The violence in the short term treasury market (yields going down) and the dollar skyrocketing against everything but the yen should tell you that this is a panic.
My comment does nothing to imply when it will end but the context is panic and having survived many panics before, which we have, will hopefully make it easier for you to manage this one.
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24 comments:
I thought I just saw a piece of the sky fall in my front yard or maybe the market is just driving me insane
No no, those were actual CFC stock certificates.
or a piece of your neighbor's colon?
stephen, your on a roll today, nice.
Panic is good. In fact, it's downright aerobic! Breath! Pant! Jump up and down! Feel the burn!
you obviously do not get enough exercise, the burn is suppose to be in a muscle group not the pit of your stomach :)
Hi Roger, All,
I'd like to increase the stock market exposure of my portfolio, but do not want to try to "catch a falling knife". Would anyone be willing to share their methodology of how to re-enter a broad market index (e.g. SP500) in a way that minimizes downside risk? I'm most interested in methodologies that use technical indicators (e.g. moving averages, RSI, etc.), but I would also be interested in those that use fundamental indicators (PE ratios, etc.). No astrology please ;). Thanks!
Rich
Go back in time and make your purchases at todays low's.
Unless of course we finish lower, than go forward in time and buy at new lows
Rich,
i would say wait till at least the 20 SMA starts moving higher. Currently the 20 and 50 SMA are heading lower, the 20 is on its way to piece the 200 and the 200 is flattening.
Technically, the risk reward ratio is not in favor of an entry.
When the 20 SMA starting moving higher you can enter and put a stop just below the low of the correction.
You will not catch the bottom but you will have a defined exit point and thus you can define the risk and size your position accordingly.
I have been systematically selling all of my funds and etf's that have crossed the 100 DMA on the 1 yr chart. I am still in bonds a few funds that have held up. I have a position short real estate and a position short the banks. I will wait for a bottom to form in world markets and buy in again with both fists when I see some lift with strong volume.
Excellent Sami -- thanks.
I guess I should have also stated that re-entry methodologies involving time travel need not be divulged ;).
Rich
I hate to sound skeptical about this wild ride today, but the finish at todays highs make all those puts at options expiration of as little value as possibly feasible.
No one would manipulate the market would they?
This also makes me feel like we should not feel to comfortable
I shorted CFC at 16 and now I am down. Why does the market always do the opposite of me. First they were filing ch 11 and now we are rallying above 20. what gives in this market.
Choosing to Speculate on CFC when you really do not know what their books look like, how long they can stay afloat, if the government will ease their problems for them, is simply gambling.
I'd recommend investing in ETFs or mutual funds when the time is right. If you want to gamble go to Las Vegas.
anon @3:27.
This market is very volatile due to hedge fund blowups, they are covering their shorts and selling their longs causing erratic moves.
Having said that, you can still short CFC if you pick an appropriate time frame and use
good money management.
For example, CFC's most recent higher low was $29.64. An appropriate stop for a short position would be right above that, let us say $29.65.
If you short at $16 then your entry is $13.65/share away from a proper stop.
If you decide to risk no more than $500 on this trade then you need to short around 36 shares and place a hard stop around $29.65.
Assuming that the stock does not get taken over at higher than $29.65 then your risk is well defined.
If you can sleep at night knowing that you are risking $500 on a 36 share position then go ahead and take it.
I personally took the opposite trade, as CFC printed a doji on astronomical volume I went long at $19 and put my stop just under the low of the day, at $14.98.
Sami,
I think you know a lot more about stops (which I never use) and shorting (which I have given up doing) than I do.
But I do not concentrate on $500 investments. Transaction fees will kill you.
I find there is way to much you do not know about individual stocks, something I tried to convey.
Mutual funds are great because you usually can get in for $3,000 or so. ETFs make sense to me, but you have to invest around $20,000 to get the transaction fees to be minuscule.
I still think long or short on CFC is a BET not an investment. One of you will be right and one of you will be wrong.
But I find whenever I make serious money it has been by investing in great themes and normally using ETFs or mutual funds. If I invest in a single stock it is for the long haul (1 year minimum) not a quick short or long, but again I think most small investors should stick to the diversification offered by ETFs and mutual funds.
There is more than one way to skin a cat.
The $500 i mentioned is the amount of risk and not the transaction amount. In this particular case because CFC is so far away from its recent higher low the investment amount is small too but that's just because CFC is a bad short at this stage.
Transaction Fees are a non-issue. Zecco gives you 40 FREE trades, stocks or ETFs, per month. ScotTrade is $7 a trade. That's less than 1 percent on a $1000 investment. If you are holding a stock for over a year and 0.7% would make a difference in your decision to buy/sell then your risk assessment is different than mine.
I tried investing in "great" mutual funds, Janus, in the late 90s. One of my "great" mutual funds went down 80% in value, others faired just a little better.
My wife's, well diversified, 401K badly lags the market in good times and bad.
My kid's well diversified 529 college plans never outperformed my self-managed account.
I am comfortable speculating in my style and I think we all should invest/speculate according to our comfort level and a style we can manage.
I am not advocating doing what I do. I was just giving an example of how you can enter a position without having to feel that the market is out to get you at every turn.
This day was marvelous. I loved it.
Buying a few distressed non-financials (except BNS - could not resist) in the blowout in late morning, closing on a great piece of fire sale bank-owned real estate in the afternoon.
I did sell CBS, but I should have done that a while ago.
MDU Resources,Bank of Nova Scotia and Goodrich may be worthy of a good bargain hunter's attention.
Who needs Vegas?
To Anon 5:30.
I would like to also add that if one trades with a limit order down a little off the opening price the transaction fees are a non-issue.
And one might also point out that mutual finds all charge a management fee that will eat up profits more that trading fees ever will. And unlike transaction fees, it is the gift that keeps on giving.
I lost most of my ass-ets in this down move. How do all the traders make thousands during this volatile chop crap. I gave back my gains for the year and am depressed as hell.
closed the CFC long at 23 this morning, no need to be greedy, a 21% return in less than 18 hours is plenty.
Sami,
Maybe you are a better trader than most.
I like to keep transaction costs below 0.1% for combined buying and selling. I think you made a big error by taking an 80% hair cut in a mutual fund. But I am sure you have learned from it. I am also sure that it does not mean mutual funds are bad. Check out prasx which I believe about doubled by the time I sold in july.
I still think most people should not short. I also do not prefer individual stocks although I do make a few exceptions. Additionally, if you want to talk about serious money it is always in my longer term investments. Most of us rarely make sizable investments on two day speculations so the percentage may look great but total dollars are small. What about our loosers? We rarely want to talk about our loosing speculations. I know I have had loosing speculations and I do not know anyone who is always right.
I advocate longer term investments over speculation.
i wish you all the luck. I am not attempting to persuade you to change your style. To the contrary i think it is very important to be comfortable with your approach.
I will make couple of final points about my style for the sake of clarification. Please do not take any of this as an advice to do anything.
I invest in my myself, my family, my business and other small privately held businesses that i am intimately familiar with.
I do not "invest" in stocks/options/bonds/futures, i merely speculate (per Trader's Vic definition of a speculator) as i have no control over the economy, the market, the Fed, the liquidity cycle, the market participants or their ethics.
I do not seek short term positions or any specific time frames.
My main focus is on money management and risk control.
Before i enter a position I decide what's my stop-loss exit based on a monthly, weekly or a daily chart. Once I define my loss I size my position based on my allowable risk. Some of my positions are hundreds of dollars, others are in six figures.
I mainly buy strength and sell weakness, except at extremes when i may fade the move on a shorter time frame, like the CFC trade.
I did not invent any of these ideas. if you read any trend-following book you will find them explained in great detail.
best of luck.
Sami, you have lost most of your money playing with fire, no?
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