The market sold off in another spectacular fashion today, once again reiterating that the BEARS are in firm control of this market. There is much chatter of gloom and doom and of the proverbial "Black Monday". Yes, the sub prime market is a concern and the implications from this soon to be fall out will reverberate throughout the country and possibly the world. But we aren't there yet. There is too much chatter and noise of the death of this economy, and many prognostications that next will be the week that all "hell" breaks loose, one for the history books. Well, if only the markets were that obvious. The market will determine the right place and time, when it is time, if at all for the Armageddon like crash of the US and possibly global equity markets. It is interesting to see how quickly people have become negative on the market that just one week before, was humming at unprescedented levels.
My take is that we will have volatility along the way. Clearly, it is increasingly clear that this is not a one week wonder "correction". I think Jim Cramer is prognosticating that Thursday and Friday's market behavior was the "whoosh" or the "Crescendo bottom". I think that he is way too premature in declaring that. The fact is no one knows what this market will do next. It is clear that we have broken all reasonable technical levels and are establishing a down trend. But it is too early to call a down trend based on one singular week. Perhaps Cramer is right. I tend to disagree with his position.
I do not think that we will get the "Black Monday" that all the bears are hoping for, including myself (though I am not a bear at heart). I tend to believe that in extreme volatile market conditions, we are more apt to get contrary events, sending the market participants running for the hills in panic. This type of market has the tendency to do that. So what did I do today? I bought, yes I BOUGHT CALLS to play the market opening on Monday. I noticed that Google was extremely weak today and is now technically oversold. For whatever that's worth, I think that we can expect a little "dead cat bounce" next week in the market and in Google.
For the intermediate term, we will experience intense volatility and whipsaw like trading environment. Only the bravest and quickest need to stick around and profit from this environment. As I have said before, just about the only thing that will work as a trade is day trading both the long and short side or going short with puts with at least 3 months of time built into the options.
Google is close to filling the gap at $429. It closed today at $438.68. I believe that as this correction continues, the stock will eventually fill that gap and possible bounce from that level. But my bet on Monday is that it will regain some of the losses encurred on Friday. Easy does it. I have 10 contracts of March $450 calls which I will close by Wednesday if no profit can be obtained. If the market players who are on the sidelines feel that it is safe to once again press to the upside, we should be able to rally past $450 level one more time, before descending to close the gap at $429 level.
I would advise staying in cash however but if you must trade, please trade the long dated puts in your favorite fast movers of the previous bull market run. The basic but not so easy to tenet in this bear market is: SELL THE STRENGTH and BUY THE WEAKNESS and KEEP YOUR TIME FRAME ULTRA SHORT.
I hope everyone is safe and did not incur too much losses this week. It's just been hell.
Friday, March 02, 2007
Thursday, March 01, 2007
Market Bounces!
I thought for sure today would be a repeat of Tuesday with the Dow Futures above 100 and true to form, the market opened with Dow down 200 points. It had the same frenetic pace as Tuesday but surely and slowly, the bottom buyers bid the Dow, Nasdaq, and S&P to positive territory. It ended down today erasing most of the early morning losses. It is days like this that I implore everyone to go to cash. The market volatility was incredible. I began to hear a lot of market pundits proclaiming that the market bottom was near, that the correction was almost over, or that this will not be a prolonged correction. Perhaps they are right. But if you delve deeply, majority of the leadership today was from the oil related stocks and the decliners outweighed the advancers by 2 to 1. That is a negative divergence from what we actually saw in the market today. The short term over sold condition has lead the fearless bottom buyers into buying the dip and totally routed the short sellers today. It was a good day for the longs. But, I continue to remain skeptical about this rally. I am not at heart a bear. I love bull markets that are trending strongly in a strong economy. But I have to listen to what the market is telling me right now. There is no future prognostications on my part. Only what the macro-economic factors are telling along with the what the market did today. That's all. I continue to see a lot of risk in this market. I see a lot of risk in the US economy despite what Ben Bernake says. I do not think that at least in the short term, the economy is as healthy as everyone makes it out to be. I tend to see the point that Alan Greenspan is saying now. I was critical of him for making the "recession" speech. But again, I think the mainstream media took that to the extreme.
In this market, the only thing you can do is to sit in cash or to trade around the volatile bounces. But as an example, today, I lost some money by being on the wrong side of the trade in CME which finished up above $5 today. Live and learn.
Good luck.
In this market, the only thing you can do is to sit in cash or to trade around the volatile bounces. But as an example, today, I lost some money by being on the wrong side of the trade in CME which finished up above $5 today. Live and learn.
Good luck.
Stocks Are Not on Sale Right Now.
Please, do not see this as the sale of the decade. Just look at the continued deterioration of the Asian markets over night. That seems to be the norm these days. Please heed what the Dow futures are telling us as they are down more than 110 and NAS is now down more than 21. It is pointing to another market plunge today. The prudent and sane way to trade this market for the unforseeable future is to short or go to cash. Do not pick up the shares of these seemingly cheap shares. They will go lower.
Short
BIDU, GOOG, RIMM, CME, AKAM, and any Chinese stocks.
Until the market bottoms, this will be my trades. Short and sweet.
Good luck!
Short
BIDU, GOOG, RIMM, CME, AKAM, and any Chinese stocks.
Until the market bottoms, this will be my trades. Short and sweet.
Good luck!
Wednesday, February 28, 2007
NOT YET! A SHORT STORY
I have been watching this market today in amazement. The differing opinion expressed by various gurus and pundits is amazing. What do I think? First, I am not a pundit or a guru.
I think this is the beginning of the correction that I would consider significant. I do not think that the 3% plus plummet that we experienced on Tuesday was the end all be all. The dead cat bounce today was just that, yet, I find in amazement how many people are stating that this was an aberration or a glitch from computers (read Dow Jones). I think that the “glitch” was due to overwhelming urgent need for the institutional investors to get out of dodge. A market does not plummet 400+ points without panic and some underlying ominous reason. As I posted in my prior posts, signs were there that we may be nearing the end of the rally that began back in July 2006. But even earlier, there have been signs that perhaps our economy is not well. Lest you forget, the impact of any economic event and its expression into an actual event has a lag period of at least 6 months. I believe that the economy will now show the signs of housing bubble that has not yet burst. I believe that the real fall out from housing market is just beginning. The subprime mortgage issue will turn into a crisis. We have not seen the mass hysteria that marks the end of the bubble boom in anything from the dot com busts to Tulip bulbs. Housing is no exception. But I do not think that the housing issue alone is responsible for yesterday’s melt down that showed all the complacent investors (including myself) that market risk is alive and real. The issues associated with yesterday’s global sell off in the equity market are multi factorial. This is because at the heart of the problem is China. China is the sleeping giant that dictates and feeds the world equity markets and to a larger extent the global economy. China is the fastest growing emerging economy and in some cases is already a world economic superpower. The relentless growth, demands for oil, commodities, and fledging equity market has lent a strong hand in yesterday’s sell off world wide. But, I also believe that they will be responsible for the continued correction and possible crash in the world equity markets. It may not happen tomorrow, but we are coming closer to the day of reckoning.
Please heed the siren call of caution as we trudge forward in this renewed market. While the previous rally was gradual and steady, I anticipate this corrective phase to also be gradual and steady but full of volatility. I do not think it is the time to be establishing long positions in hopes of getting “cheap” shares. The doomsday has not yet been declared and there is much more blood letting before this correction has run its course. Do not be suckered into the pundits and gurus who proclaim that yesterday’s sell off was an aberration or is a short term phenomenon. We have not had any significant correction since 2004 of 5% or more. I believe that we will have more harrowing days ahead of us.
The technicality of the market has changed. The character has changed from orderly and benevolent to chaotic and malicious. Please consider what the market is saying and act accordingly. The good thing that will come out of this correction is that it will refresh the market for the next phase up, and it will come sooner or later, but I would venture to guess that it is much later than anyone thinks.
How would I play this market? I would recommend those market players that have less than 2 years of experience trading to go to cash and earn 4.5%+ in the money markets and sit this one out. For the more experienced and adventuresome traders (notice I said traders and not investors) I would have a bias toward shorting the market rather than going long. The probability of success is much higher here as a short. Having said that I think one could increase their margins quite successfully by scalping the markets by employing day trading. I don’t like to day trade but when the volatility is this high sometimes I just have to heed the call of the wild.
I still believe that Google (GOOG), Baidu (BIDU), Research in Motion (RIMM), Akamai (AKAM), and Intuitive Surgical (ISRG) is a short. But I like to use puts dated at least 2 months out until expiration and close to the strike price (no farther out than 10%) to short the market. It limits the downside loss potential while shorting with the common downside risk is unlimited. On the same token, due to volatility, going long by employing quick scalping plays can be done on Google, Baidu, Research in Motion, and Apple. I would not use options while doing this but would favor commons here.
Have a good trading day and please be careful!
I think this is the beginning of the correction that I would consider significant. I do not think that the 3% plus plummet that we experienced on Tuesday was the end all be all. The dead cat bounce today was just that, yet, I find in amazement how many people are stating that this was an aberration or a glitch from computers (read Dow Jones). I think that the “glitch” was due to overwhelming urgent need for the institutional investors to get out of dodge. A market does not plummet 400+ points without panic and some underlying ominous reason. As I posted in my prior posts, signs were there that we may be nearing the end of the rally that began back in July 2006. But even earlier, there have been signs that perhaps our economy is not well. Lest you forget, the impact of any economic event and its expression into an actual event has a lag period of at least 6 months. I believe that the economy will now show the signs of housing bubble that has not yet burst. I believe that the real fall out from housing market is just beginning. The subprime mortgage issue will turn into a crisis. We have not seen the mass hysteria that marks the end of the bubble boom in anything from the dot com busts to Tulip bulbs. Housing is no exception. But I do not think that the housing issue alone is responsible for yesterday’s melt down that showed all the complacent investors (including myself) that market risk is alive and real. The issues associated with yesterday’s global sell off in the equity market are multi factorial. This is because at the heart of the problem is China. China is the sleeping giant that dictates and feeds the world equity markets and to a larger extent the global economy. China is the fastest growing emerging economy and in some cases is already a world economic superpower. The relentless growth, demands for oil, commodities, and fledging equity market has lent a strong hand in yesterday’s sell off world wide. But, I also believe that they will be responsible for the continued correction and possible crash in the world equity markets. It may not happen tomorrow, but we are coming closer to the day of reckoning.
Please heed the siren call of caution as we trudge forward in this renewed market. While the previous rally was gradual and steady, I anticipate this corrective phase to also be gradual and steady but full of volatility. I do not think it is the time to be establishing long positions in hopes of getting “cheap” shares. The doomsday has not yet been declared and there is much more blood letting before this correction has run its course. Do not be suckered into the pundits and gurus who proclaim that yesterday’s sell off was an aberration or is a short term phenomenon. We have not had any significant correction since 2004 of 5% or more. I believe that we will have more harrowing days ahead of us.
The technicality of the market has changed. The character has changed from orderly and benevolent to chaotic and malicious. Please consider what the market is saying and act accordingly. The good thing that will come out of this correction is that it will refresh the market for the next phase up, and it will come sooner or later, but I would venture to guess that it is much later than anyone thinks.
How would I play this market? I would recommend those market players that have less than 2 years of experience trading to go to cash and earn 4.5%+ in the money markets and sit this one out. For the more experienced and adventuresome traders (notice I said traders and not investors) I would have a bias toward shorting the market rather than going long. The probability of success is much higher here as a short. Having said that I think one could increase their margins quite successfully by scalping the markets by employing day trading. I don’t like to day trade but when the volatility is this high sometimes I just have to heed the call of the wild.
I still believe that Google (GOOG), Baidu (BIDU), Research in Motion (RIMM), Akamai (AKAM), and Intuitive Surgical (ISRG) is a short. But I like to use puts dated at least 2 months out until expiration and close to the strike price (no farther out than 10%) to short the market. It limits the downside loss potential while shorting with the common downside risk is unlimited. On the same token, due to volatility, going long by employing quick scalping plays can be done on Google, Baidu, Research in Motion, and Apple. I would not use options while doing this but would favor commons here.
Have a good trading day and please be careful!
Tuesday, February 27, 2007
BIDU OR NOT BIDU?
In the immortal words of Shakespear, "to be or not to be...". That has special significance to me today in regards to this high flying Chinese ADR. It has taken a lot of longs and shorts alike for a ride, both pleasurable and agonizing. I have been burned a few times on this stock as well. So, why is this stock my #1 candidate for shorting in this market "correction" or even "crash"? It is because this stock has been powerful on both upside and downside. It has many favorable criterion for shorting. I will post why I think BIDU will test and breach the 200 EDMA and beyond.
1. Chinese stock- No matter how good the stock is, China is the home base and right now, China is untouchable.
2. High momentum traders/speculators- need I say more?
3. Extreme valuation- 90 PE is not a bargain for a company valued at over $3.53 billion dollars but only generating revenue of less than $200 million dollars and declining revenue base.
4. Technical breach of the 50 EDMA- this stock will have a lot of overhead resistance when it tries to climb back.
5. US Market Weakness- housing market meltdown has not started and the idea that the housing market has bottomed is a myth. Liquidity issues related to subprime debacle will intensify and pressure the US economic growth and consumer spending. Inverted yield curve is higher than ever.
6. Denial- most traders and financial professionals are still too complacent as most are treating this as a short term phenomenon and not consider that this infact could be the start of the global stock market bear market.
7. Overextended market conditions- we have not had a meaningful correction since 2004 and much froth needs to be removed from the markt.
8. Cheerleaders- there are alot of die hard cheerleaders for BIDU which is a contrarian indicator.
Bottom line. I will continue to buy June $95 puts as I go forward. Only the brave and experienced traders should attempt to trade the extreme volatility that is likely to come.
As always please be very careful!
1. Chinese stock- No matter how good the stock is, China is the home base and right now, China is untouchable.
2. High momentum traders/speculators- need I say more?
3. Extreme valuation- 90 PE is not a bargain for a company valued at over $3.53 billion dollars but only generating revenue of less than $200 million dollars and declining revenue base.
4. Technical breach of the 50 EDMA- this stock will have a lot of overhead resistance when it tries to climb back.
5. US Market Weakness- housing market meltdown has not started and the idea that the housing market has bottomed is a myth. Liquidity issues related to subprime debacle will intensify and pressure the US economic growth and consumer spending. Inverted yield curve is higher than ever.
6. Denial- most traders and financial professionals are still too complacent as most are treating this as a short term phenomenon and not consider that this infact could be the start of the global stock market bear market.
7. Overextended market conditions- we have not had a meaningful correction since 2004 and much froth needs to be removed from the markt.
8. Cheerleaders- there are alot of die hard cheerleaders for BIDU which is a contrarian indicator.
Bottom line. I will continue to buy June $95 puts as I go forward. Only the brave and experienced traders should attempt to trade the extreme volatility that is likely to come.
As always please be very careful!
What a Day!
Today's action was frightening and breathtaking at the same time. I have been trading since 1997 and I admit that I have a lot to learn and experience. I thought I saw just about everything in terms of market melt down, when I saw my portfolio diminish to nothing in 2001. But today, today's action in the Dow was simply breathtaking! I have not seen an index go down another 200 points all within a matter of minutes! -584.86 on the Dow! I do not think this is a one day wonder event. The way the markets behaved, across the board, there is significant technical damage done. On the NASDAQ Composite, the index dived below the 50 EDMA to 2407.87, the support is smack dab at the 2400. If we breach that line and stay down, we will see the next support at 2320. Ultimately we will test the 200 EDMA whic is currently sitting just below 2300 (2297). I know a lot of people lost money today, perhaps significant portion of their trading account or even their retirement, and my heart goes out to those who did. The action today was fast, furious, and unrelenting. It was like being punched in the gut over and over again until you couldn't take it anymore, and more kept coming. I don't see any sign that this will abate in the near future.
On the Dow, the picture right now is even more grim. The index closed today at 12216 -431.40 but all signs indicate that it wont stop until about 11670 where the market will reassess if it wants to continue. The volume on the dow was below average and that was about the only good piece of news that I can say right now. But for now, there is always tomorrow.
Asian markets are continuing their descent and as I write this blog.
My advice is this:
Longs: No one made a dime by panicking. I advise the longs to keep their cool and if possible start trimming their most speculative holdings, get off of margin before the margin calls take your hard earned money, and get off of long calls. Do not give into the temptation to liquidate everything. If you liquidate, so will you.
Shorts: Continue to press this market and use every bounce as a new point to short. I don't like to short with the underlying commons. I like to short using long dated puts as this limits my down side.
On the Dow, the picture right now is even more grim. The index closed today at 12216 -431.40 but all signs indicate that it wont stop until about 11670 where the market will reassess if it wants to continue. The volume on the dow was below average and that was about the only good piece of news that I can say right now. But for now, there is always tomorrow.
Asian markets are continuing their descent and as I write this blog.
My advice is this:
Longs: No one made a dime by panicking. I advise the longs to keep their cool and if possible start trimming their most speculative holdings, get off of margin before the margin calls take your hard earned money, and get off of long calls. Do not give into the temptation to liquidate everything. If you liquidate, so will you.
Shorts: Continue to press this market and use every bounce as a new point to short. I don't like to short with the underlying commons. I like to short using long dated puts as this limits my down side.
China Markets Finally Succumbs!
As my fears have proved correct, I believe that today's Chinese market sell off will be the spring board for further global corrections in the stock market. I believe we will also experience a sharp sell off this morning when the market opens. Currently, the NASDAQ futures are just under 16 and Dow futures are just under 60. I believe we will see continued correction in our equity markets and we will continue to have price pressure well into this summer. I will now buy vigorously equity option puts in the following companies:
1. BAIDU (BIDU)- we can expect to see prices as low as $50 if this correction is more than a correction in the Chinese market.
2. Google (GOOG)- I expect this stock to correct below $400 if this correction gains steam.
3. RIMM- I expect price below $90
4. AAPL- I expect prices below $60
I am going to buy puts hand over fist to augment my BIDU puts that I purchased yesterday. I believe we are undergoing possible global stock market correction. As I alluded to before, there remains significant stock market risks, and we are now seeing the inflection point for this down turn. I do not think that this will be a one day wonder. In a jittery market, this will gain steam and should see significant corrections ahead.
Take the losses and protect your capital and if possible, go short.
Be careful please!
1. BAIDU (BIDU)- we can expect to see prices as low as $50 if this correction is more than a correction in the Chinese market.
2. Google (GOOG)- I expect this stock to correct below $400 if this correction gains steam.
3. RIMM- I expect price below $90
4. AAPL- I expect prices below $60
I am going to buy puts hand over fist to augment my BIDU puts that I purchased yesterday. I believe we are undergoing possible global stock market correction. As I alluded to before, there remains significant stock market risks, and we are now seeing the inflection point for this down turn. I do not think that this will be a one day wonder. In a jittery market, this will gain steam and should see significant corrections ahead.
Take the losses and protect your capital and if possible, go short.
Be careful please!
Monday, February 26, 2007
Greenspan Strikes Back!
The stocks traded down today after Alan Greenspan hinted at a possible recession towards the end of 2007. Additionally, the market is exhibiting signs that the 7 month old rally is running out of steam. There is rampant jitters in the market regarding rising oil prices, rising gold prices, and Iran Nuclear Crisis. The former Fed chairman's comments did not help with the overall sentiment in the market which appears to be in the early phases of the correction. I know that a lot of pundits are calling for a correction but we have to be careful here. Remember, it is not what WE THINK that matters in this market but what the MARKET THINKS that matters. I would attribute most of the down trend in the market due to Greenspan's comments.
So what do we do? We can certainly head for the hills and indiscriminantly start shorting stocks now. But that would be the sure fire way to lose all of your capital and sanity! The current market condition is still healthy without evidence of any distribution days. The major indices are still in an uptrend and technically, I cannot see anything wrong so far. There are signs though that makes me wonder. Hmmm...
Although I am bullish on Google, I believe that it has started another leg down. I would suspect that we will be testing the $450 level soon. This leads to my exact point. That is, prior leaders are beginning to or have rolled over! New leadership is emerging in the oil fields, precious and semi-precious metals, and obscure farm equipment sectors. There is still strength in the small cap stocks that follow IBD's CAN SLIM methods and these are showing excellent strength.
In this phase of the market, I would have to look at the risks, and they are increasing. First off, this latest uptrend is growing old and possibly running out of steam. No correction has yet taken place, so the risk for a steep sell off is growin. Geopolitical concerns are taking center stage- read Iran. Greenspan just spoke of impending recession- gosh! Doesn't this guy ever shut up? Oil prices are creeping up.
I am going for quick trades and will take small profits when I have them. I wouldn't enter any meaningful long sided trades unless you have more than 2 year time horizon to wait out the possible steep sell offs. I am looking at short candidates and they are increasing:
1. Google (GOOG)
2. BAIDU (BIDU)
3. COMCAST (CMCSA)
4. RESEARCH IN MOTION (RIMM)
I have entered into long sided trades in LHC Group, a home health care company, Mindray Medical (MR), and a small short position on BIDU (April $95 10 contract puts).
Be very careful!
So what do we do? We can certainly head for the hills and indiscriminantly start shorting stocks now. But that would be the sure fire way to lose all of your capital and sanity! The current market condition is still healthy without evidence of any distribution days. The major indices are still in an uptrend and technically, I cannot see anything wrong so far. There are signs though that makes me wonder. Hmmm...
Although I am bullish on Google, I believe that it has started another leg down. I would suspect that we will be testing the $450 level soon. This leads to my exact point. That is, prior leaders are beginning to or have rolled over! New leadership is emerging in the oil fields, precious and semi-precious metals, and obscure farm equipment sectors. There is still strength in the small cap stocks that follow IBD's CAN SLIM methods and these are showing excellent strength.
In this phase of the market, I would have to look at the risks, and they are increasing. First off, this latest uptrend is growing old and possibly running out of steam. No correction has yet taken place, so the risk for a steep sell off is growin. Geopolitical concerns are taking center stage- read Iran. Greenspan just spoke of impending recession- gosh! Doesn't this guy ever shut up? Oil prices are creeping up.
I am going for quick trades and will take small profits when I have them. I wouldn't enter any meaningful long sided trades unless you have more than 2 year time horizon to wait out the possible steep sell offs. I am looking at short candidates and they are increasing:
1. Google (GOOG)
2. BAIDU (BIDU)
3. COMCAST (CMCSA)
4. RESEARCH IN MOTION (RIMM)
I have entered into long sided trades in LHC Group, a home health care company, Mindray Medical (MR), and a small short position on BIDU (April $95 10 contract puts).
Be very careful!
Sunday, February 25, 2007
Stock List for the week of 2/26/2007 to 3/2/2007
STOCKS TO WATCH ON THE LONG SIDE:
1. TWGP- Tower Group anncounces earnings on 2/27/2007 before market opens. Formed a nice double bottom with handle base.
2. LHCG- Forming the right side of the cup base, reports earnings on 2/28/2007 after market closes. Look for gap up.
3. MR- Mindray- reports earnings 3/12/2007, breaking out of shallow saucer type base. Also on IBD top 10.
4. MGM- looks to be possibly forming a high tight base.
5. Google- needs to get above the 50 DMA, it's trying very hard.
6. CROX- needs to kiss the 50 DMA but this correction is good for the stock.
STOCKS TO WATCH ON THE SHORT SIDE:
1. BIDU- look for the gap to be filled at $111.80, could possibly test $115. Establish short at $115.
2. GOOG- if it fails to get above 50 DMA this week, establish short.
3. MU- I don't buy the "new" life in semiconductors.
1. TWGP- Tower Group anncounces earnings on 2/27/2007 before market opens. Formed a nice double bottom with handle base.
2. LHCG- Forming the right side of the cup base, reports earnings on 2/28/2007 after market closes. Look for gap up.
3. MR- Mindray- reports earnings 3/12/2007, breaking out of shallow saucer type base. Also on IBD top 10.
4. MGM- looks to be possibly forming a high tight base.
5. Google- needs to get above the 50 DMA, it's trying very hard.
6. CROX- needs to kiss the 50 DMA but this correction is good for the stock.
STOCKS TO WATCH ON THE SHORT SIDE:
1. BIDU- look for the gap to be filled at $111.80, could possibly test $115. Establish short at $115.
2. GOOG- if it fails to get above 50 DMA this week, establish short.
3. MU- I don't buy the "new" life in semiconductors.
Iran, Russia, Oil, and Gold Seen Pressuring Stocks this week.
Continued defiance and boldness by Iran will pressure stocks in the near term. Iran publicly declared that it had successfully lanched a missle in to the outer space in their bid to establish satellites by year 2010. Additionally, according to Fox news, http://www.foxnews.com/story/0,2933,254480,00.html, Iran's nuclear ambition is now declard as a freight train without brakes and rear gear. Further antagonism by Russia further escalates concern for continued oil price spike, infation worries, and a market sell off on Wall Street. The last dark horse that can cause a market sell off is Israel, who may take matters into their own hands in attempting to neutralize the Iranian menace. Much like in the early 1990's attack by Israeli air force on Iraq's suspected nuclear site, this may be a likely scenario, especially when Israel is the preeminent focus by prior statements by Iran's hardline president Ahmadinejad. If this scenario was to take place, it would increase global tensions, oil price spikes, and sell off in global equities, and may be the fuel that is needed for the long awaited "corrective phase" in the US market.
Russia's anti-US rhetoric is growing. Russia is increasingly supplying Iran with weapons for anti-aircraft defense and Putin has publincly warned the US and European allies against establishing anti-missle defense systems in Eastern Europe. Furthermore, Russia has publicly called for OPEC like cartel to control the natural gas supply and establish pricing power. Read in between the lines, it is clear that Russia is willing to parlay their substantial oil and natural gas powers to gain leverage and prestiege on the world stage. Any conflict within Iran by either US and their allies or Israel will result in oil spike above $65 to $70 in quick order, thereby sqashing any hopes for "Goldilocks economy". Inflation jitters will predominate and a sell off can ensue in the global equity markets.
Gold prices are hovering around $680, which is alarming, but not surprising given the issues surrounding Iran, Russia, and evidence to the contrary to what the Fed chairman Ben Bernake said regarding to the dovish economic situation in the US.
In light of these issues, it creates the "wall of worry" that is necessary for the markets to continue moving up. I don't see any reason to push the "eject" button just yet. Cooler heads will prevail in this market. I would advocate possibly starting a small short position around Bidu, Google, Crox, Apple, QQQQ, dated out to at least June, and slowly add to that position as conditions deteriorate. Long positions should be kept small, short, and sweet. Take profits early and often and reassess. Most importantly, this is not the time to be greedy as there is a lot of growing risk in this market. Many momentum stocks are extended and good entry point does not exist. Many leaders have began to roll over. As usual, don't allocate more than 20% of your cash position into any trades. That would be my advice for the week.
1. I myself will be looking to buy some June 07 $85 puts, slowly as BIDU's price rises. The gap should finish filling around $111.80 mark but the stock may run as high as $120.00, but below the 50 DMA which should pose significant resistance.
2. I have established 21 contract position at Mindray MR April $30 calls. I will look to add to this position leading up to earnings onf 3/12/2007. I expect a blow out earnings.
3. I will sell my Google call contracts this week.
4. I am establishing position into LHC Group leading into earnings on 2/28/2007. I would like to establish 100 contract positions.
5. I may establish a small 10 contract position into TWGP April $40 contracts.
As always becareful out there.
Russia's anti-US rhetoric is growing. Russia is increasingly supplying Iran with weapons for anti-aircraft defense and Putin has publincly warned the US and European allies against establishing anti-missle defense systems in Eastern Europe. Furthermore, Russia has publicly called for OPEC like cartel to control the natural gas supply and establish pricing power. Read in between the lines, it is clear that Russia is willing to parlay their substantial oil and natural gas powers to gain leverage and prestiege on the world stage. Any conflict within Iran by either US and their allies or Israel will result in oil spike above $65 to $70 in quick order, thereby sqashing any hopes for "Goldilocks economy". Inflation jitters will predominate and a sell off can ensue in the global equity markets.
Gold prices are hovering around $680, which is alarming, but not surprising given the issues surrounding Iran, Russia, and evidence to the contrary to what the Fed chairman Ben Bernake said regarding to the dovish economic situation in the US.
In light of these issues, it creates the "wall of worry" that is necessary for the markets to continue moving up. I don't see any reason to push the "eject" button just yet. Cooler heads will prevail in this market. I would advocate possibly starting a small short position around Bidu, Google, Crox, Apple, QQQQ, dated out to at least June, and slowly add to that position as conditions deteriorate. Long positions should be kept small, short, and sweet. Take profits early and often and reassess. Most importantly, this is not the time to be greedy as there is a lot of growing risk in this market. Many momentum stocks are extended and good entry point does not exist. Many leaders have began to roll over. As usual, don't allocate more than 20% of your cash position into any trades. That would be my advice for the week.
1. I myself will be looking to buy some June 07 $85 puts, slowly as BIDU's price rises. The gap should finish filling around $111.80 mark but the stock may run as high as $120.00, but below the 50 DMA which should pose significant resistance.
2. I have established 21 contract position at Mindray MR April $30 calls. I will look to add to this position leading up to earnings onf 3/12/2007. I expect a blow out earnings.
3. I will sell my Google call contracts this week.
4. I am establishing position into LHC Group leading into earnings on 2/28/2007. I would like to establish 100 contract positions.
5. I may establish a small 10 contract position into TWGP April $40 contracts.
As always becareful out there.
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