The Insightful Trader

A Nation of Day Traders

by on Mar.05, 2009, under Market Commentary

What a week. After a nice little oversold rally yesterday, at least for the first 2/3 of the day, the futures were down overnite, only to come bouncing back the first half hour today. Then reality set in and it was pretty much downhill the rest of the day other than a couple of half-hearted bounce attempts. The net result was we were down about 4% on most the major indexes although tech actually held up quite well today, perhaps helped by ADBE’s  report. And of course tomorrow morning we have the Non-Farm-Payroll. The dollar is already weaker tonight and gold had a nice move up today after being whacked for the past7-8 days. Not that it did me any good after going long early this morning, of course after getting whipsawed a couple of times overnite, had Ed Seykota’s ‘The Whipsaw Song’ on auto replay, I went long at 913 and put my stop too close at 911, which promptly got taken out just minutes before it makes a 25 point move to the upside.

But speaking of NFP, what the heck, who needs jobs anyway? Having a job is way over-rated. With all the other governments around the world cranking up their printing presses, bound to be money for everyone. If not that, then we can all become day traders. What with the VIX back up in the 50 range again, volatility has been crazy in certain stocks this week. Make that most stocks. So what if your life savings are invested in C, which managed to barely escaped closing under $1.00 today or BAC sitting at 3, when you can make 20 points a day on SKF. It’s only up $100 the past week as financials continue to melt away to nothing. Sheesh, just made me wonder what the price does when every financial stock out there goes to 0, does SKF keep going to infinity? 

FAZ, one of the new 3-1 bear ETFs has gone from 48 to 103 high today in the past week. Glad I sold at 74 yesterday. Or you could have traded POT which has fallen from 81 to 69 since yesterday morning or GOOG which is down nearly 40 points this week and had a 20 point range today. Just read some gurus advice earlier in the week to buy GOOG at 340 and sell a march call for $10. He had it worked out to some pheonominal return on an annualized basis. Wonder how all the people that followed him into that trade are feeling tonight? So anyway, I say, to heck with jobs, and bailouts, we just need Uncle Sam to send all of us $25k to open  a day trading account and we’ll all be filthy rich in just weeks.

On a serious note, the market  still continues to hunt for the ever elusive bottom as the news just continues to overwhelm us. Between GM’s auditors warning, like where have they been hiding for the past 2 years, must have been stock analysts prior to becoming auditors; GE continuing to come under pressure despite denying they need money, does anyone believe any corporate CEO these days; and Moody’s finally waking up and threatening to cut bank ratings even more, they were playing golf with GM auditors I suppose, the market is like the fighter in the ring who has already been hit a few times to many. Every time it even thinks about standing up, it gets punched again. Our next support zone is coming up quickly in the 645-660 area. I’ve been joined on the potential bounce side by Doug Kass and then today money manger Steve Leuthold, who earned Grizzly Short Fund investors 74% last year by shorting stocks says now is the time to buy(moneynews.com). Of course a recent article on the businessinsider.com site has Robert Shiller’s cyclical P/E analysis which is interesting reading if you feel like being depressed. I actually agree with a lot of it, that we could see valuations must lower in the longer term, just hopefully not in the next week or two.

Before we get into our charts, a couple of interesting articles you may want to take a look at. The first by Larry Edelson from Money and Markets has a good discussion about the water crisis, which has been one of my pet concerns for awhile now, along with a few recommendations of water related stocks that may be of interest to you as  a longer term investment. In my opinion I truly feel that water may be the major causes for war at some point in the future. According to his article and I’ve heard similar numbers elsewhere, 10,000 children/day are dying due to water problems on our planet. Kind of puts a weak market in perspective doesn’t it.

The other article I read with interest since I trade currencies also, is Tom Dyson’s article yesterday in Daily Wealthregarding the Yen. He makes a good argument that Japan could be the first major sovereign bankruptcy.

I’m way behind on getting some new posts into the Trade of the Day area and we’ve had some really good ones both in stocks and currency. I will try to get those caught up this weekend. I’m still long some real small positions in Q, AMZN, and XLF calls and will probably add to the position if we get down into the 660 area with fairly tight stops at that point.

Here are several charts for today. First is a 16 year S&P showing support areas and the next two are the NASI and NAMO which are conflicting, although the NAMO is the more sensitive of the two.spx-16yr-04mar09nasi-04mar09

namo-04mar09

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