Time to short Stocks!

[Toro]

Bullish

Contrarian analysis is bullish on stocks Mark Hulbert - MarketWatch

 

[Toro]

Bearish

Smoothed Breadth and Market Dead Air – Internal Divergences | Afraid to Trade.com Blog
McCllelan Oscillator Divergence?

 

[Toro]

Leveraged ETFs are good only for short-term trades.

http://www.cxoadvisory.com/volatility-effects/multi-year-performance-of-leveraged-etfs/

 

[uscitizen]

Ok I stocked up on shorts, what now?

 

[Zander]

I have been in cash for the last year with no regrets. Now I think the topping process is done and we are set for a major decline in stock prices.

Today I bought shares of ProShares UltraShort S&P 500 ETF at $28.08.

Best of luck!

So did you get a margin call yesterday?

No. This is an inverse index ETF - It fluctuates in value like a mutual fund. Yesterday it went to $27.67 a share. so i lost 41 cents per share.

 

[Toro]

For the bears, two groups that have been doing poorly over the past few days have been the financials and the retailers. The financials you can put off to the foreclosure mess but the retailers are a little harder. You can see it in the chart of RTH.

 

[william the wie]

Yesterday I saw a column that said the market would head up until Jan. 15 and I never saw an explanation for the date. This market is getting crazier.

 

[Revere]

Obama will burn what's left of the American free enterprise system to the ground after he loses his majorities.

 

[Paulie]

Then buy it or hold it.

I am still bearish on gold. It is a fear based, irrational bubble that, like all bubbles, will end badly. Time will tell......

What's irrational about it?

What isn't?

EDIT: just because it is a bubble doesn't mean you can't make a profit from it. It might go to $3000 an ounce.... Too much risk for me...maybe not for you.

I'm asking you...what specifically is irrational about the rise in the price of gold right now?

 

[Toro]

Another 9635 calls on the EUO were purchased today. That's 40,000 over the past two days, accounting for something like 96% of the volume.

Somebody is making a very bearish bet on the euro. Its the only thing that is keeping me from getting shaken out.

Also, JP Morgan's newly issued bonds sold off today, another bearish sign.

 

[Zander]

What's irrational about it?

What isn't?

EDIT: just because it is a bubble doesn't mean you can't make a profit from it. It might go to $3000 an ounce.... Too much risk for me...maybe not for you.

I'm asking you...what specifically is irrational about the rise in the price of gold right now?

First let me tell you, I am not invested in gold. I could not care less about it, or the price that people are willing to pay for it. As far as I am concerned, it is little more than a shiny metal with scant few uses beyond jewelry or as as store of "perceived" value for fearful investors. Some people think it is wise to have a portion of your assets in gold - good for them. Personally, I don't own any except for a few pieces of jewelry. And I have no intentions of buying any, now or in the future.

That being said.... When I see the "investor" demand exceed "jewelry" and industry demand for the first time n history - I view that as "irrational". When there are advertisements on every available media touting the "safety" and "security" of GOLD!!! as an investment - I see that as irrational. When I view the actual 30 year return on gold as investment - I see it as a lousy, irrational investment. When I see the current deflationary cycle devastating the prices of every other commodity asset class across the board except precious metals - I see that as irrational. Could I be wrong? Maybe. But since I have ZERO vested interest, I simply do not care.

So now I am asking you...what specifically is "rational" about the rise in price of gold right now?

 

[Paulie]

What isn't?

EDIT: just because it is a bubble doesn't mean you can't make a profit from it. It might go to $3000 an ounce.... Too much risk for me...maybe not for you.

I'm asking you...what specifically is irrational about the rise in the price of gold right now?

First let me tell you, I am not invested in gold. I could not care less about it, or the price that people are willing to pay for it. As far as I am concerned, it is little more than a shiny metal with scant few uses beyond jewelry or as as store of "perceived" value for fearful investors. Some people think it is wise to have a portion of your assets in gold - good for them. Personally, I don't own any except for a few pieces of jewelry. And I have no intentions of buying any, now or in the future.

That being said.... When I see the "investor" demand exceed "jewelry" and industry demand for the first time n history - I view that as "irrational". When there are advertisements on every available media touting the "safety" and "security" of GOLD!!! as an investment - I see that as irrational. When I view the actual 30 year return on gold as investment - I see it as a lousy, irrational investment. When I see the current deflationary cycle devastating the prices of every other commodity asset class across the board except precious metals - I see that as irrational. Could I be wrong? Maybe. But since I have ZERO vested interest, I simply do not care.

So now I am asking you...what specifically is "rational" about the rise in price of gold right now?

Well I suppose I would respond first by saying that your own personal feelings about what gold actually represents means little in regards to the rationality of its price action. It's been the store of wealth for centuries.

I also note that money creation is the highest it's been in history, so that lends rationality to the current demand. To me, TV ads mean nothing, other than a typical attempt to capitalize on a trend. I don't see how or why it's an indication of anything in particular, other than someone wants to make a buck off of it.

I personally believe that there will be far more industrial uses for gold in the future, but I don't count that in my technical or fundamental outlook on it. It's just a personal belief. I've studied about it to an extent, and there are technological aspects to it that I feel we can harness in our future. One of which being that it can reflect infrared light and resist heat. There are many possibilities there, including uses in space.

There will come a point when banks will lend again and demand for credit will return. I don't trust that the Fed will properly exit from the positions in its now unprecedented balance sheet, because it NEVER has. We are looking at a possibility of very serious inflation in the future. The fact that it's not even materializing in consumer prices yet, and gold is still continuing higher, is a bullish signal to me.

I see a definite possibility for a downward correction, but I see higher highs and higher lows for the indefinite future. The corrections will only serve to offer investors and traders better entry points.

I could change my entire outlook tomorrow, but I probably will not unless I see some serious moves by the Fed. Purchasing more treasuries is certainly not one of the moves I would be looking for. That is inflationary and bullish for gold.

When the Fed starts selling its assets, we'll talk about declines in gold prices.

 

[william the wie]

Another 9635 calls on the EUO were purchased today. That's 40,000 over the past two days, accounting for something like 96% of the volume.

Somebody is making a very bearish bet on the euro. Its the only thing that is keeping me from getting shaken out.

Also, JP Morgan's newly issued bonds sold off today, another bearish sign.

Use very simple terms for your explanation please.

The call seller is getting extra yield on his holdings.

The call buyer is hedging against exchange rate risk.

Speculators are doing their thing on both sides of the trade to provide liquidity.

the upward trend is bearish but who is making the bearish bet?

 

[Paulie]

Not to mention Zander, the rest of the world is debasing their currencies as well.

Gold is rising against the world's currencies in particular, while central banks around the world dilute their money supplies.

If that's not bullish for gold, I don't know what is.

 

[Toro]

Another 9635 calls on the EUO were purchased today. That's 40,000 over the past two days, accounting for something like 96% of the volume.

Somebody is making a very bearish bet on the euro. Its the only thing that is keeping me from getting shaken out.

Also, JP Morgan's newly issued bonds sold off today, another bearish sign.

Use very simple terms for your explanation please.

The call seller is getting extra yield on his holdings.

The call buyer is hedging against exchange rate risk.

Speculators are doing their thing on both sides of the trade to provide liquidity.

the upward trend is bearish but who is making the bearish bet?

It might be a hedge but it is unlikely. It is probably a short-term directional bet.

The EUO is a double inverse ETF tracking the euro. Most hedging of the euro occurs in the three-month forward futures contract. If you want to hedge, it is unlikely that you would do so with calls on a product which is enormously inefficient, given the volatility decay of the ETF, not to mention other option issues such as delta hedging. It is so much easier to hedge in the futures market, which is far more liquid. Average daily volume of all the options on the EUO is maybe 1000 contracts up and down the chain for both calls and puts. It is highly unlikely one would buy 40,000 contracts in this market when spreads are generally wide to hedge. However, it is a great way to make a leveraged near-term bet.

Again, I cannot be certain that it is not a hedge. However, it has been my experience when I see huge options buying in the ETF market, the market has tended to go the way of the bet. For example, there was massive buying of October calls with a 130 strike on the GLD at the end of September. In January, there was massive put buying on the SLV expiring a couple months out just before silver got whacked. Doesn't mean the euro is going to fall, but it makes me think there is a good probability that someone knows something.

 

[Douger]

Wanna do some portfolio screen shots and photoshop out the account numbers and names ?
I B winnin an shit.

 

[Toro]

That being said.... When I see the "investor" demand exceed "jewelry" and industry demand for the first time n history - I view that as "irrational". When there are advertisements on every available media touting the "safety" and "security" of GOLD!!! as an investment - I see that as irrational. When I view the actual 30 year return on gold as investment - I see it as a lousy, irrational investment. When I see the current deflationary cycle devastating the prices of every other commodity asset class across the board except precious metals - I see that as irrational. Could I be wrong? Maybe. But since I have ZERO vested interest, I simply do not care.

So now I am asking you...what specifically is "rational" about the rise in price of gold right now?

A few things.

I haven't updated my data, but last time I checked nearly a year ago, since the US officially abandoned the gold standard on August 15, 1971, gold has returned about the same as the S&P500, including dividends reinvested. My guess is that nothing has changed since I updated my data. Doesn't mean gold will outperform stocks over the next 30 years - I would expect the opposite in fact - but gold has done well over the past three decades. It has been a great diversifier. If at the beginning of each year since 1971 an investor invested equally between gold and stocks and rebalancing at the beginning of every year, one would have earned a higher return with lower volatility than investing solely in stocks or gold.

As I've said before, when betting on deflation or inflation, bet on the guys with the printing presses, especially when they explicitly tell you that they want to create inflation.

I can also tell you that money managers have NOT bought into gold. A handful of vocal hedge funds have, but I would estimate that gold stocks make up less than 1% of the typical mutual fund's asset base. We are miles away from the public being all in.

I think precious metals will have a bubble. I just pray to God its not right now because I sold my position last week.

 

[Toro]

Well, what my EUO call buyer "knew" was that Bernanke was going to distance himself from QE2 at his speech today. That is wrong. Thus, I will be looking to exit this position at a loss.

However, it will be interesting to watch the market reaction. The market has gone straight up over the past two months, primarily on further Fed action. Do they sell the news or does it continue on its rapid ascent?

 

[Toro]

Its going to be an interesting day. Risk assets spiked on the release of Bernanke's text at 8.15am but have sold off since, or at least they have during the past half hour.

 

[editec]

The banksters are in trouble again.

REad this AM in the NY times that thanks to the foreclosure moritoriums, the big banks can expect to lose 1.5 Billion per quarter and they think that this moritorium could drag out for the next 5 YEARS!

I cannot believe that the moritoriums will last that long, but that's what some mavens are predicting

If they do a lot of these banks are toast