New Service.....Education

We have decided to add education as part of a free service to our website. Our "TCM Investment and Trading Education" segment will occasionally provide instruction on many subjects that interest our readers. Enjoy.

Very Interesting......TVIX

VIX doiwn 7.5% and TVIX down 3%. Why is this interesting? because TVIX is supposed to be 3X's leverage of the VIX- it should be down about 21%! The volume is been enormous- about 600% to 700%. What is going on here? Our hunch is that there has been huge accumulation; but for what? Why? It is a little too early to tell and our entry point is back around 13.50 to 14 for now; however, this needs to be watched closely. The S&P500 technically can go 1400. This is not too far away. Watch out for a violent pull-back at or close to this level. Stay tuned and check emails for strastegy.

Rules Broken and Lessons Learned...The Ultimate Trader's Trap

We broke a lot of rules on the TVIX trade. Rule number 1: Don't ever "paint" yourself into the ultimate trader's mistake - "The Intellectual Trap". We will get back to the mistakes that led us into this death trap.

An "Intellectual Trap" defined: Trader's by definition fall into the group of highly competetive individuals who consider themselves (right or wrong) extremely intelligent. An "Intellectual Trap" develops when the trader thinks him/her-self far superior than the market. They just "know" that they are right and everyone else is wrong. They can't believe how dumb the market is! They get angry when their trade is losing. Wrong way Charlie! An excellent trader knows that it is not how smart they are; it is the ability to read when the crowd will see what they see. They may be spot on; however, being early can kill your capital. This is why trading the markets has caused many very smart traders everything. It drove them mad. The "Trap" comes when you are so convinced that you are right and your theory is so brilliant that you are subconciously willing to go down with the ship (and so does your capital)!

The Rules:
1. Never go down with the ship! Who cares if you were wrong. The goal is not to be the smartest person in the room; the goal is to make the most money. Socrates said: All that I know, is that I know nothing. A smart man. Surrender the ego.
2. Always use stop losses. These protecd you from yourself.
3. Just when you think you have it all figured out is when you are the most vulnerable.
4. Never, Ever....paint yourslef into a corner.

More to follow..........

TVIX trade update....The Great Escape!

Wow....although we haven't had time to post, our clients know the incredible drama we went through....here is the update:

TVIX and volatility in general continued to defy all logic. We talked about "The Fix is In" and "The Facebook IPO" in regards to "painting the tape". TVIX continued to trade down and the market continued in a straight up trajectory. Our losses continued to mount. It was very difficult to hold. Well....TVIX broke 14 and we had to decide to bail with a huge loss or double up on the entire bet. It just didn't make sense. We thought long and hard and decided to double-up the bet again at 14. So, now we are sitting "All in" with the entire financial media against us. The market is going to the moon. Volatility is an exstinct animal an we are loaded to the gills with Volatility!
Scary stuff to say the least. The technicals confirmed a potential bottom and one of our readers- "Schmitty" sent us texts saying it looks like TVIX had bottomed. We thought he was on to something. We made the bet.

The next 3 days TVIX went from 13.86 to 21! We bailed at 20 and took a small profit. We escaped!

Update TVIX

Well, we got filled on our $17 stop order a couple days ago. So now we are doubled up. I have to tell you that we are a little nervous here. Where are the traders? Where are the HFT programs? The Street knows QE3 is already in effect. So, when is the time to initiate operation "Volatility"? I say The traders start now. What are you waiting for? The mutual funds are fully invested, the sheep are in. The retail guys are sitting out and they are not playing. So, who is the first to act in this den of thieves? Act now or lose......and THAT is the word on the street.

Perfect!

It proves our theory that "The set up" is in. Google down 64 dollars after hours! We are very happy. Earnings are poor, the financial system is weak, and volatility should begin to move up.

Very happy we doubled up on our volatility trade going into these earnings. It was a tough bet; however, you gotta be able to make those bets.

The Confusion and Volatility Trade

Confused by the market? To paraphrase Jesse Livemore -" I'm not a bull or a bear, I just bet on the the right side of the market". That seems to be the mantra so far this year. Quite frankly, nobody really knows why the market continues to go up. The financial system is still extremely weak and the printing boat loads of money continues. Earnings have been disappointing as a whole so far. The financials continue to perform "funny money accounting" The volatility index just broke 20 today! There is just no fear in the market at all so far. The volume is low and most institutions have been stepping over themselves to get invested for the 2012 performance race.This is driving up the market on very low volume. What do they care? It's not their money and they do not want to miss the boat or their bonuses by being left behind. I don't buy it and still think the volatility wave is comming.

We added another bit to our TVIX trade at 21.77 today giving us a 22.88 average price. Check emails for strategy update.

Google, IBM, Intel,and Microsoft report after the bell. The easy bet says they will all be up after they report and Google should kill it. This will be our first test of the "set up". It is a no brainer to bet Google shares rocket after posting earnings. Let see if that transpires or we are still in a thin manipulated market. (our hunch is a sell-off...only the bravest would bet it)

Intial Position Placed.....TVIX

We initiated our volatility trade today. We took a 1/4 position in TVIX which is a Leveraged ETF that gives us 3X exposure to the VIX. We bought at 24.15.

We strongly believe a massive hit to market volatility is building.

Now is The Time! The Volatility Wave is Near....

The VIX has hit our target of 20 (actually it only touched 20.05 today) and we are now ready to begin "Operation VIX Wave". There is an abundance of optimism. The troubles of last summer seem to have dissipated. New year money is flooding into the markets. The money managers are positioning themselves for this year's expected returns. What's the problem?

The waters are too calm. The soveriegn debt issues have not dissappeared and the system in Europe continues to be fragil. As the volatility continues to wane, any small ripple can turn into a tsunami. We will begin our accumulation of volatility trades tomorrow with small intial postions.

The time is now.

Check emails for the strategy outlay.

2011 Final Numbers and Performance

2011 was a good year for WSR. We finished the year (12/28/2011) with a +166% return. Although we sat out most of the year, the times we did participate were during hyper-volatility. It seems that we really enjoy market uncertainty and turmoil. We thrive on it. It may seem odd to some (if not many) that we consider +166% return to be only a "good" year. The truth is, we were not very happy with our performance. We thought we could have had a 500% or more during the June, July August, and September months. Market turmoil like that doesn't happen very often and you have to be prepared to make a fortune during those times. It is a rare occurrence when the large institutions are confused and vulnerable as they were during those months. It is during those times that the quick and the nimble can take advantage of the "collective mediocrity" that is so prevalent in our investment system. We say this; not to be arrogant, but to draw attention to the lack of individual research. Most money managers today are coming from the same school of thought ( thus the extreme market correlations) and this makes for easy "kills" on the "herd". We have learned 10 years worth of knowledge that was squeezed into a 4 month cycle. We did this by networking with many of the programmers and and Algo traders that control 70% of the volume. We had the opportunity to play "live" in one of the most violent market environments of the last two decades (at least) and not only survived, but prospered. It was amazing! I could go on and on; however, I suggest you just read our report to be sent out Jan 3, 2012.

I hope all our clients and readers enjoy the holidays with their loved ones and the more important things in life. We will see you in 2012!

Market Update: Boring!

As we discussed a couple months ago, the markets are churning. Our decision to remain on the sidelines becuase you wouldn't miss much was good advice. We considered the post Thanksgiving Day bull bet; however, decided to enjoy family and friends instead. The markets have been churning in a tight range with no real direction. The daily movements are only for the gamblers and insiders at this point. The markets are looking for a catalyst.

Update: The technicals do not bode well. There is a 40%-50% chance of forming another double-top. Retail interest and confidence in the markets continues to wane. Our observation of the trading floor is that nothing is happening. The traders look bored. The financial media continues to churn out old news and soveriegn grandstanding. Quite frankly, there is no news or it is being recycled. Volatility is aproaching 6 months low and the trade junkies are closing out their positions for the year.

Strategy: Wait and Watch. Pick low points. Resist the urge to action because you are bored. The trades will present themselves as they drift lower to attract action. Our guess is that 2012 will begin with a volatility wave.

Check emails for updates.

As we discussed....

The market continues to grind down since the doji star formation. Check emails for strategy. We may continue to stay out of the market; however, there is some support here at the 200-day moving average. Stay tuned.

Where to Mister?

The market is churning around and it seems to be getting very tired. The 200-day moving average is attracting both the bulls and the bears. The whole sovereign debt issues are getting boring and traders are getting tired. The technicals continue to say lower; however, nobody knows where to go. We will stay on the sidelines for now. Check emails for strategy updates.

The Perfect Call...Now what? Redemption!

The Perfect Call...Now what? The Doji Death Star...TVIX from 38 to 62 in two days. FAZ 35 to 45 in two days. Volatility explodes! The best month in 30+ years destroyed in two days. Call it redemption. Georgia beats Florida....I guess WSR is redeemed. Any questions? I didn't think so;)

Check emails. All those that stuck with us have been vindicated plus... in just two days!!!!

We missed a month and made it up in two days.

Print it.

Trade: FAZ sold @ 44.75

Sold toda open for a nice 20% gain.

Doji Star plays out.....Death Star

The bearish formation played out perfect!

Trade: Sell FAZ @ 35.75 STOP Placed

We are not going to watch this today. Put in a stop order at 35.75 is the stock hits. It is doesn't then we will look at it before the close. Enjoy the day!

We missed the best October..EVER!

We got October totally wrong. Although we did extremely well on the downside, we missed the whole reversal. We did not lose any money...even made a little bit- but to miss the best October ever - is just frustrating to say the least. No excuses. We were wrong. We really hate to miss moves like that. Oh well...such is the trading life. We will take our 142% return since July and take a break. it would have been great to catch both the downside and the upside moves.

We will be closing our FAZ trade today and get ready for the weekend. We don't feel like trading the rest of the week. Time for fun.

This weekend is The Georgia/Florida Game...and the "World's Largest Cocktail Party" is beginning today and we look to enjoy the weekend!!!

Have a great weekend!

A Doji Star...What now?

We have a technical formation (see chart above) that can mean a move that has been exhausted. The EU crisis seems to be fairly settled in the minds of investors- although there are no details yet. The "perception" is that it may be over. The volatility has collapsed in the market as measured by the VIX. It has gone from 48 to 25 in about a month. The earnings are mixed to neutral. We have gone from a near "Bear Market" to positive for the year in under 30 days. It appears that the world changed completely during this time frame. It is hard to believe. Maybe the original fear and selling was unfounded and everything will be OK or this is a temporary reprise. I don't think anybody is really that surprised that The EU was going to get a bailout. Bankers protect their banks at all cost. What concerns us is that their really appears to be systematic problems. Now that the markets appear to have been stabilized, they will begin to argue again and the volatility will probably go up. The technical formation may be ominous. We will play the short with tight stops here. We will keep a neutral stance in our minds. The only question is; Are we going up or down from here.

let's see how the formation unfolds. It certainly reinforces the belief to always buy the corrections as The Fed will always bail it out....until it doesn't work. So far, it seems to be working.

Trade: Bought FAZ @ $37.10

The Bears can come out now......SELL!

The bombing is over. It has been an incredible run in October. The Bulls charged full steam dead on and crushed The Bears. I wish we participated. The Computers said it was safe; however, a little thing called fundamentals prevented us from participating- oh well. We went ahead and started a strong short program today. it should be clear now....Sell the news! We bought FAZ again at the opening for 37.10. The manipulation is over for now. The only thing left is for the EU to bicker over the details and the market can get back to worrying about earnings.

Trade on: FAZ @ 37.10

Check emails for details...

FAZ trade: Closes @ 45.24

Too much politics in here. Gonna wait and see. We took our 6.5% gain and are back in cash.

Trade: FAZ bought @ 42.50

Due to client concerns...we will now publish our trades after clients receive them first in their emails. We bought FAZ 10/24/2011 @ 42.50

Where have we been and what now?

I received an email from a (free) reader today asking where we have been the last couple weeks. I stated that we have basically been in cash because we did not trust the market. He advised that we "missed" the move and we were wrong. Our answer was...not really...as we posted..we closed our shorts and sat on the sidelines. We made no bet either way and advised clients to wait for better entry points. A "better entry point" can be at a higher or lower price. The key is- at a price where you have the highest probability of making money- not the lowest price. We figured in our emails that The Dow had an outside chance of approaching 12,000 because of a huge short squeeze..and choose not to participate in that move because the fundamentals are so poor ( it almost hit it yesterday). We certainly are wrong many times; however, choosing not to trade and not losing money is NOT being wrong. We continue to advise long-term investors not to buy at these prices or into this market at this juncture.

What now?

As explained in our email yesterday

We believe 12,000 to be the very top of the range and decided to short. We bought FAZ (3x short the financials @ 42.50 yesterday. We think the bank earnings with their DVA accounting is just horrendous. The momentum stocks are starting to crumble and the bank stocsk are in a very precarious position.

Mish Mash and GooLash....

Does it really matter what's going on in here? The markets are twisting around with no direction. It reminds me of a party where they bought tons of kegs and were expecting the party of the year....well- it's just a bunch of dudes drinking their own beer and no girls. Lame. Save your money and wait for better entry points.