Natural gas plays are good longer-term investments right now. I don't like the extreme short-term, simply because gluts like this take time to work out, but eventually these are going higher. The simple law of supply and demand will see to that. Due to the obscenely low cost of natural gas, many producers are shutting down or not starting new wells. Plus, the low cost is creating demand, such as in vehicles, where none existed before. A good estimate of where natural gas has to go before supply starts recovering is $4. Simply put, the price of natural gas would have to double for it to become sustainable.
The ETF plays are UNG and UNL. I will do charts of stocks as they become interesting.
Saturday, March 3, 2012
Friday, March 2, 2012
Discipline
Discipline is the bridge between goals and accomplishment.
Jim Rohn
A lot of people who don't trade have terrible stereotypes of what a trader does. There used to be commercials on TV back around 2000 which showed some weird punk scalping for eighths of a point (in the old days, that's how people traded. Really. No, really, they did!), moaning about being "defeated" when the tide turned against him, while a sober-minded fellow in a suit stood behind him and grimaced. That's pretty much the stereotype. (Parenthetical note: that was the golden age of commercials featuring punks, with the "Get a Dell, dude" guy and countless others).
Anyone who actually trades for a living will tell you that the stereotype may be humorous, but it sure isn't accurate. Traders, successful ones at least, by and large have one thing in common, and it isn't being an out-of-control punk. Want to know what it is?
Discipline.
It's that simple. Discipline. You don't need a crystal ball to trade (though, if you have one handy...). You don't need a degree in Economics (though, I have that). You don't need to be Albert Einstein, and you needn't be the junkiest of junkyard dogs with no regard whatsoever for others (though some traders act as if that somehow helps them). No, you don't need to start off with a million dollars, unless you want to really experience the pain of losing big time.
You need discipline.
Discipline is the be all and end all of trading. Forcing yourself to take a loss when that is the prudent thing to do, selling a gain even though a large part of you thinks it could go higher, not buying more when your stock drops, those are all aspects of discipline.
If you don't have discipline, you have nothing.
It is a special kind of discipline, too. It is not the sort of discipline that a drill sergeant imposes, or that will enable you to run a marathon. It is a combination of emotional and intellectual discipline that must flow from within.
I liken it to writing. A good writer must reach within to produce results. All the handbooks, all the classes, will not make you a good writer. It takes experience meshed with talent intertwined with that thing I was talking about.
Discipline.
You can have the greatest list of writing rules at your side, your Strunk on Style sitting at your fingertips, and it will not improve your writing one iota. It takes years of hard work, honing your craft, to make the sentences flow and create a plot that people will want to read.
Or, let's put it in baseball terms. I think every question in life can be answered by looking at baseball. Why do you think they have the minor leagues? Those fellows coming out of college or high school can throw as fast as they ever will, hit as hard as anyone, run the bases like lightning. So why don't they go straight to the majors?
Because they need to develop their craft. They need time, experience, exposure to the same type of play a hundred times over. Over time, they will develop the mental discipline they need to survive against the guys who are the very best. If experience weren't the magic ingredient, there wouldn't be a single guy over 30 in the big leagues, because the twenty-year-olds have all the physical tools required.
It is like preparing a piece of wood to be a table. You can take broad hacks at it, but that won't make it smooth and useable. What you need is that constant sanding, over and over over, until all the rough edges are gone and it is ready for use.
With trading, I could throw all the rules in the world at you, and it won't help you at all. You would reply, "Well, it is all numbers, and with stops and mathematical calculation, I can figure my odds and beat the market."
No you can't. It isn't that simple. The market requires that something extra that you cannot just tame through raw intelligence. I don't care if you have degrees from Harvard, Stanford, and Oxford, in the most difficult disciplines imaginable - that will not translate to trading success. In fact, the kind of pride that engenders is your top enemy, the one that will sweep you to your trading grave.
You must start out humble. And not just act humble, you must BE humble. Able to absorb these experiences like you never saw a chart before, never heard of a stock symbol before, never made a trade in your life.
In fact, I think that is the biggest downfall of losing traders. They come in, big successes at whatever got them their trading capital, or just with that confident swagger in knowing they were the ones taking the other kids' lunch money. They also probably have a little experience investing on the side, and look at this as child's play. "I just have to enter buy and sell orders and watch my positions. How difficult is that?"
They take big positions because, well, they KNOW that this stock they researched is the best one, or that option just has to double by the end of the month. Because they analyzed it, and that is what must happen. It is an exciting play like no other in the history of exciting plays, and that guy on TV just confirmed that I am right.
They might even be right the first few times. And that is the absolute worst thing that could ever happen to them. Because their lack of experience can and will catch up with them.
Eventually, traders who can become good realize it is a lot more difficult than they thought, and that they don't know the first thing about how the markets really operate. Hubris will cream you in the markets, humbleness may enable you to survive.
What will save you is discipline. Discipline, the true, palpable discipline that separates a mediocre losing trader from a brilliant winning trader, takes years to develop. There is a very, very steep learning curve. The road is littered with land mines. A new trader will have some success and stop learning, stop experiencing, and then the market will shift gears and he or she will get smeared all over the road. Anyone who has sat through a flash crash or something similar will tell you how quickly the trading environment can shift. Until you sit there, hour after hour, watching the tape and the gyrations turning into decipherable patterns, you have not developed the proper discipline.
The discipline you require is one that tells you, "Today is not a good day to trade. I'll just watch." Or, "I just made a bad trade. I am going to get up and walk away for a while." Or, "I am down on this trade, and if it hits my stop, I'm out." Or, "That stock is in a perfect set-up. I will commit a quarter of my funds to it, not all." Or, "The market has done nothing but go up for the past two months, but it still could turn at any minute. So, I will do what I always do, keep the same position sizes, and play it day by day, because I won't be tempted into exposing myself to possible ruin."
Discipline really is a code-word for discretion. You need the discretion that comes from nowhere else but sitting there and watching countless patterns develop in front of you. That will help you in some future situation, you know not when, and save your account or make you a big profit instead of a big loss.
Think about your experience, and think about how many hours you have sat in front of a monitor doing nothing but watching the five-minute charts in conjunction with the time and sales (the "tape"). Unless you have more of that than you can remember, you should be watching and paper trading, not trading with real money. And that, yes, requires discipline.
A lot of people who don't trade have terrible stereotypes of what a trader does. There used to be commercials on TV back around 2000 which showed some weird punk scalping for eighths of a point (in the old days, that's how people traded. Really. No, really, they did!), moaning about being "defeated" when the tide turned against him, while a sober-minded fellow in a suit stood behind him and grimaced. That's pretty much the stereotype. (Parenthetical note: that was the golden age of commercials featuring punks, with the "Get a Dell, dude" guy and countless others).
Anyone who actually trades for a living will tell you that the stereotype may be humorous, but it sure isn't accurate. Traders, successful ones at least, by and large have one thing in common, and it isn't being an out-of-control punk. Want to know what it is?
Discipline.
It's that simple. Discipline. You don't need a crystal ball to trade (though, if you have one handy...). You don't need a degree in Economics (though, I have that). You don't need to be Albert Einstein, and you needn't be the junkiest of junkyard dogs with no regard whatsoever for others (though some traders act as if that somehow helps them). No, you don't need to start off with a million dollars, unless you want to really experience the pain of losing big time.
You need discipline.
Discipline is the be all and end all of trading. Forcing yourself to take a loss when that is the prudent thing to do, selling a gain even though a large part of you thinks it could go higher, not buying more when your stock drops, those are all aspects of discipline.
If you don't have discipline, you have nothing.
It is a special kind of discipline, too. It is not the sort of discipline that a drill sergeant imposes, or that will enable you to run a marathon. It is a combination of emotional and intellectual discipline that must flow from within.
I liken it to writing. A good writer must reach within to produce results. All the handbooks, all the classes, will not make you a good writer. It takes experience meshed with talent intertwined with that thing I was talking about.
Discipline.
You can have the greatest list of writing rules at your side, your Strunk on Style sitting at your fingertips, and it will not improve your writing one iota. It takes years of hard work, honing your craft, to make the sentences flow and create a plot that people will want to read.
Or, let's put it in baseball terms. I think every question in life can be answered by looking at baseball. Why do you think they have the minor leagues? Those fellows coming out of college or high school can throw as fast as they ever will, hit as hard as anyone, run the bases like lightning. So why don't they go straight to the majors?
Because they need to develop their craft. They need time, experience, exposure to the same type of play a hundred times over. Over time, they will develop the mental discipline they need to survive against the guys who are the very best. If experience weren't the magic ingredient, there wouldn't be a single guy over 30 in the big leagues, because the twenty-year-olds have all the physical tools required.
It is like preparing a piece of wood to be a table. You can take broad hacks at it, but that won't make it smooth and useable. What you need is that constant sanding, over and over over, until all the rough edges are gone and it is ready for use.
With trading, I could throw all the rules in the world at you, and it won't help you at all. You would reply, "Well, it is all numbers, and with stops and mathematical calculation, I can figure my odds and beat the market."
No you can't. It isn't that simple. The market requires that something extra that you cannot just tame through raw intelligence. I don't care if you have degrees from Harvard, Stanford, and Oxford, in the most difficult disciplines imaginable - that will not translate to trading success. In fact, the kind of pride that engenders is your top enemy, the one that will sweep you to your trading grave.
You must start out humble. And not just act humble, you must BE humble. Able to absorb these experiences like you never saw a chart before, never heard of a stock symbol before, never made a trade in your life.
In fact, I think that is the biggest downfall of losing traders. They come in, big successes at whatever got them their trading capital, or just with that confident swagger in knowing they were the ones taking the other kids' lunch money. They also probably have a little experience investing on the side, and look at this as child's play. "I just have to enter buy and sell orders and watch my positions. How difficult is that?"
They take big positions because, well, they KNOW that this stock they researched is the best one, or that option just has to double by the end of the month. Because they analyzed it, and that is what must happen. It is an exciting play like no other in the history of exciting plays, and that guy on TV just confirmed that I am right.
They might even be right the first few times. And that is the absolute worst thing that could ever happen to them. Because their lack of experience can and will catch up with them.
Eventually, traders who can become good realize it is a lot more difficult than they thought, and that they don't know the first thing about how the markets really operate. Hubris will cream you in the markets, humbleness may enable you to survive.
What will save you is discipline. Discipline, the true, palpable discipline that separates a mediocre losing trader from a brilliant winning trader, takes years to develop. There is a very, very steep learning curve. The road is littered with land mines. A new trader will have some success and stop learning, stop experiencing, and then the market will shift gears and he or she will get smeared all over the road. Anyone who has sat through a flash crash or something similar will tell you how quickly the trading environment can shift. Until you sit there, hour after hour, watching the tape and the gyrations turning into decipherable patterns, you have not developed the proper discipline.
The discipline you require is one that tells you, "Today is not a good day to trade. I'll just watch." Or, "I just made a bad trade. I am going to get up and walk away for a while." Or, "I am down on this trade, and if it hits my stop, I'm out." Or, "That stock is in a perfect set-up. I will commit a quarter of my funds to it, not all." Or, "The market has done nothing but go up for the past two months, but it still could turn at any minute. So, I will do what I always do, keep the same position sizes, and play it day by day, because I won't be tempted into exposing myself to possible ruin."
Discipline really is a code-word for discretion. You need the discretion that comes from nowhere else but sitting there and watching countless patterns develop in front of you. That will help you in some future situation, you know not when, and save your account or make you a big profit instead of a big loss.
Think about your experience, and think about how many hours you have sat in front of a monitor doing nothing but watching the five-minute charts in conjunction with the time and sales (the "tape"). Unless you have more of that than you can remember, you should be watching and paper trading, not trading with real money. And that, yes, requires discipline.
YOKU March 2 2012
Another play like RENN. Bullish breakout, these Chinese Internets are unknown quantities, so be prudent, but the chart is looking good.
Thursday, March 1, 2012
Welcome to my International Visitors
I just want to say a quick welcome to all my international visitors. I get people from Russia, Guatemala, Italy, South Korea, Germany, the UK, Brazil, and many other places as well. I am glad you find my charts and perhaps commentary interesting, and hope you find profit in the markets. :)
COP March 1 2012
COP is chugging along just as I said it would in my last chart on February 24. I haven't had to change anything on the chart. Look for it to test its old highs.
WYN March 1 2012
Market Thoughts March 1 2012
We had a short, sharp pullback on February 29. I don't think that was what any of us were really looking for in terms of a correction, but we play the market as it is. It cleared out some excess and gave some longs an excuse to panic. It was one of those "shallow pullbacks" that I was talking about in my last commentary. The pullbacks have to be scary or they don't work. The cold, hard fact is that this uptrend remains in place for the time being. We'll all know when it ends, the Futures will just keep going down. They didn't last night. Enough said.
ANR March 1 2012
ANR moved down closer to ultimate support on the overall market dip of Feb. 29. Good place to look at it closely.
DRYS March 1 2012
DRYS is right in the middle of its Bull Flag and remains in play. It is holding up better than other shippers because of its stake in ORIG. ORIG is a tell for this stock, if it ramps up, DRYS will follow eventually.
SODA March 1 2012
SODA got hit after reporting good earnings. Since it remains above the trend line, it remains in play. Stop around 38.
Wednesday, February 29, 2012
COST February 29 2012
COST is a conservative play. The chart is full of Bullish patterns. As long as the overall market doesn't fall apart, this one looks good to go.
Tuesday, February 28, 2012
DRYS and ORIG February 28 2012
The main point I want to make is that DRYS took off after ORIG took off - which makes sense, because DRYS owns about 3/4 of ORIG shares. Look at ORIG take off recently, especially today, and think about what that might mean for DRYS, which has been consolidating its gains.
SODA February 28 2012
RENN February 28 2012
RENN an interesting breakout play, but may require a little waiting here to clear the Bull flag.
Market Thoughts February 28 2012
As I write this, the futures are having one of their spasmodic little sell-offs that give Bears so much continuing hope. For all I know, it is The End of the big rally. Maybe it will take us straight back to 1200 - but I'm certainly not betting my chips on that happening. That WILL happen at some point, but nobody can say when the music will end and all the Bear seats are taken.
This market is defying all expectations - which is why expectations should only be a very small part of any trading plan. Expectations, while the darling of Economists everywhere, have a nasty habit of getting traders into trouble.
What I think is going on is that the effects of the first two Quantitative Easings are still being felt. There is a long lead time between the time the Fed pumps money into the system and its effects. I've heard six months to a year quoted as the lead time, but I bet it's even longer than that. If that is true, the effects of the easing from early 2011 is just now being felt. It is as if we had QE3 right now. Next year, well, that is another story, but we'll get there one way or the other. And who knows what effect the shenanigans of the Europeans are having on a continuing and future basis, either. If the ECB legally or illegally, openly or illicitly, pumps money into the system in these days of instant capital flows, some of it will find its way into the US markets. Guaranteed.
Nebulous theory aside, and standard market references also to the Devil, this market is showing no real signs of going down. I don't fight the market, but you don't have to fight anything to protect yourself against the inevitable beating this market is going to take. While the Bulls sit back and congratulate themselves in nauseating fashion while they wait to get wiped out in the coming debacle (1987, 2002, 2008, 2009, August 2011, nah, that kind of thing could NEVER happen again, right?), we have a duty to ourselves to be prudent.
My version of prudent is to play this market on the short side. I short the rips and buy back on the dips. If that means I go a day here and there without trading, that works for me, if I want to be a Dick like so many longs I can go look at my account balance. The one good thing about this rise is that there are constant shallow dips. The one certain thing you can say is that staying short will likely continue to inflict short term and maybe intermediate term pain. Not being in the mood for pain, and constitutionally opposed to getting my account cut in half when I go long and then take my eyes off the screen for five minutes and the S&P is down 30 handles, I am selling the new highs and buying back on the shallow dips on a continuing, quick basis. You can do that all the way up, and insulate yourself against a downside surprise.
The other alternative is to just go short and stay short, which I also think is a smart play, but you will need to wait it out for a while and go do other things. Which might not be such a bad thing, and I may do that at some point, too. Just wait until the financial new reports start mentioning the word "panic" every two minutes and then come back and look at your account. But I am not going to get fooled into selling a dip thinking "This is the big one, Louisey!" and then get my head handed to me on a silver platter.
A look at the chart I posted of the Futures shows my feeling that this rally is not just two months old - it actually is five months old. It is getting long in the tooth by any measure. I am not going to hazard a guess as to the top, but it probably is higher than any of us think. Pull up a monthly chart for the last ten years. From the low of March 2003, the market went up until October 2007. Yes, four and one half years.
I am not interested in the time frame, however. That sustained Bull run - which sure didn't feel like one at the time, but was - went from 750 to 1580. While this run was more ragged, the low of 665 in March 2009 could take us that high a well, no matter how much I doubt it. But the big Bull Run doesn't have to actually end for you to get creamed if you just stay long. A standard 20% pullback would also do the trick.
I don't care how much money Bernanke pumps into the system, or how crafty the Europeans get in bypassing their own laws and forcing naive, gullible or misguided private bond investors to fund their unsustainable social spending. At some point the dip will come that doesn't get bought. And that, my friends, will wipe out so many long traders it will make their heads spin like that girl's in "The Omen."
So, be safe out there, and protect yourself. Talk to older investors, and they will, to a man or woman, tell you that they wished they had kept the money they made on the big Bull runs and not inevitably given a large portion, or all, or more than all back when the party ended. I just talked to one of them today, in fact. When the day comes, you want to keep your original capital and your profits, not see it fly out the window to the greedy bankers and investment houses who were slowly building up their hedges while pretending to cheer the market higher. They always win in the end, that's why they have expensive headquarters and the finest computers and access that money can buy. Always keep in the back of your mind the big shots of 1987 and 1999, who banked tens of millions, and wound up bankrupt. "It isn't fair!," they cry, and the market will never care. There will come a day when the time will be right to set up long across the board, but I don't think this is it.
I lay it on the line. I may be completely wrong about everything. But that is what I'm thinking right now.
This market is defying all expectations - which is why expectations should only be a very small part of any trading plan. Expectations, while the darling of Economists everywhere, have a nasty habit of getting traders into trouble.
What I think is going on is that the effects of the first two Quantitative Easings are still being felt. There is a long lead time between the time the Fed pumps money into the system and its effects. I've heard six months to a year quoted as the lead time, but I bet it's even longer than that. If that is true, the effects of the easing from early 2011 is just now being felt. It is as if we had QE3 right now. Next year, well, that is another story, but we'll get there one way or the other. And who knows what effect the shenanigans of the Europeans are having on a continuing and future basis, either. If the ECB legally or illegally, openly or illicitly, pumps money into the system in these days of instant capital flows, some of it will find its way into the US markets. Guaranteed.
Nebulous theory aside, and standard market references also to the Devil, this market is showing no real signs of going down. I don't fight the market, but you don't have to fight anything to protect yourself against the inevitable beating this market is going to take. While the Bulls sit back and congratulate themselves in nauseating fashion while they wait to get wiped out in the coming debacle (1987, 2002, 2008, 2009, August 2011, nah, that kind of thing could NEVER happen again, right?), we have a duty to ourselves to be prudent.
My version of prudent is to play this market on the short side. I short the rips and buy back on the dips. If that means I go a day here and there without trading, that works for me, if I want to be a Dick like so many longs I can go look at my account balance. The one good thing about this rise is that there are constant shallow dips. The one certain thing you can say is that staying short will likely continue to inflict short term and maybe intermediate term pain. Not being in the mood for pain, and constitutionally opposed to getting my account cut in half when I go long and then take my eyes off the screen for five minutes and the S&P is down 30 handles, I am selling the new highs and buying back on the shallow dips on a continuing, quick basis. You can do that all the way up, and insulate yourself against a downside surprise.
The other alternative is to just go short and stay short, which I also think is a smart play, but you will need to wait it out for a while and go do other things. Which might not be such a bad thing, and I may do that at some point, too. Just wait until the financial new reports start mentioning the word "panic" every two minutes and then come back and look at your account. But I am not going to get fooled into selling a dip thinking "This is the big one, Louisey!" and then get my head handed to me on a silver platter.
A look at the chart I posted of the Futures shows my feeling that this rally is not just two months old - it actually is five months old. It is getting long in the tooth by any measure. I am not going to hazard a guess as to the top, but it probably is higher than any of us think. Pull up a monthly chart for the last ten years. From the low of March 2003, the market went up until October 2007. Yes, four and one half years.
I am not interested in the time frame, however. That sustained Bull run - which sure didn't feel like one at the time, but was - went from 750 to 1580. While this run was more ragged, the low of 665 in March 2009 could take us that high a well, no matter how much I doubt it. But the big Bull Run doesn't have to actually end for you to get creamed if you just stay long. A standard 20% pullback would also do the trick.
I don't care how much money Bernanke pumps into the system, or how crafty the Europeans get in bypassing their own laws and forcing naive, gullible or misguided private bond investors to fund their unsustainable social spending. At some point the dip will come that doesn't get bought. And that, my friends, will wipe out so many long traders it will make their heads spin like that girl's in "The Omen."
So, be safe out there, and protect yourself. Talk to older investors, and they will, to a man or woman, tell you that they wished they had kept the money they made on the big Bull runs and not inevitably given a large portion, or all, or more than all back when the party ended. I just talked to one of them today, in fact. When the day comes, you want to keep your original capital and your profits, not see it fly out the window to the greedy bankers and investment houses who were slowly building up their hedges while pretending to cheer the market higher. They always win in the end, that's why they have expensive headquarters and the finest computers and access that money can buy. Always keep in the back of your mind the big shots of 1987 and 1999, who banked tens of millions, and wound up bankrupt. "It isn't fair!," they cry, and the market will never care. There will come a day when the time will be right to set up long across the board, but I don't think this is it.
I lay it on the line. I may be completely wrong about everything. But that is what I'm thinking right now.
Monday, February 27, 2012
ES Futures February 27 2012
The Futures have been rising for almost five months now. But they are at key resistance. It is make-or-break time for this rally.
Sunday, February 26, 2012
Another Interesting Divergence
Another interesting divergence between the S&P 500 and the rest of the financial world. Clearly, something wacky has been going on with the markets recently (that's a technical term). Those two lines usually track each other quite closely, if not precisely together, at least in the same direction. But, no, not this year. No reason for that gap to close, no, no reason at all....
AMLN February 25 2012
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