The first loss is the BEST loss

If I took my losses as quickly as I did my profits, I’d be laughing all the way to the bank… Unfortunately, the psychology of fear and greed always plays a pivotal role in trading, and when you’re looking at a losing position, the fear of missing a rally or higher prices after cutting a loss is usually what keeps me in that little extra bit longer- you’ve probably been there before- ‘just wait until the 11:30am post-Europe close ramp’, ‘just wait till the 3pm ‘power hour’,’ ‘just 5 more minutes to the half hour mark in this 15 minute downtrend… and those few minutes until the next ‘checkpoint’ become an excruciating eternity as I see my position dwindle and the loss swell larger. With my Hindsight Glasses on, I can see that I should have closed my long SPY call position early yesterday on any spike opportunity that we got. Instead, I chose to wait it out, and even added a small average down on what looked like a stabilizing base and rally mid-morning. Unfortunately, as you all know, the market plummeted in the last hour, ending on new lows, making it the worst performing week of 2014 for the Dow (another minus three hundy day!) and S&P 500. And just a few days ago we were about to breach new all-time highs just shy of Dow 18,000!  My hesitation was rewarded with a LOD (low of the day) print in my position, closing it out at the last minute right before 4:15pm in after hours, when the SPY printed even lower lows and the VIX spiked higher (I was amused by an AAPL defender saying “VIX isn’t spiking, which means market sell off is aggregated to some big companies. Apple way oversold.” So 11 to 21 in a week is not spiking eh? Uh huh. Lots of levels of denial in that statement…). Fortunately I had taken gains earlier in the day on my WAG and GPRO calls, so I basically ended slightly negative to flat. I am reminded again of the very useful adage, “sell when you can, not when you have to”.  Being put to a decision during the last 5 minutes of trade when your position is at the day lows is not a feeling that I ever want to repeat having.

Once again oil collapsed, hitting fresh multi-year lows to close below $58/barrel, which is a stunning 22% nosedive from just the November 27 OPEC meeting, let alone from $100+ in the summer.

It has been a very volatile and whipsaw-y week, to say the least. I loaded up some SPY puts after seeing some bearish signals on Monday, and closed them on Tuesday for a tidy profit after the market tanked in the morning before bouncing back strongly. I attempted to keep some short exposure in the market by getting back in some December 205 puts at $1.94, having scaled out of them earlier near $3, but was stopped near the day lows as the market continued to bounce. Too bad, as these puts steadily held above $3-4 over the next few days as the market continued its decline, and closed at the week’s high of $5.75! S&P 500 futures closed below 2,000 at 1,998 so this will make for an interesting week with the FOMC meeting on Tuesday and Wednesday, with an announcement on Wednesday Dec. 17 at 2pm eastern.

So, my mantra from now on is “The first loss is the best loss. Take the first before it gets worse!!!”  Trade well, and stay disciplined my friends.

The Swiss say ‘NEIN’ to more gold in the Swiss National Bank

Gold is starting to look like Swiss cheese these days, with a lot of holes and ready to meltdown into a fondue… the shortened trading day in the US markets on Friday started off with a modest 0.7% drop in gold from $1,190 to $1,182, but it eventually cascaded into a massive 2.65% decline, ending down over $31 for the day to close at $1,165, ahead of the weekend Swiss referendum on whether the SNB should hold a minimum of 20% gold in its reserves. Today, we got the answer, and it was a resounding ‘No’ at 77% of the vote.

Someone seemed to know something during Friday’s equities session as junior miners were shellacked, with GDXJ down more than 12%, and the corresponding 3x leveraged bull (JNUG) and bear (JDST) ETFs making 35%+ moves. Interestingly there seemed to be a lot of new goldbugs and gold bulls joining StockTwits in the last couple of weeks, and their recent bravado led me to believe we were at an inflection point. Of course, the biggest news was the stunning (or maybe not so stunning, if you had been expecting OPEC to not cut their production) 10.3% plunge in oil, which roiled energy names like CVX, COP, XOM. Another double-digit winner was ERY, the 3x energy company ETF (ERX is the bull ETF with a corresponding move in the opposite direction). Even though the S&P 500 was green for most of the morning it eventually succumbed to the selloff in the energy sector, closing red for the day, having touched yet another all-time high. However, airlines were a huge beneficiary of the double whammy of lower oil prices and holiday travel, with UAL, AAL, LUV and JBLU leading the charge.

On the economic calendar this week we have China Manufacturing PMI numbers out tonight at 8pm ET as well as HSBC Manufacturing PMI at 8:45pm. Europe Manufacturing PMI is out tomorrow morning at 4am, US ISM Manufacturing follows at 10am, with Fed Chair Janet Yellen speaking on Tuesday at 8:30am, and an ECB interest rate decision and press conference on Thursday at 7:45 and 8:30am respectively. US jobless claims will be out at 8:30am that day, and all payroll numbers out on Friday at 8:30am.

Have a great week all, trade well, and stay disciplined!

AAPL gunning for $120, Turkey and shopping madness around the corner

After a breathtaking month-long run in AAPL which has seen it gain over $23 ($161 pre-split!) since the October 15 low of $95.18, the stock is now poised to take out the $120 level, having already hit a high of $119.75 this morning and surpassing the $700 BILLION level in market cap, the first time any company has ever reached that size. Sentiment on StockTwits has reached euphoric levels, with some users commenting “$125 by end of this week possible!”, “I’m buying a Lambo if this hits $125!”, and “Looks so cheap now on its way to $150!”. Of course, a flurry of well-timed upgrades by analysts has helped as well. Before you get caught up and chase the feel-good rally, note that the RSI is now at a blistering 87 (an RSI over 70 is considered overbought territory), and the charts show the prices peeking over the upper Bollinger Band, with stochastics also flashing overbought levels. This rally may also be spurred by anticipation of strong Black Friday sales after Thanksgiving this week, as well as Cyber Monday, but after that there may well be a consolidation or pullback. Of course, there’s always the beginning of December and the ‘Santa Claus’ rally to take into consideration, but the markets have continued to power to new all-time highs, helped also by China’s central bank cutting interest rates for the first time in two years, as well as ECB’s Mario Draghi commenting on more government bond-buying.

In commodities, oil is hitting lows again today, ahead of the OPEC meeting on November 27 (Thanksgiving- coincidence?). Gold has been holding a tight range just around the $1,200 level, and the next major news event the market seems to be anticipating is the Swiss referendum on Sunday, which may provide some impetus for the next move. Natural gas has also been extremely volatile, spiking over 5% last Wednesday after reports of more cold weather, with a net draw of 17bcf shown on Thursday’s EIA inventory report, but plunged back down on Friday and yesterday after new moderating weather reports came in and the futures contracts rolled down to January.  This has spurred heated debate in traders of UGAZ and DGAZ alike, both of which have seen tremendous daily swings of 12%+, and it looks like it won’t be settled anytime soon.

 

Thar’s GOLD in them thar hills!

What appeared at first to be another rout in gold on Friday turned into a monster bounce rally, after prices hit a low of $1,146 before roaring all the way back up to $1,192, just shy of the psychologically important $1,200 level. This lit a fire under the still beaten-down and almost forgotten miners index, GDX, which clocked a massive +6% gain and closed above the recent $19 resistance level. The triple-leveraged NUGT ETF added 17.4% to close at $13.90. Could this be the start of a recovery after falling off the cliff last month upon the official announcement of the end of QE? The weakness in the US dollar also helped, as it took a breather after a strong rally, which also helped oil prices bounce.

This has been an impressive week for tech names, with AAPL hitting new all time highs of $114.19, just a hair’s breadth away from the pre-split $800 level. YHOO also powered to new highs, as did BABA, reaching exactly $120 before pulling back five bucks and change. Interestingly, BBRY also broke through $12 on Thursday, a level not seen since August 2013, as CEO John Chen announced new software and gave a tantalizing glimpse of his plans for potential new partnerships in China with Lenovo and Xiaomi, as well as confirming a deal with Samsung during their Investor Day event. Unfortunately any bets on a strong finish to the week proved, well, fruitless, as it gave back all of Thursday’s gains and more. Granted, the stock had already rallied the entire week so perhaps this was the pause that refreshes.

FOMC minutes are out this Wednesday at 2pm ET, as well as some jobs and housing numbers the rest of the week. Full US economic calendar can be found here.

It’s Tough To Be A Bear

US markets juggernauted on to new highs this week once the midterm elections were out of the way leaving the Republicans firmly in control of the Senate and Congress. After that there was no looking back as Mario Draghi offered little surprise on Thursday with the ECB interest rate decision unchanged, and the Friday jobs report showing continued improvement, with the jobless rate at a 6-year low, although companies were hiring fewer workers.  Alibaba (BABA) continued to soar to record highs, closing in on the $115 level after a breathtaking two-week run leading into earnings. Hard to believe this was only trading in the $82s during the mid-October correction. I surmise this rally has been partly fueled by short speculation that the stock would drop back below its IPO price of $68. Once again the chatrooms and boards showed the desperation of some unfortunate put holders and short positions as every $0.10-0.20 pullback in the SPY was greeted with proclamations of collapse, ‘rug pulls’ and ‘bull traps’. Quite the opposite, as every dip was bought back fiercely as we closed near all-time highs in the last minutes of Friday’s session.

On the commodities front, gold and silver both hit new year lows, hitting $1,131 and $15.04 respectively, before bouncing back sharply 3% (+$34.80!) and 2.26% by the end of the day on Friday. This helped stem the hemorrhaging in the gold miners ETF GDX and its leveraged cousin NUGT, which had fallen off a cliff since the official announcement of the end of QE, but now enjoyed a massive dead cat bounce of 8% and 24% respectively. Crude oil also continued to slide before bouncing off $77.19, but what really got my attention was the huge squeeze in Natural gas – going parabolic from a low last week of $3.62 all the way to $4.49. I was tempted to nibble a little at the 3x leveraged Natgas ETF UGAZ, which jumped from $10.02 to a high of $18.75 on Friday, but alas, it had already surged past levels I was comfortable with in such a short span of time. I can’t help but think there’s a commodities desk blowing up somewhere.

Other notable comebacks were in the coals sector with beaten-down-left-for-dead tickers like ANR, BTU, WLT staging huge double digit rallies on an almost daily basis.

Thanks for stopping by, enjoy your week, trade well and stay disciplined!