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GoodVibe4Ever (< 20)

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GoodVibe Chart Of The Day - The bears are setting up the BBQ tables

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February 02, 2009 – Comments (16) | RELATED TICKERS: TLT , GLD , SLV

After more than a year being justifiably in the bears’ camp, I switched to the bulls’ camp on Nov. 20, 2008 (solely based on technical indicators). Since then I had a strong believe that this low will hold. Fortunately I developed through the years the ability to trade the charts not my believes. So, I swung some with bulls and some with the bears. When the rally was cut short in mid January, I started to position myself in a defensive mode reducing my long exposure swing by half on Jan. 28. Also, I have firm stops for the rest.

Back then and still until today, I believe the market must get a relief rally from the leg down that started on Oct. 2007. Now, if and when this Nov. low get broken, a lot of bulls will throw the towel and the bears will cheer. I beg to differ. There is a sizable counter trend rally that must be fulfilled and the charts support my believes. The coming breach, if it comes, will be the last decline before a decent multi-months rally for the stock market. This is I believe and will trade.

A lot of bears will come to you and tell you; "Here we go again. I told so." The bears will set the table, the BBQ bulls will be served, the forks will pinched in their meat, the knives will slice, and even a bite or two will be munched on. Low and behold and from nowhere, the cash will show up with a stealth move dispersing the over confident fat and lazy bears who though that this day will never come.

I am not saying that the coming bottom is THE bottom; this is just A bottom but will be the strongest and longest one that will hold since 2007. The table will turn and the bears will flee their party. So, I'll say to you that things might get wrose before they get better but then things will get better before they will get really worse. I'll have another blog to explain why I believe this to be true. For now, let's see one day at a time:    

The Big picture:

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There are two things I would like to bring to your attention for they will tell us the direction of the market for the next couple weeks. These are T-bonds and gold.

No doubt, T-bonds is anticipating the global junk bond default rates, which will accelerate further in 2009. Investors are jumping to what they wrongly perceive as a formidable secure debt in the form of T-bills and bonds. Unfortunately, time will come when U.S. IOUs size and scope will destroy that myth of security and Uncle Sam will have to increasingly raise his yield to convince investors to hold on to their investment in U.S. debt. Until that day come, I see nothing but widening spread between low-grade debt and U.S. treasuries. The charts at these levels favor at least a rebound if not new highs in T-Bonds. against all odds, I am long TLT in caps and short TBT. Almost everyone else here is taking the other side of this trade even GMX bailed out on his call last month and took his gains off the table on that trade. I might get some heat from a lot of caps' players because of this call but hey sometimes right, sometimes wrong, but always honest. After all, it's a trade for rent not to own.

The U.S. dollar will not be appealing as the IOUs but still as long as deflation is in place, the U.S. dollar will stay in demand and the dollar will reach new highs. Cash is king and puts are gods! Once bonds fall, it's time to get out of every U.S. dollar you have for it will signal the demise of the U.S. currency.

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For gold, I have only one question to gold bugs. If after almost 9 trillion dollars of pledged U.S. money to fix the problem of which 3 Trillions already spent, why gold is under its March high? By all means, every gold bug's dream and bond man's nightmare came to fruition but the opposite of what they expected occurred. Is this not enough evidence of deflation in full force? Gold being better investment than stocks doesn't make it a good invetment. That said, time will come where the yellow metal will outshine the rest. For now, until gold make new high or reach new lows around $600ish, gold is in well-established downtrend.

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There’s a current but not final bullish Dow theory non-confirmation. The Dow Industrials didn’t close beneath its Nov. 20 closing low of 7552 while the Transports closed at 2959 below it’s Nov. low close @ 2989. This Dow theory bullish non-confirmation will turn to bearish confirmation if the Industrials follows the Transports and make new low.

For myself, I believe the Elliot wave principle is superior to the Dow theory and I will start to circle the wagon to scoop my long positions at what my wave count lend me to believe that a bottom instead of a collapse is happening. Sell hope and buy despair. Rule # 9 in GoodVibe's Trading rules.

I hope this added value to your thinking. Be happy, do good, and the rest will be taken care of. That I believe and aspire to live.

GoodVibe
Strength & Honor

What am I doing right now?

Heigh Ho. Heigh Ho. Heigh Ho. It's bed from work I go!

 

16 Comments – Post Your Own

#1) On February 02, 2009 at 2:02 AM, drummnutt (< 20) wrote:

Great post!!

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#2) On February 02, 2009 at 3:02 AM, nthought (< 20) wrote:

seems plausible, but I have a question that might help beginners like myself. 

 

I think playing the ranges is a very good strategy right now, but is it too obvious?  If everyone loses faith in long term buying and is playing a range bound market, does it not reduce the size of the swings? 

 

I don't think we will breach November, and I think news and the effectiveness of government policy will determine where this market goes in the year or two ahead.

 

 

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#3) On February 02, 2009 at 7:11 AM, Mary953 (76.13) wrote:

GoodVibe - Have a good start to the week.  At the moment, I am planning to sell Hope and buy Nyquil or any other cold and flu medicine that will get me through the next week or so. May all your trades be prosperous ones!

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#4) On February 02, 2009 at 10:26 AM, GoodVibe4Ever (< 20) wrote:

Update:

Daily 02.02

Enlarge

I stay defensive and seller on strength.

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#5) On February 02, 2009 at 1:32 PM, Tastylunch (29.29) wrote:

hey goodvibe

just curious ,do you end up trading equities or just markets and sector ETFs using these market calls? Or do you play options?

E.g. On one hand gold does not nearly as bullish as it "Should" under the currency collapse thesis so I have borrows lined up on some miners if need be. But on the other hand gold miners look beat up compared to gold as it is...

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#6) On February 02, 2009 at 2:01 PM, GoodVibe4Ever (< 20) wrote:

Update:

Daily 02.02II

Enlarge

Tasty -

Currently, I trade ultra 2 and 3 ETF for market and sector calls. I also prefer the Russell's options above the rest. IWM is my favorite. I tend to go option most of the time for individual stocks. I prefer highly liquid Beta stocks and rarely trade any stock under $5 or with low volume and never under $1. I am a swing to position trader but 10% of my trades are daytrades. Hope this answered your question.

GoodVibe 

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#7) On February 02, 2009 at 2:24 PM, Tastylunch (29.29) wrote:

yesh it did completely , thank you very much.

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#8) On February 02, 2009 at 2:48 PM, kstarich (30.56) wrote:

Goodvibe

Another great chart.  I am going to save these to read and read again.  Can you do an how to invest ETF 101 for beginners.  I have never bought an ETF and would like a simple strategy explanation of what and when if possible. 

Thanks for all your work!!!

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#9) On February 02, 2009 at 4:34 PM, GoodVibe4Ever (< 20) wrote:

You welcome Kstarich. I'll do.

For now, you can check out these places to have better understanding:

On Yahoo, on Morning Star (Quick and free sign-up required) and right here on MF. Best

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#10) On February 02, 2009 at 8:27 PM, isusan (< 20) wrote:

I am not saying that the coming bottom is THE bottom; this is just A bottom but will be the strongest and longest one that will hold since 2007. The table will turn and the bears will flee their party. So, I'll say to you that things might get worse before they get better but then things will get better before they will get really worse. I'll have another blog to explain why I believe this to be true.     

Hello GoodVibe, I'm looking forward to reading that. 

I don't know if you saw this, but I think you'll love it....Abitare's blog:   http://caps.fool.com/Blogs/ViewPost.aspx?bpid=138378&t=01007146184382914537#commentsForm

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#11) On February 02, 2009 at 9:13 PM, Mary953 (76.13) wrote:

"I trade ultra 2 and 3 ETF for market and sector calls. I also prefer the Russell's options above the rest. IWM is my favorite. I tend to go option most of the time for individual stocks. I prefer highly liquid Beta stocks and rarely trade any stock under $5 or with low volume and never under $1. I am a swing to position trader but 10% of my trades are daytrades"

GoodVibe - Could you choose any of the statements above and explain it with the reason for using it as an investment stragedy?  I am not requesting that you explain more than one.  You have other things to do and I will be happy to learn any portion of this.

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#12) On February 02, 2009 at 11:33 PM, GoodVibe4Ever (< 20) wrote:

Nice, Susan. I did. If I look deeply in our current charts, I'll see a black bear not a black swan. ;)

Mary -

First, these are trading not investing vehicles. Options and ultra ETFs are time sensitive. Options are not equities but a bet between two people on the price of an underlying security such as a stock like IBM that will be accomplished in the future at certain time.

So, you come and say; Vibe, I bet you that IBM will be a $100 from its current price of $90 before Feb. 20, 2009. I say to you fine, I believe the opposite. How many shares would you like to bet? You said 100 shares. I go and tell you give me $2 for every share = $200 and I will take the risk. If IBM go to $100 before Feb. 20, I will deliver the shares to you @ the current price of $90 not $100/share. I lose $8 ($100-$90-$2) with total $800 loss for me. That mean your $200 trade made you a return of $800. If the shares go down to let's say $85 instead you lose your $2 bet and no more. In options this is called you bought IBM call and I sold you IBM call. This is very simple way to explain the process but it's bigger than this.

For Ultra ETF, it's a basket of stocks that track sector or index for example but also had option component where it gives you double or triple upside or downside the normal return of the original stocks inside that ETF on a daily basis. If you buy SPY, it gives you as much as S&P 500 returns but if you buy SDS or SSO, it gives you 2 times the return for the day .

Does that make sense to you or answered your question? There're number of links in comment #9, did you check them? They will help you understand ultra ETFs  

Traders refer to high flyers like AMZN, RIMM, GOOG, BIDU, AAPL. etc. as Beta stocks. They're more volatil, riskier, but offer the potential for higher returns.

Day, swing, and position trading are different styles of trading that differ in the time you hold your positions. Day is the shortest and position is the longest but all of them are trading styles not investing

Hope this put you in the right direction. Can you tell me more about your goals doing what you're doing now, how much you tolerate risk, time frame, expectation, time available for you, etc? I see you so eager to learn but don't crush yourself. Take it slowly and all the pieces will come together one day.

GoodVibe

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#13) On February 03, 2009 at 12:55 AM, RainierMan (75.92) wrote:

I'm not a technical analyst or a gold bug per se, but I don't know that looking at gold in March is a good time frame. It was a different world in March. It was a different world in August for that matter. Trending from any time before this fall doesn't quite right.

Gold has been strong during the last two months, and I don't think it's only due to inflation concerns. There are those who believe that holding some gold even during a deflation might not be such a bad idea. I think there may be a very wide range of valid and invalid concerns that lead to gold buying. I think those concerns could actually increase in the near and medium term.

Gold has has a big run up in the last couple of months. I would expect some pull backs, but the conditions for the run up are still there. 

Anyway, good post; I enjoy seeing how you analyze the charts. 

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#14) On February 03, 2009 at 7:50 PM, RandomHero (75.83) wrote:

Vibe, Today I have come across your blogs for your "class".  After reading all of your post,  a few questions have poped up.  Given that I am a rookie at trading  I have been self-teaching myself since June of last year.  I have invested in a Roth account last year and maxed it out.  I will be maxing it out every year.  Anyhow,  I have really enjoyed learning about the market while making long term investments for retirement, and ive came to realize that I want to trade more often as I am watching the market many hours of the day.  Anyhow, back to the question after that little rant,  I dont understand what all the lines on the charts mean.  Ive watched many tutorials but none have said what everything on the chart means and how they came about, and what they are predicting.  If you have any way of directing me to a good source to learn this I would greatly appreciate it!!!  Or even better if you could do a little class on basic chart readings.

 

Also, what platforms are you using to get realtime quotes, charts, broker?

Thanks for all of your time and knowledge!!  I will be learning a lot from you.  Soon I hope to get my feet more wet than they are heh.

 

Ive bought two stocks a while back, one being cvtx at $11, I sold half at $15.8 and hope to see them take the $1B offer on the table for higher returns.  heh, it was a good first stock purchase i think heh.

 

Thanks again!

Ryan

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#15) On February 06, 2009 at 9:46 AM, arboretum (28.25) wrote:

What  a great post.

I would like to point out what meat it is we'll all be eating at the barbecue - PORK.

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#16) On February 06, 2009 at 10:00 AM, PrestonCheek (32.41) wrote:

GV, thanks again for your information and I am following now. Holding SRS and GLL, will see what happens.

Preston

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