Some like to call it 'a dead cat bounce'. In other words, even though it is dead by the time it hits the ground it will still bounce shortly afterwards - that is right before it finally hits the ground once again -officially declared dead. This is what I think of the markets right now. If it was a bottom why didn't the short sellers cover in a fit of panic?? The buying would have been a lot stronger than what it was. It truly was a piss weak rally (like 70 points on the Dow). And it is the 4th of July and the U.S only had a half session - there is no trading tonight...
I didn't post yesterday because it felt quite uneventful. But it actually was significant - I guess I was just lazy not to post. I was all cash and it turned out to be the right decision, my colleague didn't capitulate at the bottom! I found that interesting. But perhaps he has capitulated "NEAR" the bottom? Hmmmm....
A lot of the stocks I followed were off 10-20%. Coal stocks in the U.S tanked 13% on average. I was getting lunch from my usual plaza and I ran into a broker I knew from years ago. He is a very nice man.
**I feel a poke on my shoulder**
Me: 'Wow, hey! How are you going??'
Him: 'I am great!'
Then, the first thing we said to each other, even after all these years...
Me: 'Did you see coal last night?'
Him: 'Yeah! All the majors off 13% on average.'
Me: 'So why did oil close higher on the same day?'
Him: 'That is exactly why it will go back up...'
Me: 'Do you think its a matter of people factoring in slower world growth? **Then I realise he is in a hurry** Oh well.. nice seeing you!
Him: "Take care!"
I wonder if coal will be like the uranium move... will it strangely dwindle to the downside despite the strong global fundamentals? I guess the impetus for uranium is a lot further in the future than coal. Is this just the hot money leaving temporarily? Anyway all our majors were off 10% plus in the coal sector - and they were buying BANKS!! Of all things... I guess the long resource-short bank trade is beginning to unwind.
Maybe high P/E coal stocks are a good thing to go short now???
I saw a few bargains pop up yesterday (namely MAK at $1.35) but I did not touch anything because the market looks dangerously placed. MAK traded out $1.65 today - but I am not overly concerned I missed that trade. I stuck to my game plan, I dont buy downtrends and I dont buy extreme weakness.
As I mentioned a few days ago - I have been holding a stock called POZ for about 3 days now. Well, it went up 26% today, and 15% the day before that.
I decided to trade it - I put some out on the offer and kept getting done. The bids kept creeping up. I fed them 10 and 20 thousand at a time. When it broke to new highs I was forced to buy them back - I decided that I CAN NOT be left out of this in the event it keeps running. I always made the mistake of selling early on other stocks - well not anymore, I have well and truly learnt that lesson. Markets DO overshoot, go with it.
I ended up pushing the market around from both directions. At the end of the day I was 15% of the volume traded (!!!) and I managed to pocket $10k of profits in the process. It was less than if I just stayed long in the first place from my original entry - but on the other hand I would have carried more intra-day risk if it failed to rally. I rebought everything on the close which also happened to be the high. Monday should bring more joy I figured - I will smash the open price which is likely to be an overly enthusiastic extension to the upside.
The thing that irked me about today though was my online trading account screwing up. It was saying that I was net short when I in fact thought I had balanced my account. Then my CHESS holdings went down. It took about 15 minutes of sitting waiting on the phone line for "customer support" to take my call. Meanwhile I was VERY scared at the thought of me being net short a hugely illiquid, speculative and upward momentum driven stock!
It turned out I was net long all along - which was a relief. It was still a worry that it shut itself down like that. The guy said it was because "I was trading too much and too often, your CHESS holding system couldn't handle it". LOL. This is the first time anyone ever told me this. Am I overtrading? Is this a sign of my overconfidence? Hmm...
I also got long ARW - check this chart out!!!
If this is not insider buying I will be amazed.
If not it is still a decent excuse of a company to be buying it. Agricultural inputs in and oil out (biodiesel). I have spoken to management in the past and they were honest to me. The reason it fell from grace in the first place was a stagnate oil price relative to agricultural commodities going through the roof. Well, as of late that formula has compeltely reversed. So the upside remains huge. Their net assets are basically trading at par of market capitalisation, and sales agreements have been signed before.
I grabbed $50,000 worth on close for a punt.
Oddly enough my colleague refused to go with the momentum (and he is meant to be the momentum trader!!). Maybe he is afraid of getting sucked into the false hope I mentioned at the beginning? My positions are small and I am quick on my feet in the event things go sour. Until then, I am chasing momentum on the small caps that are going against the market tide.
Oh yeah, and before I sign off, I finally was able to go to the bank to ask about a short account. Looks like I have to set it up as a margin account using the equity as collateral. Apparently I already have the capability to short on the day - but how useless is that??
Happy trading and tight stops.
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