Tuesday 9 October 2012

Terrifying Tuesday.

This is what I wrote yesterday:

Earlier I had indicated that the bounce level is 1430.(/ES) Cycle says that it should happen in a day or two.
The 15 min charts in most indices is looking like a bear flag  or at least a continuation or consolidation pattern which indicates more selling ahead.

In fact after the post was published, I was thinking that I might lose face tomorrow. But God saved his idiot savant. (sorry BDI!)

This time the cycles have been spot on, which is not always the case. So now we have most of the down calls fulfilled. Earlier Oil sold off, today gold and silver corrected and is just about the lower part of the range. Now we have the remaining part of the call, which is to shoot up till election. Even Apple, o mighty Apple, also corrected below $ 640. Now we are coming in the final part of the bull market rally which hopefully will culminate around 2nd week of November.

In the pre-market, when I scanned the futures, the emini was up around 6 handles.  I sent out this tweet: 

‘GMA. Day starts where we left it yesterday. Not much change but somehow I don't like it, don't know why. Feels like a trap. May be I am paranoid” That was much before the selling started. Well, sometimes it pays to listen to the intuition.

Now the intuition is saying that we will see some more selling before the bounce. I think we still have little more selling to come tomorrow but will ultimately close above /ES 1430.

In the afternoon I started scaling in long positions in PM sector and TBT. Over the weekend I will write about the importance of scaling in any position. It is one of the trading disciplines I have learned very late in life. I am not touching other stocks yet but depending on how tomorrow turns out, I would be interested in SGEN and PNRA. But as of now, they are not a priority.

One notable exception to selling was Oil, which was actually up throughout the day. I think the Boyz were rotating money. If the sell-off was due to concerns about the global recession, why oil did not sell? Moreover TBT was up. Even Nat.Gas was up. You see, things don’t add up.

Many have been conditioned that there is inverse relationship between Equities and Bond. To a certain extent they are right. The investor psychology has been so scarred by the 2008-9 financial crisis and mom and pop investors lost so much money in stocks that they did not participate in the entire rally from SPX 666. Scaremongering blogs have not helped either. Now investors are fully loaded with fixed income funds and bonds.  Next comes the scariest part. In the forth coming melt down, both the stocks and bonds will go down together. And retail will again lose money.

I want to avoid rants of all kind in this blog and keep it focused on the market action, devoid of macroeconomic analysis and other stupid things that our politicians and economorons do. May be a dedicated blog for the rants would be in order. But I would need contributors for that. Please raise your hand. In the other blog about better life, I got some very nice comments from some of you:

Bluesky wrote:
Hello BB,

I'm a huge fan of your finance blog. I consider it one of the best 5 on the Internet.

I just found this one and it's got off to a great start. I'm looking forward to reading this regularly too.


Thank you Bluesky.

Paul said:

Hi BB, I came across this blog through your financial blog. Between the 2 sites it can be synergistic (hate that word). Keep up the great work. I'll donate when I can.

Thanks Paul. Yes, they are synergistic. A better state of mind will result in better trade and investment decisions.

That’s all for tonight. Hopefully we will see the bounce tomorrow. If not and /ES closes well below 1430, then “O”  is going to lose the election. It seems unlikely at this point but who knows.

Thanks for all the donations and supports. Your continued help and support is important to me to keep the blog running. Please remember to disable Adblock and help the blog anyway you can. Raghu,(reader of this blog) suggested that I sign up as affiliates with Priceline etc and I will definitely work in that line.

Thanks for reading http://bbfinance.blogspot.com/  join me in Twitter (@bbfinanceblog)for the real time market updates and calls. And if time permits visit and comment on http://artofbetterlife.blogspot.com/


  1. Great blog btw.
    Interesting you and other respected bloggers believe the bounce will continue right into the election. Some other decent bloggers think the bounce will be short lived and actually fall into the election before having a good rally. Both forecasts are possible given the discrepancies between the indices etc..
    All I can say is get in and out quickly until everything lines up better and there is a solid trend in place. Have a good night...

  2. You are right is saying that get in and out quickly. That is why I am not touching SPX or stocks.
    Thanks for the compliment.

  3. im gonna cash in on some shorts..but leave some on the table..just in case

    1. Suggest you have a tight stop. Good luck trading.

  4. >> May be a dedicated blog for the rants would be in order. But I would need contributors for that. Please raise your hand. In the other blog about better life...

    Sounds like blog about better life is a nice place for rants :)

    Btw, all treasuries were noticeably down today (you mentioned they were up), despite market down. Note also how much lower was ZF (7yr note) compare to 10 and 30 years on a usual day. It means that short end of the curve is expanding and it's not a good sign for the market (and US deficit funding as well).

    (SPY-TBT) spread is starting to brake down. You're spot on that both bonds and stocks are going down. It'll be a lesson of lifetime to those who believed "safety" and piled in blindly in fixed instruments. Also it's been a crazy campaign over the last few years in press, on the radio, on all business TV stations: "Buy Bonds".
    Gonna be pretty costly lesson I think :)

    Oh, and the last thing - gold. I think people don't realize that if you're a bank, then it makes perfect sense to hedge inflation risk with shiny gold bars in a vault. But if you an average investor or trader - treat it as a commodity, because it is a commodity. I wonder why nobody treats for example corn as an inflation hedge, although it's doubled in price since 2008? :)

    1. I have the screen flashing /ZB (30 yr) up .21% and /ZH(10 yr) up .07%. may be I saw something wrong as TBT was up.And you are right.
      Yes, it will be a very costly lesson for the safety trade.
      And no, A better life is all about finding inner peace!:)
      My cycles are saying all sorts of good things about gold and silver for another 14 months at least.
      Would you contribute to the rant blog?

    2. TBT got second life after reverse split. One of those ETFs that "goes to zero" over time.

      My point about being long gold is that gold has nasty commodity-type corrections. Yes, it's been grinding up and up so far, but 20% corrections are always around the corner.

      Contributing to a rant blog? Nah...
      It doesn't make ones trading or investing any better. Besides that there is already best rants blog - ZH :)

  5. Good stuff BB. Got 1 fill today, hoping for that drop again tomorrow for some more fills.

    I like the in-text ads.

  6. BB - can you share the mechanics of TBT? I haven't had a chance read the prospectus - is there a decay in TBT like you see in other commodity or leveraged ETFs (a la contango)? I'm assuming that there is but figured you might know specifically how it works. If there is some sort of decay involved - is TBT a short term play for you? Thanks!

    1. Yes, there is decay in TBt also and I may hold it till Mid-Nov. for now. But I cannot find any other short bond etfs, apart from selling puts on TBT.
      If you can find out, please let me know.
      Thanks Mike.

    2. Perhaps sell shares of UBT short? This will provide you with a play on short treasuries, has leverage, and will let you take advantage of the ETF decay.

    3. You can short TLT (or buy puts or put spreads for the same purpose), but it sucks too. Futures is the best instrument.

    4. Apart from options or futures I do not see much opportunity to short bond for retail in 401K. I do not like options for retail investors.

  7. Great job done BB! your cycle prediction is very good!

    Wish tomorrow is a up day when closing.

    so BB, how do think oil will do within this week? still up and down?

    1. Thanks Mikey. Today most likely range bound or small red.
      I think Oil will move between $88 and $92.