Trade Update

We sold our leveraged  long oil ETF a few minutes ago for a nice 12.5% gain. Oil jumped to $30.00 despite negative news. The pop was not big enough for us to think it bottomed. If oil starts to break 30 or gets close to $25.00, we will reposition. We used some of our profits to reposition in the leveraged long volatility trade. The market bounce was not impressive at all and we think traders will sell going into the weekend as the public reconsiders their 401k losses and call their advisors.

Trade and Market Alert

We sold our short oil and long volatility leveraged ETF's this morning. The Major Indexes have touched the August 2015 low and should find some support or at least a major bounce here. Crude Oil WTI futures touched its March 2002 "Gap-up" low at  around $27.50. Most of the Algo's and HTF's have to at least dip in here.

We bought some oil leveraged ETF.s here. We may be a little early because the load up is around $20.00 for oil. We normally wait for some mass capitulation; however, this was our initial target and we have to follow the plan.

The S&P target still remains around 1600 if there is no hold here.

Where we stand...

The markets are back to normal- for now. The technical indicators are functioning as they should be. The central banks are out of the picture and have exhausted their dominance. Although this has been the worst start of the year ever (if you are long) for the indexes, it is a welcome event. The markets are behaving in a rational manner. Price discovery is now " free floating". There is no going back ( we hope). What this means:

1. The global stock markets are now free to trade on "true value and price discovery".
2. The correlations will revert back to the mean for each asset class.
3. Although initially painful, the reversion back to normal operations is fantastic news to all of those traders and investors who had to deal with "rigged markets" since the QE experiment.
4. The "non-skilled" on Wall Street will be wiped out and the asset managers can get back to the business of hiring "the best and the brightest" instead of poorly skilled and trained sheep.
5. Hopefully; as Ayn Rand wrote about may years ago, mediocrity  is dead. The Wesley Mouch Syndrome in the markets has run it's course.

Happy Trading! 2016 truly is a "watershed event" thus far! It is also the very best thing to happen to Capitalism in a very long time! How the U.S. markets ever hinged our success to communist markets in the first place is a mystery. Time to decouple.

Happy New Year!

We went "underground" for a few months. Our loyal followers enjoyed the personal emails and reports. We are back on-line. The reason, as explained in the email, is that we really did not have time to update the blog as we were concentrating on finishing the electric car tax- credit sales cycle and did not have time to devote to the public blog as a free service. Our trading basically stopped as we focused on our "real jobs".

Easter Weekend

Good Friday and Easter. Thank you Jesus.

Not just a theory any more - Markets rigged, broken, or whatever you want to call it

As we have been saying for 2 years now, the markets have not been functioning in any resemblance of normality. The list of high profile and exceptionally bright investors and traders who have broken their silence on market functions is growing very rapidly ( Yardeni and Gross to name the latest). We can identify a few reasons for this:

1. The invention of Quantitative Easing.
2. Global Central Bankers interference in the markets by directly purchasing of bonds and stock futures.
3. High Frequency Trading and Algorithmic Program Trading utilizing "quote stuffing"
4. ETF distortion and manipulation programs
5. Extremely large trading volumes concentrated into a few market participants
6. Advances in trading technology and lagging monitoring and governance tools
7. Risk distortion and index gaming
8. The total transference of economic power from governmental agencies to trading and investment firms


Welcome to "The New Market Order".

You have 4 choices:

1. Choose not to participate and watch your purchasing power erode
2. Throw out 150 years of investment books and teachings and jump in
3. Change the system
4. Move on and find other ways to enrich you life and your wealth

In my 22 years in the investment and trading business, I have never seen such a total lack of interest in the markets by such a large majority of the American  public while the global stock markets are hitting new highs. I guess most people on the planet have more important things to think about than what the global stock markets are doing. This is not a good sign. No new fodder for the machine. A small amount of participants for an ever decreasing expected  return.

A major correction is coming.

The Prisoner of Wall Street: The Federal Reserve

There has always been a revolving door between Wall Street and The Federal Reserve. Not a big deal in the past because we all know that elected officials in government are not that smart when it comes to finance. If you ever watched the Senate hearings during the financial crisis or any other hearings concerning Wall Street you can easily see that they are completely ignorant on financial matters. It's almost comical. This makes them lemmings. The QE project has now made them prisoners. They have not raised rates since 2004! They can't. Someone should have bought them a calculator many years ago. It's simple math. After all the bonds they have bought since this "Experiment"  began, any increase in interest payments would have a devastating effect on our national budget. Now all central bankers on a global basis have joined the party. The only thing they know is QE makes your stock market go up. It makes those that own stocks richer and everybody knows that those that own stocks contribute the most to helping them get re-elected. A no-brainer. If Wall Street doesn't like what you are saying? No problem, send stocks down 5% and they get scared. Prisoners indeed! The book "A Random Walk Down Wall Street" is out. Nothing that happened the last 3 years is random. The markets are broken. Put all your savings into the stock market and trust that Wall Street and The Federal Reserve will take good care of you. Forget about CD's. God Bless Wall Street and The Fed.

BTW... What percent of the American population own stocks? What percent of Americans are benefiting from " The trickle-down theory"? What percent of corporate profits, jobs, and cash are held outside of the USA?

The American people are indebted to you - literally!

CNBC just said it will take $&2.5 million dollars for you to retire comfortably - we all got that covered.....right?

Update: Crushed in oil

Trade Alert! Large Oil Trade Initiated Today

Details later....we jumped in.

Volatility Trade Closed!

It was a great move! We had to be patient and buy all the way down ; however, it paid well in the end.

Standard Deviations

We certainly are not mathematicians; however, The level of standard deviations above historical variances are visually off the charts. Our trade was just a hunch this morning and now our trading programs are confirming our speculation is at least logical. Do we add more?

We couldn't resist!

Although the technical charts continue to indicate Bullish moves higher, we still sense everything is wrong. Technical Analysis is not 100% accurate.  There is an almost comical artificial support for the stock markets. If everything is going so well, why do the large bankers keep propping and talking it up? It's good to know that they care about keeping the markets going and helping the millions of investors and their 401k's. Never seen them so nice.

Strange.

This morning, we initiated a decent size position on the expectation of significant profit taking in the markets soon. We are betting that this is an artificial liquidity bump so large investors can liquidate some stock holdings. We will have tight stops. We also see a potential doji star formation which may signal a short-term trend change is coming. We don't like to jump the gun; however, we are speculators and we just don't think the bankers always have the best interest of their  minions in mind;)

We couldn't resist!

Market Update: The Slow Grind and Strange Action..RED ALERT!

The market continues to grind higher in a fashion we have not experienced in 21 years. It is a strange action as there is very little churning and a complete lack of normal fundamental or logical moves in the majority of stocks. The markets are being manipulated. Not that this is anything new (as this a normal part of markets). The problem is that there is NOBODY left on the other side of the upward grind. The complete lack of normalized differences of opinion are absent. The true volatility is being held in artificial check by the enormous proliferation of ETF's over the last couple years. We cannot overstate the impact this is having on the global markets across all asset classes. This is not rocket science. They are very easy to use, asset specific, and excellent trading vehicles. The ideal instrument for Algo trading platforms and HFT computer programs. It's easy and effective. The problem is this can make it very easy for indiscriminate moves in markets and individual stocks. The fundamentals and price actions are skewed. This also makes it extremely easy to manipulate trends and an excellent choice for "tape painting". We would love to run a few billion dollars in this environment - you can literally print profits. The thing is - if we did - we would be "painting a bull tape" in the midst of deteriorating global fundamentals while we accumulate bearish bets. When the spark that eventually reveals itself hits, we can pile on our bearish bets and "paint a bearish tape". This is legal and the tools are available. The financial IQ of the older generation of regulators are not accustomed to the new generation of traders who are running high-tech trading programs with a huge amount of assets under their control. This leaves The Fed and ECB way behind the 8 ball. When the U.S. markets turn, it will be fast, furious, and explosive.

We are not participating in the upward move at this point.  We are not aggressively betting on a negative move either. We are slowly accumulating bearish bets at a slow and deliberate fashion as to let the bubble continue to inflate while limiting our downside. It is boring. We are playing for a huge pay-off on a vicious trend reversal. We are not confident; however, we have to play it this way.

Our strategy remains the same. We continue to buy volatility at record low prices. A slow and methodical process. We may miss the potential rise of the S&P500 to 2200; however, we don't really care. We may cut and run along the way. Eventually - without a doubt - this façade will end.

Paul Tudor Jones once said (paraphrase): He will attempt a trade;if he believes he is right, multiple times until the markets confirm his analysis or he recognizes he is wrong.

Of course, risk management and auto shut-downs are an integral part of capital preservation. We are convinced that we are right; however, we recognize the fact that we may be completely wrong;)

The bids and volatiity are not right...

In our observations: The bids for stocks do not seem natural. The volatility bids do not seem right. If you have been watching the tape, there has not been any churning. The markets are not acting under normal circumstances. There is a significant erosion of strength that is not accurately being reflected in stock quotes and volatility prints. It almost seems as if there are two markets. The public quotes and unseen dark pools off the radar. There has been multiple exchange breaks and bugs at convenient times. Humans do not act this way. It almost seems as if "The Tape" is being painted. Any reversal would cause multiple support breaks as the "painted bids" would evaporate into thin air. The printed volatility is between 14 and 15; however, the observed volatility we estimate to be in the lower single digits. This is an extremely over-crowded trade given the current uncertainty and un-resolved Black Swan events that are present. This is not good. Not good at all. We expect an explosion of volatility that has not been seen since the summer of 2011.

VIX target: 45+

The training wheels are off....

QE is over. Let's see how things do without it.

S&P500 1400 to 2000 in Two Years and The Fed Decision

If your investment condo went from $140,000 to $200,000 in 24 months, would you sell?

Housing top? Market top?

There is not a sole left on Wall Street who does not believe The Fed will be extremely dovish and a fairly decent amount believe they will continue their QE. The markets are all on one side of the trade.

Did the public and media not get the internal memo? It is priced as if everybody on Wall Street knows 100% for sure that this will happen. It certainly is not corporate revenue growth or earnings.

There is 0 volatility. It's all just a formality now.

The is no room left in The Bulls Bar

Talk about crowded trade!

Don't really remember when a trade was as crowded as this one.

A couple thoughts on The Markets

Whether you are long or short, the powerful moves in the markets (all assets) the last few weeks have been impressive. What is most impressive has been the resilience of Wall Street Bulls and The Fed to hold this market up. I have never seen this kind of resilience in the face of so many negative factors in my entire 20 years of trading. There are forces that are very strong that do not want the party to end. The entire system of normalized volatility and standardized market reactions are not functioning normally as predicted by 100+ plus years of expected market reactions and standardized standard deviations. The Algo systems running about 70% of money flows (purely an educated guess) only " see " past patterns and parameters set by historical trading variances imbedded in the systems. This makes for extremely easy "manipulation" of market subsets that domino across all markets. All you need is concentrated money flows into key market subsets to trigger mass program directional changes across different asset classes as asset and market correlations are set in the 98th percentile. Yes, The S&P500can hit 2200 quickly and Yes, The S&P500 can hit 1600 quickly. The potential volatility is not priced in. This is an excellent time to train your skills against the machines. If you do not have the stomach, speed, or ability to withstand losses - do not trade long or short.

We love the challenge! It is crucial for those who aspire to become elite traders to participate in this environment if one is to ever obtain the tools to necessary to continue in the business of speculation. It is very easy to lose money in this environment (Long or Short). Win or lose - this is a wonderful time to test your skills (in moderation) against some of the most determined and skilled competitors in the world. There are 100's of billions of dollars at stake in this Bull/Bear Battle.

Stockspeare 10-27-2014

Only The Pigs , Ostriches, and Sheep left now

You know the old Wall Street words of wisdom. These people left now are probably going to get SLAUGHTERED in our opinion.

Pigs: How much more do you think you are going to get off this pump?
Ostriches: Sticking your head in the sand is not an excuse.
Sheep: Afraid to miss your performance bonus? The next big bounce up? Following the market up even though it doesn't feel right?

Very strange market technical alerts occurring all over the place. There are powerful and concentrated cross-currents. Money-flows are very deliberate and targeted. Liquidity has to be force-fed into the system. Volatility is extremely low for current headlines, news, and the actual facts. Not sustainable.

The Tail Wagging The Dog

Threaten to pull stimulus and "The Street " sends her down just far enough until they get what they want and then send her back up to confirm their approval. This leads to another great opportunity to digest this market dynamic. Whether it is right or wrong is not for discussion here - know your market and profit from it.

To the point:  We see mixed signals from The Fed. We think it is time to really consider going long volatility and shorting the markets again. The Fed and ECB provided this mini "Verbal Bail-Out" the last 4 days. It cost them nothing ( except credibility to some or maybe even a lot -who knows).

The path of least resistance is now DOWN

Our Previous trades are BACK ON. It only took a few days and we originally thought we sold early. We were spot on. We are going to do it again with the profits from the previous trade.

Is it your last time to buy or Sell? We are betting it is time to sell Mortimer. Sell Mortimer, Sell!

Let's watch and see if the profits roll in;) Again!  We need to collect our Christmas bonus now...you can bet "The Street" will be doing the same thing;)

All Long Gold, Market Shorts, and Leveraged Long Volatility Trades Closed Out

Huge profits! Update later.

It just does'nt feel right....

The markets have not followed the normal rules in quite awhile. This is not just our opinion. We have even heard The Gods of Trading ( Goldman Sachs) and other highly respected Pros who have complained that the lack of volatility and following " The Normal Rules of Engagement " are not being followed and it does not allow for the generation of normalized profits thru churning. This is a problem. We believe volatility should be injected into the markets immediately! The longer the delay, the wider the collateral damage. I hope there are at least a couple wise "Master's of The Universe" types who are articulating this concept to The Machine. C'mon Man!

Important Reminder

The events and opinions in this blog are that of "Stockspeare" and are the public diary of a "Mad Scientist " trader who is solely expressing what he is thinking and using his personal money to place trades on his beliefs. He - by no way advocates anybody follow what he says or does. It is used only as a public blog to document a Trader's journey to achieving financial freedom or failure. This is a real life experiment.

I see four "Black Swan Events" that happend in last 4 days!

Did you see them? The 4th happened today We have gone Red Alert. Our greed inspires us to go bonkers. Bought Gold and Shorts en masse today. Hard thing to do considering it is very difficult to go against The Machine. At least we throw real money on our convictions no matter how crazy it may seem at times. It is our belief that unless you are risking financial pain by vocalizing your financial opinions, you should.....we digress;). We see black swans and we are betting heavy on the market having at least a normal %10 correction. No biggie. The odds are 85% that it happens very soon.

- Stockspeare "The Mad Scientist"

Capitalism injected into China...Russian collapse redux

Here's the thing...Capitalism has been injected into the Chinese Communist system with the success of the Alibaba IPO.  Think of Long Term Capital in Russia, Think of the book "Animal Farm". China is headed for a rude awakening. Wall Street investors in China are heading for a rude awakening. Capitalism in Communist countries lead to one outcome. Pandora's Box has been opened. Expect significant global market contractions. It's amazing how easy money and greed can collapse a socialist system. Brilliant. The global markets are going to get hit hard as China tries to reign in un-controlled domestic demands for freedom and their citizen's demand for a share of the wealth. Jack Ma may be responsible for the end of communism in China (not without a fight).Expect global volatility to hit the roof soon. This is not a drill.

Has the Bell finally rung?

1. Alibaba IPO -  The largest spectacle of total hype, profit, and greed in U.S. history. It was done by a Communist company in a Capitalist Country!

2. Apple's ugly, expensive, and cheap new IPhone ( in our opinion).

3. Bill Gross leaving PIMCO and the selling off of the High Yield Market.

4. The Goldman Sachs tapes.

5. The rising dollar

6. Global unrest.

7. S&P500 at 18X's trailing earnings.

8. There is way too much money locked in paper profits. Greed if off the charts. How much more do people expect to make in less than 3years?!

9. What can possibly make the market go higher at this point? Don't say earnings.


Are we just grumpy Bears? Maybe- over-all we have lost a fair amount of money betting against this persistent bull market the last 4 months.

We shorted again on the day of the Alibaba IPO. If now isn't the perfect excuse for a 10% correction, then I don't know how this market can be stopped. It's not healthy for the market to go this long without a pause. It's not natural to Wall Street not to have volatility. Wall Street and banks are forced to take excessive risks buying assets they know are way over priced just to get a return. You need velocity and churning to have natural and healthy markets.