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.

It's simple mathmatics...

We love the economy, we love the recovery, we love the future, and everything is awesome. We love buying just because everyone else is......

However- Our financial calculators on annualized rates of return and projected current rates at the current pace has them going bonkers! How many standard deviations are we outside normal ranges since November 2011. We are not going to wait for Wall Street to plug that into their "asset allocation and risk" trading programs. Call us crazy,Call us pessimists, but don't call us "Illogical".

In the end -we estimate 70% of trading volume on the exchanges is due to computer programs. The last time we checked, computers use logic, not emotion. We have the advantage of intuition-we are using it now.

Alert! The Russell 2000 is up 100% since Novemer 2011

Yep. You could have bought the IWM ETF for $60 in November 2011. It broke $120 a few days ago.

You know the drill;)

Of course we are short.

Alert! The S&P500 is up about 82% since November 2011

Yep. You could have bought the SPY ETF for $110 in November 2011. It hit $198 a few days ago. Do the math.

Conclusion: We are Short or We are sellers. Definitely not buyers!! Good luck lemmings;)

It's just basic math people.

Greed is not good...sorry Geckko

Apparently making a 300% return on our option trade in a week was not good enough for us. We were convinced we had a 80% chance at a 1000% return in 6 weeks. It didn't work out and we let our options expire worthless. It was so close that it came down to the last day May 16th. We bet huge and took a pretty big hit to our speculative account. Oh well. We will trade our account back up and go back to options.

What the Technicals are saying....

Opinions aside, It's really all about what technical analysis is saying. Some have said as much as 70% of the volume are Algo's and trading programs that are "reading" the markets and buying/selling accordingly. They have no emotion. Our trade programs continue to indicate strong sell across the boards. The charts can be "painted" for short periods of time. The momentum has stopped and fundamentals always win in the end. We are not short because we have an opinion on the market, we are short because our technical trading programs are flashing warning signs across the board. Our computers  trade a lot better than we do! We designed them that way;)

The False Flag

We heard some ridiculous rumor that "The Bulls" are behind the fear and crash warnings. The media is scaring the public. Why would "The Bulls" do this? Because investors have been taught that the bears are never right and stocks climb a  "wall of worry". It's a "False Flag". The Bears are not trying to push stocks down, The Bulls are trying to make investors "think" they are. Thus, it will make the donkeys buy more at any price. BRILLIANT!

Meanwhile back at the ranch.....Institutions have been net-sellers all year. 

Beastie Boys Song!

Ali Baba and the 40 Thieves, Ali Baba and the 40 Thieves, ....They are trying to hold the market together for this ridiculous IPO. The largest IPO in history on this POS! We have to laugh. Wall Street will make a large fortune off this deal if they can hold the market together. The IWM ETF and small-cap growth stocks are getting crushed and they are still extremely expensive. The Russell 2000 will break all support soon. Almost 1/2 the stocks are in a bear market and "The Index" is on tissue thin footing. "How long do you think a wet, single-ply piece of toilet paper will hold up the 10-ton Elephant that is tight-roping across The Grand Canyon"

That statement says it all. Back to the music...Ali Baba and the 40 Thieves...We love The Beastie Boys tunes.

We wouldn't even consider 90% of all stocks in the market right now. It would have to take at least a 15% correction in all equity indexes to even glance at stock prices to see if we even want to take a gamble. If it doesn't happen soon, take the spring and summer off and enjoy the weather. Wall Street will;)

Hmmmmmm.......Lol!

We have asked if a CFA would really buy the IWM ETF with their own money. This is an index of small company stocks that have appreciated substantially above all measures of standard deviations. The valuation is quoted as high as 80+ trailing P/E to much lower. No-one really knows for sure. Try to get a definitive answer. Just try. The thing is - they wouldn't. It is not their money. Look at the quality of Bulls that are speaking on TV. Hmmmmm....Lol! This thing is due for a slam to the 200-day  moving average (on a weekly basis) of  $95 or at least $100. It is $112 now. We are thinking by May 17th. It will be fast. Thanks HFT!

Horrendous Earnings...Sky High Valuations

Wow! The tech companies operating profits have been terrible. If you prefer to use Non-GAAP earnings or virtual currency, then they were great! Fortunately, stocks don't trade on that for too long. Spring is coming and people are not going to be spending as much time playing on their idiot boxes. Sell in May and Go Away - are The Words on The Street. These stocks will be a lot cheaper by summer. A lot cheaper.

Why now would be a good time for a correction

The boards need to be cleaned up. I haven't seen this many "less-than-quality" deals priced so fast and selling at ridiculous prices since the 1999 Tech Bubble. We have indexes selling at unsustainable multiples, horrendous investment advice all over the media, and no fear at all of the risk of investing in stocks by the general public. The "10% Correction" in the NASDAQ" is over. It is safe again, buy!

It is good for the country to have a healthy stock market; however. right now would be a great time for The Fed to allow a healthy pull-back. This would clear the board of complacency and protect the investment public. They need to know that the market does not go straight up. There are too many nearing retirement that should reconsider their allocations. The markets can handle a reset right now. Most of these individuals have recovered from the 2008 financial crisis and have more than enough profits. If it is not done soon, it will set a dangerous precedent. Earnings are going to be anemic for at least the next couple quarters A  quick 20%-30% correction in  NASDAQ and Russell 2000 would be perfect to get the multiples back in line and save the Bull Market. This would be the right thing to do. Let's see what The Fed does.


* We are short the markets- we think they will do the right thing.

FEAR

The markets are full of it. The Bulls AND Bears are scared. The next 8 trading days are crucial in the short-term. The NASDAQ's resolve will be tested.

If you are long, you are nervous.
If you are short, you are nervous.

We are still short and even added a little more at the close yesterday. We are very nervous too. We had an opportunity to lock in a large gain in our short positions. Our instincts won't let us out of the trade. A 30% correction in the NASDAQ is there. We see it in our dreams.

Our vision will either pay us very handsomely or cost us a fair portion of our capital. Nobody really knows how this is going to play out. We failed to fully capitalize on our gut feelings many times and this time when we decided to play it out. It is extremely difficult to not sit this trade out.

This is trading in it's purest form. The fear of losing money because you believe your analysis is above the vast majority. A trader will need great resolve in situations like this.

A little perspective

Todays close:
NASDAQ 5-year return: +141%
The DOW 5- year return: +100%
S&P500 5-year return: +112%

Now after all the "carnage" and "fear" in the media.....

NASDAQ YTD: -2.6%
The DOW YTD: -1%
S&P500 YTD: 0%

The question should not be "What percent they are off the highs?" They are a bargain!

The question we would ask is "What percent are they off their lows?" They are Expensive!

What do you think?

Perfect Bounce...

The ATS's hit the 200-day on the NASDAQ. This triggered auto-buy programs. It triggered our buy program. We did not buy. The ATF's do not know valuation. There are a lot of Bears, Bulls, and Pigs that got slaughtered today. The earnings releases will be poor to average (of course they will beat the lowered bars), the spins will all be bullish, and almost every portfolio manager will find any reason to be publicly bullish. They have to be. You would too if you had to stay invested. Your bonus depends on it. I have never seen so much confusion and complacency in the financial media. We heard some of the most ridiculous financial advice media outlets gave to their viewers. There was a very noticeable fear when it passed through the 200-day on the NASDAQ though ( for a brief moment ).

Going to be tough; however, let's see if they can pull off the façade. They just might. We wouldn't touch the NASDAQ or RUSSELL 2000 with a 10 1/2 foot pool. There is substantial profit yet to be taken in these indexes.

P.S. We expect a visit from Yellen tomorrow. It would be perfect timing to make some kind of public announcement. Watch;)