Wednesday, October 28, 2009

Bookkeeping: Morning Transactions

With this selloff, some names are finally coming into play - however, some of them are not just pulling back into support but breaking down, so it's a tricky area.  While the large cap indexes have been holding up - the Russell 2000 (and Wilshire 5000) which has the smaller and middle cap type of names more heavily represented have been much weaker the past few days.

First, I was stopped out of 80% of my remaining Gafisa (GFA) - an amusing trade.  We jumped back into this name in a material way last week on a pullback into the $32s, I was greedy and hoping to sell at $37.  Just missed.... so instead we lost all the gain from the trade and now take a loss as I placed the stop at $30.42 which executed.  One reader congratulated me on the trade after the initial bounce but I wrote to him, the trade is not done until the sell order goes through.  I don't have trailing stops in (the tracking mechanism we are using) so that's a bit of handicap; would of probably sold it earlier if we did.  Oh well.

All the world is a dollar trade as you should know by now.  If the dollar goes on a very overdue oversold rally precious metals (and just about everything else) will get hammered.  But we took profits on silver quite a bit higher, and the SLV ETF has filled a gap, and pulled back to the 50 day support, so I am going to slowly begin to rebuild a position I want to make much larger.  This is more of a long term play so all I am doing is replacing a stake we sold off higher and getting about 0.9% of our exposure back at a lower cost basis.  We are using Ultra Silver (AGQ) for our instrument; I am not so worried about a break of support - as this is different than a stock.  The chart for AGQ is immaterial - since its just a reflection of silver but with leverage.  To me the precious metals are now a store of value versus a world gone mad printing paper money.  At some point I believe, like David Einhorn, it won't just be an "inverse dollar" trade. Hence I am more than happy to see silver pull back to $14s where I want to make this a much larger position - we are still under 2% exposure.  With the "real" US economy weak and politicians desperate I believe all this talk of "caring about the budget" will be a farce - more stimulus, handouts, and the like will continue to rain on us.  I believe after the initial Fed rate hikes are priced into the market (which will help the dollar initially) people will see the US, like the UK, is a big steaming mess and will have low interest on the short end for a long time.  I could be wrong - but that's my thesis for now.

Obviously the US dollar is all that matters - a break over this $77 level would mean some interesting things.  I want to reiterate than in the "old days" the US dollar going up used to be a good thing for the market - things have changed a lot these days.

I will update this post with other things I might do this morning; many moving parts.

EDIT 10:50 AM - well here we are at S&P 1051... like I said Monday "the next 48 hours should be interesting".   Let's see what the invisible hand has waiting for us.  Recall, we have NOT broken the 50 day moving average since July.  Brown shoots?  Expect the cursory bounce of 1050 as computers do their thing - then what happens after that will be compelling.

EDIT 11:00 AM - Stopped out of 70% of my CNinsure (CISG) position - thankfully we locked in some profits last week on that "double top" pattern.  Bought some back on its initial pullback earlier this week but we have now broken support big time; stop was placed at $19.77 so we just were hit..  I'm seeing a lot of charts like this in the $500M to $5B market cap range.

EDIT 11:05 AM - Bought back the BHP Billiton (BHP) we sold earlier this week in the $72s for $68s - not a large purchase but just got us back what we sold, at a lower cost basis.  Placing a larger buy order at $65, just scaling in slowly.

EDIT 11:20 AM: Selling 2/3rds of Blackstone Group (BX) in $13.60s - not a limit order here; I just see the exact same chart as CSIG above.  A break of support, unless it is recaptured fast the chart is no longer very attractive.  Either a lot of stop orders are being taken out across Wall Street before we turn back up, or the bull story has a chance to make a turn for the worse.  I am seeing (again) many charts like this today.

EDIT 11:25 AM: Stopped out of 60% of Discover Financial (DFS) at $14.50 - yet another break of the 50 day moving average.  The same chart, over and over and over - regardless of sector.  Once more, needs to recapture the 50 day relatively soon or we're limited in our exposure to the name.  


Long Ultra Silver, Gafisa, CNinsure, BHP Billiton, Blackstone Group, Discover Financial in fund; no personal position

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