Bear Repellent

Uncle Ben steps in and let's the market know he's going to do whatever it takes to keep the credit crisis in check. It also appears that Wall Street is pricing in a decent probability that the Fed cuts before the September meeting. At the moment, I still don't think it will happen, but that viewpoint is likely to change as the time draws near.

Bush is on deck to make a speech here about his plan to save his voters, but I wouldn't even make my Tivo watch it. You'll have to tell me what happens, if anything.

So outside influences are trying to tamper with my bearish stance on the market...


In fact, I have footage of Bernanke and Bush...take a look...

Recommendation: I think the Fed is going to need a bigger gun.

Long: Japan, most definitely

Short: "Bull"nanke


The Day Before Friday

Running late today, but for plenty of good reasons.

Take a look at a few intra-day charts I have going here. We are at some interesting points as I write this....
SPX 5 day, waiting for a breakout.

FXY setting up a nice descending triangle
$RUT has stalled.

VMI is running. Good thing I only had two portions.

Honorable mentions from yesterdays post include MTG, GRMN, OMG, RIMM, BIIB. Those trades are keeping me from going postal about my losses in CNH and GLDN.

Looks like the market is finally cracking down. Let's root for some losses by the close. If not, I will find the money responsible and give them a dose of the following...

Recommendation: Take profits quickly, and don't take any losses.

Long: The Closing Bell

Short: The Market


That video pretty well sums up how I reacted to the market open.

Then I realized we still have plenty of time left before the bell.

I have been able to get my feet modestly wet over the last week, but still not fully operational like I was pre-Chicago. I haven't seen the types of gains I had wanted to see yet, but I haven't lost anything, which is not surprising.

I will say that I have never seen volatility like this in my career. It is unreal. Regardless, I still won't trade VIX options (I have 3 unread e-mail on this topic). I haven't heard much day trade chatter, but honestly that is the only place to be right now. Place your bets at the open and cash out at the close. Anyone long the Russell right now?

Before I go forward I want to pay tribute to the Hurricane Katrina anniversary. I have talked with people that were involved in this disaster and want to take a moment to let them know that they are in my thoughts. I'm glad to know that many people made it through everything and have been able to move on.

Today will be remembered as a festival of charts here on Option Addict. I didn't have the time or motivation to be creative, otherwise I would have thrown these into a slide show while playing some good tunes in the background. Here's part 2 of my watchlist...


I talked about this earlier, but keep an eye out for the inverse head & shoulders. If you are bearish, of course.VMI SGR
OMG! It's OMG!
GLDN, one of few long term positions I am still sitting on. Looking to add on the upcoming breakout.

Well, that will conclude the festivities. Thanks to those that showed up this morning.

Recommendation: Have a good one!

Long: Lunch

Short: Work


Deep Thoughts After The Bell

New Release!

Recommendation: Right click and select "open in new window" for best viewing results.

Long: Watchlists

Short: Playlists


Terror in the SPX Pit

I am going to follow the trend of bloggers commenting on the "911 trade."

This was in regards to the open interest on the Sept 700 SPX calls. A lot of traders are looking at this as a large bet on a predicted directional movement in the market. "A prediction of a terrorist attack." Niner.

The headlines won't tell you this, but notice how the Sept 1700's have the same open interest. It's a box spread (I checked). It's commonly used for short term financing. The trader picks strikes that are unlikely to get hit and at expiration it will unwind, hence trading the "tips" of the option chain.

Don't bet on another 911, unless you see huge lots firing off in stocks like RICK, SWHC, HAL and PYX.

It brings up a good question though... How should I protect myself from this event?
You can't. Don't let it hinder what you have going. Continue to position size, diversify, and manage your portfolio by risk first, and you'll do fine.

My scrapbook is running behind... here are a few more contributions.

Here is a pic of Jamie on a kayak trip in Jersey. This was taken at an event he helps organize and manage to raise money for the Special Olympics. Jamie, I told you before, but you are a hero in my book.

Here is a pic of Kim and Dan (aka "VA beach girl") at the 3 day live class last week. We got to visit for a few of the days that they were here... thanks for keeping me company!

Next you'll see Tim on his Option Addict water sled. He bought the one and only limited OA edition. Nice call.

Finally the Marketcast posed for a few shots with Danny and his mom at Investools headquarters.

Well, I think I will crawl back into my hole. I might post a watchlist this evening, if the mood catches me right.

Recommendation: If you happened to be on any side of the box trade, exercise your option just to piss off some hedge fund/corporation.

Long: 911 (the Porsche kind)

Short: 911 (the terrorist kind)

Dow 14,000 or 12,000?

Who gives a $hit at this point. I think the market is infested with morons. Mostly because they don't know which way the market is going either.

I'm reading a few headlines regarding M& A activity. Wow. I must have taken the last years worth of M&A fueled rallies for granted being that I was so caught off guard. US Steel, Gateway, Chicago Bridge & Iron all inking deals this morning. Despite all the supply getting taken out of the market, we're still heading lower.

While all this madness has been going on around me, I am just now noticing China stocks hitting new highs. Unreal. That was pretty quick, don't you think? I'm okay with shorting the US and going long China at the moment, but let's see how I feel after lunch. Take a look at the FXI today.I also like the triangle setting up in KLAC. I can't imagine this one taking much longer to break out.

ONXX breaking out of a lovely cup and handle this morning. I'm going to re-evaluate towards the close.

It looks like my game plan will stay the same this week. I am keeping an eye on materials, water transports, China, Bob Pasani, high volume breakouts and Monster Java. For those that haven't tried this drink yet, I can't explain how amazing it is. Experience it for yourself.

It's been fun, but it's time for me to go back to my equity research department and make some noise. We'll get a watchlist out there soon enough.

Recommendation: It's going to be a great week, I can tell.

Long: Profits

Short: Losses


Keeping It Real

Imagine trading in the market from a pure technical perspective. You never pick up a newspaper, turn on the evening news, watch CNBC, or even worse, read my blog (insert scream). You'll never hear reporters acknowledge or deny any storms brewing in the financial markets. You'll never be influenced by guru's, or financial media celebrities that throw daily opinions in your face, but struggle to outperform the market themselves. You'd be left to form your own opinions, come to your own conclusions, and solicit your own ideas from none other than yourself.

Is this bad?

Technical Analysis is of course the study of price action, and price action represents how market participants feel about the market. What better opinions to gather than that of the actual participants as a consensus. You've heard all the hype about how bad the market is underneath the wad of debt being injected into our system, but how are traders reacting to this? Check this out...

VIX (5 YR)

If you have read about my approach to trading, you'll know I don't get too caught up with technical indicators. I am an easy goer when it comes to my technical analysis. However, you'll see as clear as day the bullish divergence going on between any oscillator and any major index. Compare this to the bullish divergence that occurred May/June of 06, and the end result.

The VIX has gone flaccid from the black swan run it has taken over the last several weeks. It's reverting back to a historical mean that falls right around the $20 level. I expect it to consolidate here for a little while until the market sorts out some of the lingering credit and housing issues. Who knows... perhaps piling on the debt in a debt fueled crisis is the answer?

Next week I am going to keep a close eye on materials stocks. It seems that they have ceased to move lower, and many you'll find at long term trend lines on long term charts. I don't think that these are bad buys at these levels as long as you are taking care of risk first.

Here are a few interesting set-ups I am throwing money at this afternoon...






I try not to let my opinions get in the way of making money. Neither should anyone looking to become a more efficient trader. I have been open about my feelings on some of the market fundamentals, and yes, these feelings are bearish. But make no mistake, time frames are the only variable. Your time frame is different than that of the next person, and that time frame is what should drive your actions.

Well, I still have a long road to walk today to try and get caught up from my recent absence. I am going to need to a little "Encore" to take us out today...

Recommendation: Drink it in... Goes down smooth.

Long: Fridays, Money, Jay-Z, Linkin Park, and Volume

Short: Time


Welcome Back

Chicago Midway Airport, Gate A13, Wednesday, August 22, 2007 5:43 p.m. Central

Here I sit in the stench of a crowded airport, hungry and tired, awaiting a 3 hour flight back to the good life.


Chicago has come and gone and I must admit, I had a great time. For all those who took the time to come up and introduce themselves, for those who took the time to meet with myself and the group (both on campus and off), for those who reluctantly decided to attend my presentations, I want to say… "thanks." There was quite a group of addicts that showed up to meet with the group after the opening reception on Sunday night, but only a few addicts showed up at the piano bar on Monday night (what’s up with that?).

Regardless of attendance we had a great time. Here are a few photos…

The Addict Family

Angela, Tonya, and Papa Addict

In Action...

The Marketcast Live!

Howling at the Moon

Having a blast

First, a few items of business…

I finally got to try the Chipotle Mexican Grill (CMG). The illustrious "burrito" that had always been talked about in the comments is going to receive a new nickname. "The bullet." Don’t ask me to elaborate any further. Although the market did finish up well over a hundred points upon consumption, I couldn’t imagine adding that do my daily repertoire. Giordano’s however, was a different story. Whoever offered the reco, I owe you one.

Returning back to the market after a vacation is always a complicated task (read: pain in the ass). It’s nice when you have multiple trades already in play to help absorb new trades you are looking to get into. But establishing a new inventory is going to cause some serious sensitivity between my account and the market movement.

For the last several days the only contact I have had with the market is through word of mouth, a couple glances from CNBC, and Fidelity’s ticker tape across from my hotel. I haven’t bothered opening my accounts to check positions or tally up my triggered stops, because I am not in the mood. In fact, it’s likely when I check things out in the morning; I might be totally in cash. Wouldn’t that be fun?

I plan to spend the rest of the week establishing a decent watchlist and surfing the comments for reco’s. Speaking of comments, I haven’t had the time to read them all, but upon browsing through them quickly I see a few things going on that I plan on addressing soon. I know it’s been tough to trade in this market, but keep your heads up.

In the process of meeting all of you, I appreciate the nice words and encouragement that you all had to offer. The insight has helped me to realize how important this community really is. Thank you for the perspective.

Well, I am officially back to business. I’m going to sleep. See you all in the morning.


Option Addict Gathering Goes Mainstream

Check out this link. The rumors of an Option Addict party have hit the financial media.

Stay tuned...

Recommendation: It's not too late to catch a plane, train, or automobile ride to Chicago.

Long: Champagne rooms

Short: Class rooms

See you at 9.


Wishing You Were Here

For those that are not in attendance here in Chicago, you are missed. We had a casual meet and greet after the opening reception on Sunday night and took a large group photo. I'll upload it as soon as I can find a USB cable.

The live Marketcast presentation starts at 7 a.m. and after that I am scheduled for two breakout sessions. It will b a long day, so hopefully all of you out there can hold down the fort while I am passed out.

For those that are here and were looking for directions to tomorrow nights gathering, here is the address...

Howl at the moon
26 W Hubbard St Chicago, IL 60610(312) 863-7427

Click here to map it

For those not here, we are wishing you were here...

Recommendation: Listen to tomorrows Marketcast

Long: Chicago

Short: Rain and humidity


What Rally?

The emergency discount rate cut has played out beautifully. As I said yesterday, the Fed's hand was forced to do this. What is hilarious is that the Dow panics higher by about 300 points, remembers that this rate cut solves nothing, and in all likelihood the market heads back lower sooner than later.

Last time the Fed stepped in to service the market with an emergency rate cut, the Dow responded a lot better (temporarily) but the end result was a continued trend lower. I can't imagine we see anything but the same scenario. Remember, downtrends will have rallies too. Sharp ones!

If you dare step into a bullish stance here, reevaluate your stance at the end of each trading day. Keep your time frames short term, be quick to take profits, and trade small. Yes, I know this is the same regurgitated BS I say every single day. Listen, because I still mean it.

CONFERENCE UPDATE: Since the recent poll reflected more individuals wanting to meet at the Conference Center instead of a Piano Bar, I am making a change. After the welcome reception, I say we meet in the "lobby." I haven't been to this establishment yet, and I imagine that the "lobby" will be a good place to meet until we get a better feel for the conference center. Once everyone has at least gotten together, they can plan future rendezvous accordingly. Afterwards, I am still going to check out the Piano Bar, and those interested are welcome to attend. For all those that won't be making the trip, I hope we will cross paths at some point.

It's been a long week, and early next week will be some light blogging. I'll do my best to get a new thread opened each day, but I won't have time to deliver much content. Wednesday I should be back on track.

I'll see you on the other side....

Recommendation: Have a great weekend.

Long: Chicago

Short: Packing


Karen (aka. Doji Girl) typed up this piece about trading parallels that she wanted to share with the group. Karen, thank you for your efforts, job well done.

Since becoming immersed in the world of trading I am constantly finding parallels between other aspects of my life to the trading world. I have often thought that dancing is a lot like trading. So is art. Real estate….the list goes on.

In the dojo where I learn and practice Taiko drumming, hang four framed Japanese characters with a sentence in English below each one. Although I look at these every week, I never related it to trading but for some reason last week something clicked in my mind. I realized that the way the dojo is run reminds me a lot of this wonderful blog community that many of us have come to call Home.

Here is what the four plaques say:

Manners, Harmony, Commitment,
Language and Unity of Spirit

How we conduct ourselves in the dojo and online on our blog is basically the same. We are all here for the same reason. We are all committed to becoming the best traders (drummers) we can be. Respect for the dojo (blog); respect for each other.

Discipline of Body Strength,
Power & Stamina

If we do not take care of ourselves physically we will not have the mental energy and psychological fortitude necessary to be successful. Drumming is hard work. So is trading.

Musical skills, Artistic Expression & Rhythm

You’ve heard it said many times that technical analysis is an art. Creating the perfect trade is an expression of that art. Being in tune with the rhythm of the markets will allow that art to flourish and become the masterpiece you envision.

Discipline of Mind, Self Control and Spirit

This last one is for me the most important. Without the discipline and self control to plan your trades and trade your plan, you will not be successful. The spirit of the Taiko drummer is a warrior’s spirit. The spirit of a trader is much the same. Attitude is everything.


Forcing the Hand...

Treasury prices are flying, yields are falling. The market has already priced in the rate cut that the Fed failed to provide in it's last meeting. The flight to quality confirms that the market is finally starting to understand what a serious bind we are in here. I have been warning everyone about this since July 24th (according to the archives) and I hope that everyone has been able to take a defensive stance and proceed cautiously with their exposure, position size, and portfolio risk during this panic (which by the way is the worst I've seen since Sept 11th).

(This doesn't really help either)

Amidst this sell off, I can't believe how well some of the recent trades I have been talking about have worked out. Based on recent e-mail traffic, I know a lot of people are enjoying some of the following trades I have discussed...





LEN, or any others from this post




And finally, I had to use the INDU to mark the top that the Marketcast called.

I have divided my option positions in my portfolio by about a 70-30 ratio of puts to calls. As of last week I was about 60-40, but I have been stopped out on quite a few yesterday, and a few again today. I would talk about the ass kicking I am taking in a few of my bullish positions, but I am not in the mood. I hate to see profits evaporate.

Chicago is almost upon us. I am pretty busy trying to get my act together. More details about our gathering will follow.

Recommendation: Buy puts by the truck load.

Long: Very little as of today's close.

Short: Everything I can get my hands on.


Finish Them!!!

A sympathy bid is preventing me from causing bankruptcies in the home builders. I bet the Citadel is wondering where the 2.23 million shares they own is going to take them?

Right to the scene of the crash.

These stocks are all sitting at last weeks lows, contemplating whether or not to move lower. BZH and I have fought a long hard battle over the last several months, but the outcome is inevitable...

Since my handpicked bear basket is overflowing with good trades, I needed to tap the bulls keg and partake of a few good call option positions.

I'm taking down some JEC...

Chasing it with some AMLN...

and if OMX breaks down, I'll guess I will have to make more room.

Only a few ideas for this morning. After all, I have been trying to lighten my basket while I am in Chicago. I'd rather relax and have little to worry about while I am there. Speaking of Chicago, it looks like the majority would rather meet somewhere at the conference. That's fine with me. I plan on doing both. I'm keeping the poll open for another day, and then I will discuss the results.
Recommendation: If you have missed the double play in GMCR, I like this spot to double down.

Long: Us

Short: Them

(I am long Pink Floyd lately, In SIZE... in case you didn't notice)


About me

  • I'm Option Addict
  • From Saratoga Springs, Utah, United States
  • I am a professional trader and an instructor for Investools. I've had relations with the markets for 9 years. Born in Concord, CA, but reside in Saratoga Springs, Utah. Father of THREE, Husband of one.
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