The script plays out.....

A funny thing happened on the way to the debt talks-the markets didn't go down. Before this week, everyone was a least a little surprised that the markets barely moved during the debt talks and rating services down-grade discussions. I even saw some opinions in the media that our debt rating doesn't matter! ( I guess the journalism and the economics buildings were far apart from each other when this guy received his diploma). Well- someone got the point because it might be a good idea to cause a little drama if people are going to take this seriously. Selling begets selling. We don't buy it. We stick with our plan and play the bounce. We bought a large chunk of XIV (Inverse Volatility ETF). It typically goes up when the market goes up and volatility goes down. We don't buy "The Scare".

In at 15.48

I know its Washington; however, they really can't ALL be naive enough to not raise the debt ceiling. We are betting on it!

Calling this trade: MR. SMITH GOES TO WASHINGTON

(P.S. Let's just hope its not BOZO THE CLOWN)

A New Play on an Old Favorite

Ignoring the media for now with all this political posturing, we decided to play an old favorite again. The volume is extremely low today and we wanted to take advantage of nervous sellers and placed a few limit orders below the market to see if we could catch any bored Market Makers. We did. The company is Genetic Technologies (GENE). They have FDA approval to market breast cancer testing in the U.S. and just went through a round of additional funding. We played it before and have been following it for months. I really like the chart in here and I think I have a good feeling for how this stock moves. If you look at the chart, you will see this stock is explosive. We played it before from 5.25 to 10 in just a few weeks. Our cost basis is 5.97. it was very hard to get those shares even though the stock hit lower levels. It seemed the Market Maker had "sticky hands"with those shares. Keeping with trading is fun theme...We will call this trade: "GENE GENE THE DANCING MACHINE". You might remember him from The Gong Show!

Target: 10 plus

The Numbers.......

SPY Support 131...break to 127
DIA Suport 123...break to 118
VIX at Resistance.......

Plan: let the markets develop a little further...thinking short the debt relief bounce coming soon. Check emails for more details and strategy.

A lot more interesting -Potential Double-Top Formed

The technicals are indicating a potential double-top in the S&P500 and The Dow. It started to form yesterday and it just made the market a lot more interesting. It is hard to tell if this was an "intentional painting" or something for real. It almost looks too perfect. The month of July just completed the text book drawing of a double-top. Gold continues to break out. The path of least resistence appears to be down. Not sure yet how to play it. We could jump on gold for a few more points, we could buy some volatility, etc....working the books...stay tuned.

Debt Limit- Really?

It seems the markets are not taking this "Debt Stalemate" too seriously. The averages are holding up extremely well for such a perceived risk. It appears the media and the politicians are stirring up more dust than the financial markets. Does anyone REALLY expect the U.S. to allow a default? C'mon now- the U.S. markets have barely moved and the volatility index is sitting just over 19. The question becomes what happens after they approve raising the debt ceiling. The bulls and bears are wrapped so tight that there just isn't enough volatility to make any huge profits in here. Who would have thought a potential down grade from the rating agencies has little effect on the markets- I guess they lost mega credibility during the 2007 financial crisis when they had AAA ratings on everything. Boring is the word for today. We will keep looking and have some ideas. Check emails.

Taking off Gold for now at 53.88

We will complete write-up at a later time.

GOLD RUSH! New trade-DGP

We are keeping the fear trade on- just moving to hard assets. We purchased a large position in Gold. We bought DGP at $51.88. DGP is an ETF that is 2X's leveraged the price movement of gold going higher. We switched because this will allow for the fears of the public to assist with demand because they can purchase this commodity. Obama speaks at 11am today about the debt ceiling. Our computers indicate Gold is breaking out and talk about switching to the gold standard may help a specutlative buying frenzy.

Check emails.

Stepped aside! Out of TVIX

The the market is acting too strong. The earnings are comming in from Goog and Citi strong. The market futures did nothing on being posted on "Credit Watch" by the credit agencies. Sold at open and got 21.03 for a net profit. We follow our rule- if the market is not acting the way we think it should, we bail. Looks like bad news may be priced in. We will watch to see the action. Can't complain about taking a profit. I trust many followed this morning's email before the opening!

P.S. We bought more TVIX

at 21.28 just a short bit ago. let's see what happens.

The Past or Present?

I just finnished reading "Lords of Finance: The Bankers Who Broke The World" by Liaquat Ahmed last weekend. My brother had given me the book. It is an outstanding read on what happened leading into the 1929 stock market crash and what happened after and during the great depression. It talks about the central bankers and gives a great insight into John Maynard Keynes.
The reason I brougtht this up is because I started thinking about our current situation and the wreckage of the 2007 financial crisis. The events in the global economy and how it effects our banking system is fascinating. The movement of gold, the fiat monetary system, the printing of money, the current austerity programs, etc.....The fact that our labor numbers have not improved, commodities and gold have sky rocketed, and the value of our dollar is depleting. The QE1's, QE,2s, and maybe even now QE3. .... I digress....

I began looking at our market in a new light. What I saw is that we are on shaky ground and noticed the volatility index had hit near new lows even though the little "forest fires" across Europe started sparking. I pulled up the technicals and started to show a breaking down of the S&P500, the dollar, and the rapid rise in gold. I found out that Goldman Sachs is in the process of funding a 6 billion dollar " Black Swan" fund. A "Black Swan fund bets on the very small chance of a total market meltdown. They are going to be using some ETF VIX futures among other things. the fact that they can raise 6 billion dollars on a an investment that has a very low probabilty of ever comming to fruition-drew my interest. What's up? Thus comes the crux our trading strategy. We expect a huge spike in volatility in the next 2 weeks. Thus we buy the TVIX ( 2X spike in volatility)....then we may swith to the XIV ( bet against volatility) to play the opposite direction at the height of fear. Our trades will be simple in hear.

In simple terms: We are buying fear right now; We will sell fear later.

Isn't Wall Street grand?! Imagine that- ETF's that allow you to trade in emotion!

New trade is in place! TVIX

We have already been working on a trade the last few days. We had a little problem setting up new accounts, so we missed some of the move personally; however, some of our devoted readers have taken advantage of our pick.

The new pick is TVIX. This is a 2X leverage ETF on the VIX (Volatility Index) based upon futures. It is supposed to increase at twice the amount the VIX increases ( not an exact match). Ideally,the more the market goes down, the higher this will go. Our entrance price was at $16/share bought on 7/7/2011. A second purchase was added on 7/13/2011 at 18.25. Another purchase was complete today at 20.68/share. We are continuing with our pyramid strategies we used before. (For the purpose of simplicity, we use 100 share blocks- it could actually be much more)

Trade Flow:

100- 16.00 Total Shares 300 at cost basis of $18.31 (not including commissions)
100-18.25
100-20.68

Stay tuned- We will explained the trade later since we do not have time right now. Check emails for targets.

We are back!

We coudn't stay away for long! Due to popular demand, we are re-opening up our platform and going to be starting a new log. It's good to be back in the saddle. Stay tuned.