading at 3.88 as I write. There are a few arguments going for a long position at these levels. First of all, seasonality is bullish as we can see in the chart below:

The chart has been trading along with the seasonal trends for the last couple of months as we can see here:

Recently, Jeffrey Gundlach also mentioned he was bullish on Natural Gas. I can`t recall exactly where NatGas was trading when he made the call but it was a lot higher than it is now (perhaps in the mid 4`s). I highly respect his market views and I consider him to be the smartest manager around. So that`s another plus for this trade.

While being long is the natural trade, selling United States Natural Gas Fund (UNG) puts also looks a very interesting proposition. I will expand that idea on future posts.

I am smelling a good trade.

I will leave you with a fantastic sound:

Related: United States Natural Gas Fund (UNG)

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Surprise 2.2 Million-Barrel Decline In Commercial Oil Inventories

"The Department of Energy posted a surprise 2.2 - million-barrel decline in commercial oil inventories last week in its 10:30 a.m. EDT report. The decline came on the back of higher demand from refiners, who ramped up operations by 1.2 percentage points to 90.3% of capacity." - in WSJ

Nymex Oil Futures (Oct) are trading slightly up in a narrow range trading session.

Related: United States Oil Fund (USO), Valero Energy (VLO), Western Refining (WNR)

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Gundlach: Stay In Low Risk

Interesting comments from Gundlach earlier this week,

”Stay in low-risk. Do not think a small drop in risk assets is a tremendous buy opportunity.” - Jeffrey Gundlach

Everybody likes to listen to Bill Gross but this guy is the very best in the bond complex.

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Inventory Data: Market Consensus

"Analysts estimate crude inventories last week rose 1.3 million barrels, according to a survey by Dow Jones Newswires. Gasoline stockpiles are seen falling 900,000 barrels, while inventories of distillates are seen climbing 700,000 barrels." - in The WSJ

Related: United States Oil Fund LP (ETF) (NYSE:USO), iPath S&P GSCI Crude Oil Total Return (NYSE:OIL), Energy Select Sector SPDR (ETF) (NYSE:XLE)

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Petromatrix: Bad News Is Good News

"The macro-economic data continues to deteriorate but three days before Jackson Hole this is considered to be positive as it increases the faith that Bernanke will hint at a third round of quantitative easing." - in a Petromatrix research note

Related: United States Oil Fund LP (ETF) (NYSE:USO), iPath S&P GSCI Crude Oil Total Return (NYSE:OIL), Energy Select Sector SPDR (ETF) (NYSE:XLE)

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Overbought, Buying Madness, Bubble. Call It What You Want.

The labeling is pointless. Gold is coming down soon and fast.

A long term and a medium term perspective on the speculative frenzy:

Related: SPDR Gold ETF (GLD)

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Mobius: We Are Bouncing Along The Bottom

“At this point, I do think we’re bouncing along the bottom. For us in equities, it’s particularly good because people will eventually realize that to beat inflation that’s coming as a result of this higher money supply, we’re going to have to be into equities.” - Mark Mobius, Templeton

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Brilliant New York Post Cover

The market will gap up and this will probably be a bargain hunting week on Wall Street. A kind of rebajas week.

Have a great day!

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A Bigger Perspective: A 3-Year S&P 500 Chart

The S&P 500 Index (SPY) is down for weeks in a row. There`s big support in the 100 - 102.50 on the SPDR S&P 500 Index ETF but being down 4 weeks in a row we can have a pullback before retesting those support levels.

Ben Bernanke will make his Jackson Hole speech on Friday. But I don`t think that much of anything will come out of that. Anyway, with 4 trading sessions for that key speech, we will have some pretty violent swing with such an oversold, panicky market. Feels a bit like 2008, there`s no doubt about that. But history rarely repeats itself...

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Art Cashin: Europe Is Going To Continue To Drive This Bus

"Europe is going to continue to drive this bus and we should be worried about any new things there. And the bus driver is Germany, which he said is "damned if they do and damned if they don’t. It’s now almost solely up to Germany to bear the full financial burden for the European bailout. That’s a very expensive proposition.

If they fail to do it and the euro zone disintegrates, then they will be stuck with the Deutche mark again, which will go up and kill their export business. So either side of this problem is going to be tough on their economy." - in cnbc.com

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Fantastic Research Piece On Gold

Cullen Roche wrote a masterpiece criticizing the hyperinflationists like ZeroHedge and Peter Schiff. He has a very well documented thesis and thinks gold is in bubble land. I totally agree:

"I’ve built all of this into my reasoning for thinking that gold is entering an irrational bubble. And I believe one of the primary drivers of this inevitable bubble is this misconception that the USA and the Federal Reserve are the primary causes of inflation and gold prices. The reason the hyperinflation theory in the USA has been so wrong (aside from misunderstanding how the modern monetary system works) is because the hyperinflationists have misunderstood the actual cause of their inflation worries. They’ve no doubt been right (in terms of gold), but they’ve been right for the wrong reasons. In my opinion, it is not the “central planning” of the USA that is causing this fear trade. Rather, the true fundamental driver is the Central Bank of China.

The key for investors will be understanding the point where the gold market reaches disequilibrium based on these misconceptions (the Euro crisis and the Fed contribute significantly to this misconception) and undergoes the inevitable collapse that always follows a bubble. I personally don’t think we’re there yet. In the meantime, when someone points to the Fed, the US government and their “central planning” or “money printing” as the primary cause of the surge in the price of gold and justification of their USA hyperinflation theory, you might do them a favor and let them know that they’re right about the flaws of “central planning” and excessive “money printing”. You just might want to also let them know that they’re focusing on the wrong central bank." - in The Prag Cap

Read the full article (with graphs) here: DO GOLD PRICES CORRELATE WITH U.S. INFLATION?

Related Tickers: Related: SPDR Gold ETF (GLD), Newmont Mining (NEM), Barrick Gold (ABX), Novagold (NG), Goldcorp (GG), Anglogold (AU), New Gold (NGD), Freeport McMoran (FCX)

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Morgan Stanley Cuts Global Growth Forecasts: Sees Recession Threats

"Morgan Stanley slashed its global growth forecast for 2011 and 2012, saying the U.S. and the euro zone were "dangerously close to a recession", and criticized policymakers in Washington and Europe for not acting more decisively to contain the sovereign debt crisis." - in CNBC

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Quote Of The Day: "Screw Loose"

“Great investors tend to have a 'screw loose,' pursuing the game not for profit, but for sport.”
- David Swensen

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Trading Desk`s Buzz

"Although debt issues mainly across Europe and the U.S. continue to dominate much of the economic headline space, the oil complex is preoccupied with connecting the dots between downsized economic growth expectations and a reduction in oil demand forecasts across this year and next." - Jim Ritterbusch at Ritterbusch and Associates

Related: United States Oil Fund (USO), Exxon Mobil (XOM), ConocoPhillips (COP), Marathon Oil (MRO)

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NYMEX Oil Is Rallying On Globex. Should We Fade The Move?

Oil is rallying 1.50 dollars per barrel pre-market. I see limited upside for the rest of the session and a very decent probability of a new test around 87.50.

Stock futures are trading higher and I have to say I am bit surprised with the early strength. Let`s see what the session will bring.

Have a great day! (Related: United States Oil Fund (USO))

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Oil Futures: V Shaped Session

Oil Futures were threatening a break on the downside right before the regular session open. That low was rejected and oil is now trading at 8770, more than 200 ticks away from the intraday lows. Oil futures have been trading weaker than stocks for most of the day. I have a bearish outlook for the rest of the session.

Related: United States Oil Fund (USO), Exxon Mobil (XOM), ConocoPhillips (COP), Marathon Oil (MRO)

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Quote Of The Day: Howard Schultz, Starbucks

Related: Starbucks (SBUX)

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Eurozone Crisis Taking The Stage Again

It`s all about Germany slowing down fast and euro politics this morning on the trading desks. The Eurozone Mess is again the main driver of this erratic market:

"The German economy slowed between April and June to its weakest quarterly growth rate since 2009, fueling concerns about an European economy already weakened by a credit and debt crisis. German stocks fell 2.6 percent." - in Reuters

Other notes of interest, Wal-Mart (WMT) just reported its earnings and raised guidance. I will be looking to buy Wal-Mart (WMT) on weakness going forward.

I will leave you with a fantastic joke, "What do you do when you miss your wife? Reload and shoot again." (Pippa, if are reading the blog today, don`t worry - I love you :))

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Quote Of The Day

Discontent is the first necessity of progress. - Thomas Edison

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Bearish Economic Data

The economy seems to be contracting and today we got another bearish data point:

"A gauge of manufacturing in New York State showed the sector contracted for the 3rd month in a row in August, as new orders fell to their lowest level since November 2010.

The New York Fed's Empire State general business conditions index fell to negative 7.72 from negative 3.76 the month before." - in CNBC

Have a great day!

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Gundlach: Its Not Really A Downgrade Of U.S. Bonds, It's A Downgrade Of The U.S. Dollar

"What happened on Friday, in my opinion, is not really a downgrade of U.S. bonds, it's a downgrade of the U.S. dollar.

What they're worried about is that what you're going to get in terms of the payback is going to be worth a lot less. But that is not their job.

Standard & Poor's is looking at the risk of print and pay. But what they are supposed to be focusing on is the probability or the wherewithal to pay. The payback ability of the United States is absolutely, positively 100 percent—they just run the printing press." - Jeffrey Gundlach, Doubleline Capital

Related ETFs: ProShares UltraShort 20+ Year Trea (ETF) (NYSE:TBT), iShares Barclays 20+ Yr Treas.Bond (ETF) (NYSE:TLT), iShares Lehman 7-10 Yr Treas. Bond (ETF) (NYSE:IEF)

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Quote Of The Day

“So many people want the positive rewards of being a successful trader without being willing to go through the commitment and pain. And there's a lot of pain.” - Bill Lipschutz, hedge fund manager

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A Few Market Views On The US Downgrade

A few interesting market views on the S&P downgrade and how markets will be reacting in the near future.

Have a great day!

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PIMCO's Bill Gross on The U.S. Credit Downgrade & ECB Bond Purchase Program

Gross on the ECB bond purchasing program:

"What Trichet has spoken to tonight and on Friday was that they would implement a significant bond purchase program for Spain and Italy...We're expecting $2 billion to $3 billion a day in terms of ECB bond purchase. How many days and weeks that continues, I am not sure. They might eventually have an actual interest rate target in mind. We are not sure of that either and they probably won't divulge it."

On the response in Asia and Europe to the U.S. debt downgrade:

"I think overall the most important impact will be from a currency standpoint. We're not seeing that tremendously tonight in terms of the dollar, but when you put the pieces together, the ECB action in terms of supporting euro land, when you look forward to the next few days in terms of the Fed and what they might do to ease interest rates to a certain extent, those in combination - in addition to S&P's downgrade that speaks to the longer-term vulnerability of the United States - Put all that in a package and it's the dollar more than anything that is vulnerable on the downside."

On whether other countries will be downgraded after the U.S.:

"To the extent that France or some of the inner core of Euroland become vulnerable with their AAA, then it becomes a successive waterfall on the way down…To the extent that the U.S. and other liquid AAA countries such as Japan, France, Germany, Canada, Australia, to the extent that some of those are vulnerable, then there's little room to maneuver.""The U.S. at AA+, does it make a difference? Perhaps 10-15 to 25 basis points immediately."

Have a great day!


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Globex Markets Opening After The S&P US Downgrade

Markets are just opening after the S&P US downgrade. S&P Futures are down 29 points but forex markets are rather quiet. EURUSD for example is only up 0.4%.

There are also some important developments coming from Europe, with the ECB issuing a press release on the bond buying program. So while we will most certainly have a down gap in US equities, I am not expecting a panic mode market.

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The Week In Numbers. The Indexes Were Hard Hit.

For the week, the Dow falls 5.8 percent, the S&P is down 7.2 percent, Nasdaq is off 8.1 percent:

Today we beat the flash crash volume on the $SPY by a few million, it was the biggest volume since 2008...

In a pure contrarian move I went long on the mid day dip. So far, so good. As I was preparing myself to fade the sell-off and go long I had Twain`s quote on my mind - "I was seldom able to see an opportunity until it had ceased to be one." - Mark Twain's Autobiography

Related: SPDR S&P 500 Index ETF (SPY), PowerShares QQQ Trust, Series 1 (ETF) (QQQ), SPDR Dow Jones Industrial Average ETF (DIA), iShares MSCI Emerging Markets Indx (ETF) (EEM)

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Markets Still Very Volatile. I Think We Will Rally Next Week

I think a short term bottom was reached earlier today. I expect markets to rally next week and I am long the indexes from lower levels.

Have a great weekend!

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Dax Futures Trading At 6150. That`s Too Much.

We are probably making a short term bottom in the Dax Futures. Dax Futures are trading at 6150. Down another 250 points on the session... That`s too much!

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Crazy Action Today. And It`s A Friday In The Peak Of The Summer...

Nobody writes about the usual summer doldrums these days. We sprint 10 points in the eMini Futures every 15 minutes or so. Crazy, crazy action.

But the volatility is mostly in stocks...commodities and forex markets are relatively quiet today.

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Futures Have Completely Reversed. Now Down 12 Points. What A Market!

When we think volatility will come down a bit and markets will snapback, we have another big downside reversal. Pretty crazy action and it`s only 25 minutes into the trading session!

What else can we expect this week?

I am watching gold. It`s not spiking on the risk sell offs. Maybe it`s beginning to roll over.

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We Can Have The "Mother Of All Short Squeezes"

Well, well, well. This summer keeps getting more and more interesting... We now have a better than expected Employment Report in a insanely oversold market. This can turn out to be the mother of all squeezes.

I will drink my Sugar Free Red Bull and I will sit tight. It will be a busy trading session!

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Bill Gross: Economy Is At The Tipping Point Of Recession

Bill Gross gave his outlook of the US economy and as expect it isn`t too bright:

"We are at what we call a stall speed, in which corporate profits don’t grow, jobs aren’t created and therefore the economy sinks.” Bill Gross, PIMCO, in Bloomberg Television

Of course markets are insanely oversold and a violent rally will occur at any time now. Dr. Marc Faber has a similar view,

There is a case to be ultrabearish about everything, and markets are going to go lower, (but) markets are "extremely oversold" and I expect a "snap-back" rally in the U.S. Standard & Poor's 500 Index of about 40-50 points. - in Bloomberg, August 5

Hildebrand, SNB`s chief also drew a line in the sand regarding further swiss franc appreciation:

"I will not accept a further franc appreciation without acting" in NZZ newspaper

Have a great day!

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Evidence 2. Gold Is Way Too Expensive.

"On March 6th 2009, the SPX made its intraday low of 666. Gold on that day was $965. Thus, the S&P 500 bought .69 ounces of gold. Today, At the high of gold intraday today and the low of the S&P’s, the S&P 500 bought .72 ounces. Therefore, in gold terms and/or in REAL terms as opposed to NOMINAL, today’s action in the S&P 500 has us basically back to the March ’09 low." - in Ritholtz

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Interesting Chart: Gold vs Corporate Earnings

In the midst of all this turmoil, here is a long term chart.

Global equities are the cheapest on record relative to gold, bolstering the case for investors to buy stocks and sell the precious metal even as economic growth slows, according to Citigroup Inc.

Just as a side note, 1208 is probably today`s low in the futures.

Related: SPDR Gold ETF (GLD), SPDR S&P 500 Index ETF (SPY)

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Volatile Markets, Fast Moves & Opportunity

For those who love volatile markets and fast moves this has not been a disappointing summer. We have a little bit of everything, from a Washington generated crisis to large scale foreign exchange market interventions by central banks.

Normally these markets create lots of opportunities but it`s also quite easy to get carried away.

There are a few stocks that are screaming buy. I will take a look at a few defensive names.

Procter & Gamble (PG) is down 9 sessions in a row:

Merck (MRK) is down 9 sessions in a row:

Exxon Mobil (XOM) is down 8 sessions in a row:

On the japanese yen intervention, I checked that in March (last time the BoJ intervened in the forex markets) the USDJPY rallied about 900 pips in 17 trading sessions:

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Japanese Traders On The BoJ Intervention.

Here`s the japanese trading desks reaction to the BoJ intervention in the forex markets:

“They may continue to intervene until the yen weakens beyond 80” - Koji Fukaya, chief currency strategist in Tokyo at Credit Suisse

“It was the right timing to step in, given concerns among manufacturers. After Switzerland’s action, there was a risk that the yen would’ve extended gains alone. So, it was good Japan intervened.” - Masahide Tanaka, a senior strategist in Tokyo at Mizuho Trust & Banking Co.

Have a great day!

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After The SNB Here Comes The BoJ. Intervention Time In The Forex Markets.

A few hours ago the Bank Of Japan intervened in the forex markets sending the Yen sharply lower. Yesterday the Swiss National Bank also intervened to weaken the Swiss Franc. While SNB`s success was limited to about 7 hours, it seems this Yen intervention will keep the Yen and the Swiss Franc down for a while...

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The Stock Market Has Far More Short-Term Countertrends Than Commodities

“The stock market has far more short-term countertrends. After the market has gone up, it always wants to come down. The commodity markets are driven by supply and demand for physical goods; if there is a true shortage, prices will tend to keep trending higher.” - Bruce Kovner, hedge fund manager

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Gold ETF (GLD) Gaps Past Bollinger Bands. That`s Too Much Isn`t It?

While everybody knows that gold is overbought few are calling for a move lower. One exception is the perma-gold bull, Dr. Marc Faber. He is expecting a 10 percent correction in the yellow metal.

I was scrolling over a few charts and the SPDR Gold ETF (GLD) really caught my eye. GLD just gapped through the upper bollinger band...that is too much. We will see lower gold prices in a time window that may range from a few hours to a couple of days.

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A Blood Bath In Stocks, SNB Lowers Rates

The day is just starting but there`s a lot of things to cover today. It`s turning out to be one of the most exciting summers in years...

The Dow Jones Index (SPDR Dow Jones Industrial Average ETF (NYSE:DIA)) has traded down for the last 8 consecutive sessions equalling its worst streak in late 2008 (many are establishing parallels between now and 08) creating lots of opportunities to play the market on the long side. McDonald's Corporation (NYSE:MCD), The Procter & Gamble Company (NYSE:PG) are down 8 sessions in a row and Wal-Mart Stores, Inc. (NYSE:WMT) is down seven in a row.

These stocks are good swing plays for a 2 to 3 day rebound. Institutional players will be looking for these blue chips, dividend paying stocks as soon as the market stabilizes and things are not looking bad today for that reflex rally. Pre-market risk metrics are positive and a good indication for a move higher.

As a more risky play, Nvidia (NVDA), looks poised for a move higher. It showed excellent relative strength in the last 2 trading sessions:

On other topic, the Swiss National Bank lowered interest rates to curb the swiss franc recent surge. I am playing that one, I bought USDCHF on yesterday`s out-of-control upmove. So far so good. (read yesterday`s posts on this subject: What Will The Swiss National Bank Do? and Goldman Sachs: US Dollar Outlook)

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The Quote Of The Day Goes To...Ron Paul

This is akin to a family “saving” $100,000 in expenses by deciding not to buy a Lamborghini, and instead getting a fully loaded Mercedes, when really their budget dictates that they need to stick with their perfectly serviceable Honda. But this is the type of math Washington uses to mask the incriminating truth about their unrepentant plundering of the American people. - Ron Paul

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Goldman Sachs: US Dollar Outlook

"Beyond the risk of a short squeeze near term, our expectation is for USD to continue weakening on a broad basis." - Source: Goldman Sachs

Related: SPDR Gold ETF (GLD), IShares Silver ETF (SLV)

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What Will The Swiss National Bank Do?

I mentioned a swiss franc play earlier today, here`s an interesting article on the SNB`s options to offset the rising currency: Will the Swiss Central Bank Intervene Again?

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Meredith Whitney: Housing Double Dip Putting Enormous Pressure On The Economy

"Our GDP number on Friday was an indication that states and local governments, which make up 12 percent of GDP, are really pulling back. We’re certainly in a double dip on housing, which is putting enormous pressure on the economy." - Meredith Whitney, in CNBC

Related stocks: Lennar (LEN), DR Horton (DHI), Pulte Homes (PHM), Toll Brothers (TOL)

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Fear. A Few Trading Ideas.

There`s a lot of fear and anxiety in the markets, this time from both sides of the Atlantic. On one hand we have the debt ceiling still hanging in the markets and a real sovereign debt crisis in Europe (Spain and Italy are under pressure now).

So, where is the money now? I see a few opportunities in this environment but they are all very risky. One of them is to short the "ultra strong, rallying-every-day" swiss franc the other is to short gold (only for the very, very brave)... There is probably a bit more downside in oil, but with the big WTI-Brent spread it`s a lot harder to trade oil these days.

What a volatile summer we are having.

Related: SPDR Gold ETF (GLD)

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Krugman: The Debt Deal Will Take America A Long Way Down The Road To Banana-Republic Status

Here`s Paul Krugman`s reaction to the debt deal. Not very encouraging at all,

“It will damage an already depressed economy; it will probably make America's long-run deficit problem worse, not better; and most important, by demonstrating that raw extortion works and carries no political cost, it will take America a long way down the road to banana-republic status,” - Nobel Winning Economist Paul Krugman, in NYT

Equity Index Futures are still trading up but near the Globex lows. It will surely be an interesting session.

Have a great day!

Related: SPDR Gold ETF (GLD), SPDR S&P 500 Index ETF (SPY)

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