Wednesday, December 31, 2008

The Obligatory End Of The Year Post

I'll keep it short and sweet.


A lot has happened since Ma Ying-Jeou was elected, but I, like many others, feel that the worst is yet to come for Taiwan in terms of its sovereignty, freedoms, and economy. Perhaps a glimpse of what is to come, Hu Jintao (Communist leader of China) held a speech outlining China's policy towards Taiwan. The key quotes and what they actually mean:
  • "As long as the 'one China' principle is recognised by both sides.... we can discuss anything," (Read: As long as you admit Taiwan is a part of China, of course we can talk about trade agreements and international space, but that doesn't gurantee anything)
  • If Taiwan's opposition Democratic Progressive Party gives up "splittist activities" and "changes its attitude," it would elicit a "positive response," (Read: We hope your party dies, once we take over Taiwan, your party will cease to exist; if you happen to give up your splittist activites, then maybe we won't kill you when we takeover the island- just place you in jail)
  • "We understand the Taiwan people's feelings on participating in international activities, and we attach great importance to related issues on this," (Read: Blah blah blah, fluff fluff fluff)
  • "...We can have realistic negotiations to reach a reasonable approach for the issue of Taiwan participating in the activities of international organisations on the premise of not causing one China, one Taiwan." (Read: Again, we can negotiate participation in international organizations if you admit Taiwan is a part of China; that does not gurantee anything)
A few articles mentioned some sort of armistice or peace accord. That is exactly what I described a few months ago as one of the signs that Taiwan is falling into the grasp of China. The sad part is that the 50-60% of Taiwanese who support 'status quo,' are too afraid or actually think that what is happening is still, 'status quo.' By the time the 'status quo' actually changes, it'll be too late.

The Markets

Over the past couple years I've read many books on investing and trading. One key theme throughout all the books (it seems like), is similar to what Dwight Schrute said in the television show, The Office:
Mr. Brown: Great, well, what is a hero to you?
Dwight Schrute: A hero kills people, people that wish him harm. A hero is part human and part supernatural. A hero is born out of a childhood trauma, or out of a disaster, that must be avenged.
Most notably, the last sentence. One theme throughout those books was that they "saw the light" or became "great" at what they did, only after going through a crash, or losing it all once, or something like that.

Like a hero born out of a disaster

Those who were in the markets for 2008 should be able to claim this year as a disastorous year. Perhaps it is as it is, that only after something like this year, can we truly become a great investor/trader.

Earlier this year my account was at an all time high. At the time, since it's inception in December 2006, my account was up somewhere between 350%-400%. Sometime between then and now, my account value ended up really close to where it was 2 years ago. No I did not lose everything, but all those gains that I never realized when my account value was at an all time high, evaporated in just a few months.

Looking back, I easily thought I knew what I was doing when I was up 300%+. I mean, who does 300% ROI in their first year trading? This year has been a tough year, but I'm glad I learned what I learned in my first 2 years of trading- better now then later as they always say.

Here's to those who survived this year: May we become true heroes.

Sunday, December 21, 2008

The Perfect Storm

So I've been "bunkered" down in our house for the past week with what started as mediocre snow in this region, but the past few days, has become quite a blizzard. Having ventured out once, traffic is slow, people are pissed, people do not like shopping in this weather.

This is icing on the cake, for a poor shopping season for retailers. Huge markdowns and last minute e-mail trying to get me to buy their items with free 2-day shipping to get it in time for Christmas speaks volumes. Now add to the fact that many families are stuck in their houses, and now you have less shoppers than even intended due to weather. I wouldn't think there be much impact if it was just this area, but this is happening across the U.S. Despite what they say, the patriotic thing is not to go out and consume and buy up more stuff on credit. Work and save is the way to go.

Too lazy to put up charts, but I'm in VFC puts and short the actual stock on ANF.

Sunday, December 14, 2008

Why The World Thinks Taiwan Is A Part of China

When Taiwan actually does get some front-page status on, you can bet they'll get the history of Taiwan wrong. And this is why everyone except Taiwanese people think that Taiwan is a part of China.

"China, Taiwan reopen regular links" -

As if CNN were a part of China's propaganda machine:

Taiwan separated from China after the communist victory in the Chinese civil war in 1949, with the defeated Nationalists setting up a government there. Beijing has always considered the island a renegade province and has threatened to go to war should Taiwan declare formal independence.

Please note that Taiwan did not separate from China in 1949. What actually happened was Chiang Kai-Shek lost the civil war against the Communists and fled to the island of Taiwan. At the time, Taiwan was to be a temporary-camp where he hoped to eventually launch a counter campaign against Mao Zedong to retake China. But, that never came to pass and eventually the KMT and Chiang Kai-Shek stayed on Taiwan and occupied it for the next 30-40 years.

Edit: I came across this editorial in the, which I found to be very well written and digs deeper to the underlying cultural ramifications that underpin how China views the world, and the U.S.

Jeffrey Garten, an undersecretary of commerce in the administration of former president Bill Clinton, has said: “Barack Obama’s first overseas trip should be to China and it should occur within a month after his inauguration on Jan. 20. He should bring Secretary of State Hillary Rodham Clinton, Secretary of the Treasury Timothy Geithner, Secretary of Defense Robert Gates and his ambassador to Beijing.”

“Such a trip would be a showstopper, breaking all precedents,” Gartner, a professor at Yale, wrote in Newsweek magazine last weekend. “The trip would not be designed to negotiate or resolve specific issues. Instead, Obama would be setting the style and the tone of a new US approach to China.”

The Chinese, however, would see that visit as the young, new, and relatively inexperienced president coming, like the envoys of old, to pay tribute to China. In Asia, where symbols command more attention than in the West, an early Obama journey would be seen as the “Western barbarian” submitting to the power of the Chinese court.
What you don't want to do with China is cuddle it, feed it, and make it feel like a superpower. Because they'll feed on it, and use it to their advantage. Don't think you can make a bully not bully you by continuing to give him your lunch money. For the most part, dong hong lang all know that China is the biggest threat to stability in the Pacific region, but do we all realize that China will be one of the two biggest threats to stability, in this world. Watch and see, China /Taiwan & Israel/"Everyone Else In That Region" will be the key tipping points over the next decade.

Friday, December 12, 2008

The Chart That Everyone Is Looking At

Getting caught up in the short-term 3/5/10 min charts, that I forgot to step back and look at the daily movement. The parallel trendline in red sloping downwards has kept us within that bound for a good two months now. Notice the two red vertical lines I drew indicating the overbought condition on the stochs, with the short-term indicator crossing over. Both times, the rally up was on decreasing volume. For a similar downside to result now as it happened in early November, I'd like to see the SPY overshoot the upper trendline on volume less than 400 million, and then correct and resume to the lower channel.

Wednesday, December 10, 2008

Short Idea - VFC

I wasn't paying much attention to the "sales" and "deals" that the North Face [.com] (yes I subscribe to them) was sending me, but after being bombarded with many emails in the past couple weeks, I realized that they could be a good short candidate once this rally runs it course. Retailers should get smashed (once again) once their 4Q numbers come out next January/February. (VFC is the parent company, which has a whole lot of other retail companies under them.)

Now why did I think to short them after getting bombarded with their "sales" e-mails? To me, it speaks volumes about how bad they need customers/cash. For the most part, the North Face fad is over, and everyone and their mom has one by now. Out of the other retailers in that brands list, it would make sense if the North Face was one of their best products with the highest margins. So as you may have noticed, or not, the deals that the retailers have been putting on (at least for clothing) have been many and steep. The retailers are hurting for money, and it's looking to be a bad Christmas season for them.

Here's the chart:

It's had a full retracement back to the Obama (Election) highs from Nov 4th. That retracement coincides with the declining 50DMA as well as a decent trendline that if, falls below, would make it a great short candidate. I will be eyeing this one closely as a potential short to put capital towards rather than towards the regular index shorts.

Tuesday, December 9, 2008

Governor of Illinois Facing Corruption Charges in Attempt to Sell President-Elect Obama's Senate Seat

Alrite, look. Obama is our next president, like it (most of you) or not (a few of us). I was not going to post on this, as I thought some media outlets would propose the real question, the tough questions, in their articles, but I didn't find much at all. See the title for this blog? That's what the biggest headlines on news websites should be.

Lets look at it another way. Had the governor of AZ been in this situation isntead, do you really think that McCain's name would only be mentioned once, or twice in an article about the governor's corruption charges on selling off McCain's senate seat? An onslaught of articles headlined something like, "Governor of AZ jailed on allegations of selling McCain's senate seat,"
would be hitting the wires, instead of some vague, "Governor of Illinois jailed."

To think that Obama has no connection at all is ridiculous. From CNN articles, Obama is quoted as saying, he's had no contact with the governor and has no clue what was going on. Serious? An intelligent man (Obama) who is going to be our next president, had no clue at all about what was going on in his state? Puh-lease. Lies, Lies, LIES. So much for all of you guys being head over heels in uproar about Bush lying to us-- Obama's following down Bush's path already, and guess what, it only took him -45 days (yes that's a negative in front) of his presidential term to do so.

I didn't even do any research, but I'll leave that to you guys. If I did, I bet I could find a connection between Obama and the governor within 5 minutes. Anyways, just another thing for you Obama-fans to make an excuse for.

Lastly, I can understand this bias. With the U.S. facing a depression, and just having elected a new president on a platform of "hope" and "change," it'd be a real blow to the image of the United States if our president-elect was brought down before he even was inaugurated on allegations of connection with corrupt politicians. So, I believe that's the real reason. Life's not fair, but that's the way it is.

Anyways, remember that Dark Knight, Obama connection I made in the past? Well what do you know, Dark Knight (the movie) was shot in Chicago, i.e. Gotham = Chicago. And oh, if you haven't seen the movie yet, the politicians of Gotham were corrupt as well.

Friday, December 5, 2008

Missed The Boat

Here's a snapshot of some of my orders for today:

Pretty much, I was going to close out all shorts at SPX 792~ and immediately turn long. Looks like that 792 number should have been SPX 822, the initial line I drew in my previous chart below. Sums up the day- missed opportunities. I have a lot of re-thinking to do over the weekend in terms how I'm trading this market.

Haven't had time to look at the charts yet, but from just a quick glance at today's close, we should have put in a higher low. Higher low, next is higher high? If we put that in, things are looking extremely good on the long side. I ended up buying that SSO position at end of day today in case we just blow through the gap area on Monday (from the last Monday's gap), but I suspect a pullback will be in play. I will likely update Saturday night with a chart of where I will add to SSO/UYG/QLD. For the time being, I will not be entering short positions as I feel the momentum has temporarily significantly shifted towards the long side.

I just had to show this to you guys. Seriously, is this what the 52% of the people that voted for Obama believe? If so, we're in deep sh*boop*, because what we don't need is people still thinking that things are getting better before they get worse. Why? Then we are ignoring the problem, because the problem doesn't exist in their minds.

Has any body noticed the market reacts the opposite way from the general thinking. Oil, houses, commodities were reaching new peaks not too long ago; newspapers, cabdrivers, barbers every one was following the trend of S&P 500 reaching new highs, every one was buying stocks. They all over reacted as the past 3 months have shown. Now there is gloom and doom every where. This will change with President elect Obama assure office. From what I have heard from him, he will be a Peoples' president, common man and main street will thrive, so will the economy. The gloom days will end in a few more weeks, look for the rainbow soon. Shorting at these levels can prove to be worst then being long in November 2007. We will see a new and prosperous USA emerging soon.
Edit: Back with my weekend charts:

Alrite, the bad unemployment numbers managed to be shrugged off and the market rallied on Friday. What gives? A lot of people are whispering about a Christmas rally, which would coincide with things in terms of Fib series and EWs, which I do not know enough about to comment on; but looking at my own charts, it would pay to continue to be very cautious on the short side. Yes, we are in a primary downtrend (aka bear market), but as they say, bear market rallies are the fiercest and fastest of all rallies. I've decided to not enter any more short positions for the time being as I feel the market is sending a message that it wants to go higher. I'd consider easing into some puts again if we get to SPY 95-96 (although will likely wait for 100), followed by SPY 100, followed by SPY 106 of positions.

There's a lot going on in this chart, but bear with me. Once again, we're coming into that gap zone from Monday's gap down, where it looks like we're right under the 25DMA as well as the middle line of the upper and lower channel. If we break this 88-90 gap, it would clear the way for a test of 95, where we first met resistance on a bounce, after the election highs. On a move up, especially with the Christmas cheer rally spreading, a run to 100 in the next couple weeks seems very viable. Above 100 though, would require us to break out of this channel we're in, and IMO not very likely as of this point. But, things will change if/when we get closer to those prices.

So, where does this put me in terms of trading this market? I'm looking right now to buy the dips, rather than short the rips. If we get a pullback next week, I would be a buyer at the 85 resistance/support that we've had a lot of fights over, these past 5 days. Any lower, I would be buying at the 82-83 low that we've held onto this week, with a stop right below at ~81.

All that being said, I am still in short positions, mostly Jan/Feb/June put options, that have time to work out, but I have one IWM Dec puts that will be begging for a pullback to exit out of.

The bigger picture:

We will likely test that 50DMA on any move up, but the 200DMA is well above us, and is continuing downwards.

Finally, a spotlight on one of my old-time-favorite stock, LDK:

LDK has been one of the most controversial solar stocks of the past, and perhaps of all solar stocks. They had some previous trouble with allegations of fradulent accounting pratices, which were eventually cleared- but the bias against them (IMO), never really faded. Anyways, LDK is one of the only solar companies that reported solid 3Q earnings, while maintaining FY08 earnings, and upping guidance for FY09. Which, is why I would like to dump my position in JASO as soon as a decent rally appears. It's a long term position, so I will have good tax treatment on that (0%!), so I'd really like to get something out of it, and not have to pay taxes to the next administration to give away as welfare.

So, LDK is seeing overhead resistance at the 15.50-16, where it's been unable to overcome that resistance twice now. A rally in the markets could easily spike LDK past the resistance and towards the 38.2 RL (~$25), which is also a level that corresponds to the gap down on 10/06. I may add LDK to my list of stocks/ETFs that I will trade if we get a rally moving. Currently looking at SSO, QLD, and I suppose LDK, for stocks to buy on dips.

Lastly, more of me trying to read into what happened in Taiwan, and infer from that the U.S. Markets' future:

Again, there's really no basis for this other than the fact that there have been a lot of similarities between what happened in Taiwan and what is happening in the U.S. in terms of politics, presidential elections, and stuff to do with that. Check this post for more information on that.

So, days to watch for if U.S. plays out like Taiwan:

Dec 16 - temporary high?
Jan 9 - temporary bottom?
Jan 19 - temporary high?

Thursday, December 4, 2008

Just One Chart

Just a chart to see what I'm looking at tomorrow. Pretty much across the board, the bloggers are all in one accord, that tomorrow will be a "judgement" type day. We either fall hard, or solidify a multi-leg rally.

Wednesday, December 3, 2008

More Indecision

A lot more of what we've been seeing the past two days- that is, more choppiness and range-bound trading. Although, we are putting in a significant up trend on the 3-day chart from Monday's lows. Two charts, both of which make a more bullish case:

First chart above is the 3 day chart I mentioned. If we don't gap up or down tomorrow, we should open right at the resistance, and it should be a battle right from the start to determine the rest of the day. Although, these days, the market seems to want to fakeout every single person. I still would rather remain in cash, waiting for a better sense of direction of where the market is heading, rather than jumping in. Even though, I jumped into some puts yesterday when we hit the 61.8% retracement at around 87, and as such, currently holding them for a loss. Again, I'm paying for my mistakes that I'm blogging about to not do. Yeah, horrible. I'm still hedging sort of with shares of SSO, and will continue to add to the SSO position on down moves- most likely at 84, where we've found significant support there over the past couple months. Why? Well, most of what I see on the charts is just making the case for the bulls:

The descending triangle is usually a continuation pattern, and it worked the first time as we broke down on 11/19 to the downside (continuing the downtrend); but the market quickly reclaimed that support over the next three trading days. So, I know the descending triangle is usually a continuation pattern, and not a reversal pattern, but perhaps we are breaking to the upside temporarily in this case. Adding to that, the SPY also reclaimed the 5DMA.

The good news for the bears, we're still in a downtrend as seen by the 50DMA, and obviously the 200DMA. But, if we were to test even the 50DMA, there will be a world of pain for the bears to ride that one out.

On a side note, Obama can't seem to get off the air. He's been... maybe off the air for maybe one or two days out of the past week and half? And one of those days was Thanksgiving, so he's been on everyday in my opinion. Isn't this guy the one that said that there's only one president at a time? So why is he acting like he's the president already? As much as Bush is a lame-duck president already, please, we have set terms and inaugurations for a reason. They aren't there as guidelines, but as rules.

Monday, December 1, 2008

Quick Update

Even after seeing multiple 600+ point drops in a day, I'm still pretty "wowed" by the fact that we continue to drop like we have been dropping. The calmness and "un-panicky" feel of today adds to my feeling that we haven't quite gotten to that short-term bottom. As I, did not really suspect, but mentioned last week, the buying of stocks last week might have been some sort of ploy to instill a sense of calm in the markets, that things are getting better, in order to manipulate consumers (who apparently make up 2/3rds of the U.S. economy) to get out there and, buy buy buy! Following that, some sort of "Black Monday?" was my comment.

And, what did we get? Monday Meltdown, or Meltdown Monday. :)

Anyways, I'm trying to stay out of large positions even though I think the chances for another big drop in the next week or two is decent, but after messing up on this last shorting party, I've decided I just need to manage risk. Most of that is waiting for the confirmation, instead of trying to get that extra 1 to 1.5 points that you may miss, if you wait for the breakout. And what do you know, that goes back to what I previously said... patience, patience, and, patience.