Trade Alert: UNG

I missed the boat on United States Natural Gas Fund UNG, when it was at 41. This is what happens when construction foremen have no regard for the market. So what to do now? First as with GLD, SLV, and USO ignore the momentum indicators such as stochastics. After the establishment of a powerful trend, the data will bias the indicator in the direction of the trend. Now you wont get this in books, but I think the pegged condition of the indicator is simply confirmation that the trend still has momentum. In other words before the trend breaks the indicator will alert you by it's less severe condition. The chart of UNG you see here has no stochastic or even moving averages. Just look at the W formed by the double bottom at 35 in September and again in December. The middle of the W was in November at 45. You can see that 45 was resistance, which has now been broken confirming the W. For a trade it means that this is a good place to enter with a 1/4 position and a stop at or just under 45.

The Chicken or The Egg?

The stock market is just like the FED. As this blog has warned, the financial owned financial media being mouthpiece of the Wall Street elite persuade retail investors into a stock or sector just before the institutions intend to exit it and they try to scare you out of a position just before they want to come in. This is an old and painfully successful MO. Now we see the FED has been doing it too. I wonder which is the chicken and which the egg. From Mish

The reason banks (and government) want inflation targets is that inflation is beneficial to those with first access to money: banks, government, and the wealthy. By the time access to credit filters down to everyone, the economy is poised to reverse. This happens time and time again in every cycle. The current housing bust is the latest example.

And

Attitudes are like pendulums. Momentum carries both pendulums and attitudes to extremes. The pendulum of consumer recklessness has now reversed, having recently reached a secular peak. It will not stop at equilibrium on the way down. Instead, momentum will progress to a point of complete exhaustion marked by cautious saving instead of reckless spending.

Well this always ends with some one getting screwed and this time I mean hard. Need I say who?

When Do We Buy the Builders?

The short answer is not yet. Take a look at the two year chart of the Dow Jones US Home Construction Index. You can see the double bottom around 250 in December and January. The index then went to 400 and now trades at 390. The double bottom just described forms a bullish W on the chart. If we go long at all it will be with a 1/4 position just above 400 with a stop at 350. We will use an ETF, which has options on it such as the IYR.

What we really need is for a stock market style capitulation in the housing market. Right now home owners as well as potential buyers are holding out for a better price. So, who will win? Well the supply is on the buyers side. Once sellers give up and drop their prices the inventory can begin to clear, but this will not be an over night process, there is still the larger economy to consider and that stinks.

Back to the charts, the W is a very powerful pattern, but in this market we may wait for the 20 day moving average to turn up --or another momentum indicator– before stepping in.

Why Blogs?

You could pay big bucks to get your financial info from Goldman Sachs, but just look at what you paid for. The headlines are from CNN

Freddie Mac, Fannie Mae, WaMu downgraded to sell at Goldman Sachs; shares fall

Make that shares fell a long time ago. Don't believe me? Check the charts right here Freddie Mac, Fannie Mae, WaM

Now Freddies 52 week high was at 68.12, Fannie was 70.57 and WaMu's 52 week high was 44.66.
The question I have now for all those respectable people who paid so much to Goldman is this, What the hell good does it do you now? Why didn't Goldman tell you to dump FRE at 65 or at 55 or at least when it broke clear support at 55 and formed the 45 degree down angle decline. Hey why not then? All I have to say to Golden Gangsta is thanks guys thanks alot.

End Of The Line

Trends are powerful economic and psychological forces. On a price chart an established trend can be reliably is followed by a trader until it is broken. An old saying goes ''the trend is your friend''. What that really means is that the trend is your friend until it is not anymore (when broken). When trading I will not exit a position or reverse positions until a trendline break, on which I will act immediately, while ignoring all the noise above (below) the main trend line. But there are all kinds of trends, major trends, counter trends secular and cyclical trends and now we see an altogether new kind of trend the End Of The Line Trend.

This new trend is already forming unnoticed by most investors, ensconced in the --you are a sitting duck--buy and hold habit and espoused religion of the financial media and Wall Street spin misters. You can always see some old gray beard suit on CNBC teaching you that to hold is to be disciplined. Yea like a deer in the headlights. After a proportion of the retail investors wised up to this ploy the Street brought out the Crammer types and bulls and bears to tell you what to buy and when. That would be load up at the exact wrong time. You can read Crammer's Golden Rule to get the skinny on that scam.

The chart of the S&P 500 shows a huge double top with twin peaks of 1600ish at 2000 and 2007. Pile onto that the fact that all the gains from 750 in 20003 to 1576 last year came on the backs of people who would not be able to make their mortgage payments, then you realize the last five years of earnings was on air. The stock market was lucky to get back that high. I should say they were lucky that Greenspan could blow another bubble. And that is what is wrong with buy and hold, that is why this is the end of the line and why this trend seen or unseen bounds us all.

Its like a guy I know, a friend of mine named Ponzi who refied his car, refied his house, paid Mastercard with Visa all the while working 80 hours a week with no bathroom breaks. Ponzi through all his up and downs booms and busts and no matter what always got the bills paid- if not on time. I got used to him paying off his bills, I would have even bet on it. But I never lent him a cent of my own money for the simple reason that even a construction worker can see. Because sooner or latter the cascading, compounding debt would engulf him and it has. Ponzi reminded me of those crash test cars, going faster, faster, until crush into the wall, the end of the line.

Bet you didn't know it, but there is a name for guys like Ponzi. He is called a ponzi finance unit, and the nanosecond he crashes into that wall is called his Minsky moment, and the point is that he has to crash no matter what. For all of Ponzi's hard work his income is not exponential, his debt is, so it eventually overcomes his ability to repay it, even by refinancing.

It's no different for us, our economy hurdling toward it's inescapable Minsky moment since 1913 and the FED induced debt based financing of government and business. Through all the booms and busts we have reached this point in human history where there are no more options and the crash must come, the trend is no longer your friend, and the metal is meeting the wall. This is simply the end of the line.

Goldmans Hit

If nice guys finish last, then Goldman Sachs will beat the wolf pack of the banking group again, but not by as much this time around. The scam is running out of steam even for the Godfather of corporate vice and public corruption. Last year Goldman walked on water when largely avoided the subprime mess that took the rest of the street down hard. They floated in bad guy thin air when it was learned that they shorted the very issues they were selling to clients. But still they stand to take a hit if monoliners go under, so what does that say about the monoliners? They won't go under. Forget smart guys like Nouriel Roubini and Paul Krugman, a construction worker thinks like this. Goldman's on the line for the monoliners and CEO Treasury Secretary Paulson is leading the bailout blitz, fuget about it. And don't think the gangsters weren't already long at 3 pm last Friday just before they threw Ambac a lifeline. So go long the monoliners.

After 10 quarters of year over year higher earnings the gangster will have to settle its smallest quarterly profit in three years. It will have to look over its shoulder for the $42 billion to leveraged loans for the LBO binge it went on last year. It could get hit by some of its large take overs. The tumbling Industrial & Commercial Bank of China comes to mind. And any of the assorted subprime problems could blow up on it, but it could take a $4 Billion big hit and walk away.

Goldman won't take a big hit, but it wont make that many of them either. It is not that the gangster is not stealing as much, it is that there is not as much to take.

Trade Alert : GLD

We are long 100 shares of GLD from about 89.00. I think we should hold these with no stops forever. I don't want to loose it all I just don't want to get stopped out of GLD at a time that the dollar is dead, the economy is moving into global recession and gold is at it's all time historic high ever! But as you can see on the weekly and daily charts the GLD trading in its new range above 93, but barely. The stochastics are over 80 and turning over on the daily. In the 15 minute time period there is a gap that formed between 89 and 91. If GLD falls below that gap it may drop a few more points and offer up a buying opportunity, but I'm not holding my breath.

The point is that instead of using stops on GLD we will sell short the IAU, beginning with 25 shares at 92.0 and adding another 1/4 position for each dollar that GLD falls. If GLD plummets through the gap at 89 we will profit from the short side and still be long GLD without having lost a cent since we went long the GLD at 88.93.

Trade Alert: EXK

Endevour Silver Corp. EXK had a break of the long downtrend line that ran from 5.50 to 3.75. What you see in the chart is the anticipated result. The powerful break sent the shares up to 4.25. EXK is likely to retrace, but as long as it stays above the old down-trend line we will stay in. In order to not be stopped out too soon we are moving the stop down. In the chart you can see support just under the 50 dma at about 3.75, so that is where the stop goes.

Sell 100 shares EXK @ 3.45 : Order type-stop loss

Trade Alert : IAU GLD SLV USO

I said we would enter into these positions, but today we made no moves. These stocks have had great runs with no real pull back, I keep thinking that the metals and oil will be getting hit soon yet they give nothing back. That's OK we have not lost a cent we don't want to get caught. We are long a full position of GLD if it falls back I would rather hedge by shorting IAU than get out of GLD. Similarly with GDX we have had a couple of successful covered calls if it sells off we will sell another one. To play oil I may want to short some OIL as the stochastics are above 80 and rolling over. We may even take a full position of USO and hold it forever and short OIL for they minor pullbacks.

Alert: IAU

Dump the IAU short position

Buy to close 25 shares IAU @ 94.17

Alert: EXK

Buy 100 shares EXK @ 4.10 with a stop @ 3.90

Trade Alert: GLD SLV OIL

Gold silver and oil have broken out above thier 50 and 100 day moving averages and continue to climb, pegging the momentum indicators along the way, they could stay pegged all the way to $1000 per ounce which is not so silly an idea now is it?. For GLD you can see that it is at a 52 week high having broken the range of consolidation in the 89 to 92 area, so thats the line in the sand, long above 92 for GLD. We will dump the remaining short shares on IAU after the open.

As for silver SLV what can you say? The chart for SLV shows pure break out, 20 is soon to be had, long above 17.

Oil is interesting. USO closed at it's all time high of 79.32 last night. The chart shows two prior entries above 76.00. If USO fails here and crashes back it would force a triple top to form on the chart. Triple tops being rare tells me USO is going higher.

We are long a full position of GLD from 88.93. We want to take a 1/4 position in SLV and a 1/2 position in USO as soon as the opportunity presents itself.

Alert: IAU

Sell 25 shares IAU @ 89.51

Alert : GDX

We are going to get some protection from the double top on GDX @ 54. You can also see a huge wedge forming in the daily chart from which the break will be decivisive. With the stochastic above 80 and the 50 dma merging with the 100 dma I am taking no chances. Since the bottom of the wedge is @ 42 we will sell one March 2008 covered call for the 42 dollar strike price.

Sell to open 1 contract GDXCP @ 6.50

Trade Alert : IAU GLD

We were stopped out of the short side of our IAU GLD hedge, namely IAU @ 90.50 on Feb. 7-th. With a head and shoulders building on GLD we don't want to take any chances, so we are putting a stop @ 90.50, but will aggressively short IAU on a break back below 90. On both the daily and weekly charts the stochastics are over 80. Heap on top of this the fact that merchants in New York are accepting Euros says it's time for a dollar rally.

Daily
http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=gld&sid=0&o_symb=gld&freq=1&time=8&x=35&y=17

Weekly
http://bigcharts.marketwatch.com/advchart/frames/frames.asp?symb=ung&time=8&freq=1

Euros
http://www.reuters.com/article/domesticNews/idUSN0655798320080206

Trade Alert: UNG

UNG gaped up on the open this morning and we stayed away. With the stock just touching the 200 dma and the stochastics at 80 and rolling over there is no use in chasing it. This will be a great buy when the momentum is behind it again. See the chart

http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=ung&sid=0&o_symb=ung&x=0&y=0

Trade Alert: UNG

We did not pull the trigger on UNG Friday. This market is too dicey for longs unless it's an 11 on a scale of 1 to 10. You can see in the daily chart that UNG closed above 40 on January 14 and closed the week at 40.50 on Friday. With the stochastics above 80 I want to see that tiny double top @ 40 broken with force before taking a 1/4 position. In the 15 minute time frame you can see the impressive rally from the second point of the smaller W formation @ 37.00 to 40.87. There is a wedge/flag formation developing in the 40.25-40.50 area which portends more upside ahead. On the weekly chart the stochastics are crossing at 75. If I buy UNG at all it will be above 41 with a stop just under the slightly concave 50 dma, but don't guess trade the break.

Link 1:
http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=ung&sid=&o_symb=ung&freq=1&time=8

Link 2:
http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=ung&sid=2676708&o_symb=ung&freq=2&time=18

Trade Alert: UNG

The chart of UNG has taken the very bullish W formation, in this of all markets. From the daily chart (Link 1) you can see the first bottom in August and the second in January, both in the 32-34 zone. Notice that the 50 dma and 100 dma have actually flattened out and are turning up. The stochastics are above 50 moving up and separating.
In the weekly time frame the W is very pronounced and the stochastics though above 50 are moving sideways with plenty of room to go (Link 2).

This is a bear market and going long has not proven rewarding, but this is what we will do. We will take a 1/4 position with a stop @ the 50 day moving average. Buy a small number of shares, and PUT YOUR STOP just under 50 dma or 37.50. Wait for the alert

Link 1: http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=ung&time=8


Link 2:
http://bigcharts.marketwatch.com/advchart/frames/frames.asp?symb=ung&time=8&freq=1

Alert: GoldMan Sachs

Dump Goldman Sachs

Sell 25 shaers GS @ 189.87

Alert: GDX GDXBN

Buy to close 1 contract GDXBN @ 6.70

Alert: IAU GLD

Put stops in

Buy to close 100 shares IAU @ 90.50

Alert: GoldMan Sachs

Enter a 1/4 position on Goldman Sachs (Risky)

Buy 25 shares GS @ 188.01
Stop @ 184.00

Alert: IAU GLD

I can't tell if gold is going to re bound or sell off some more. The stochastic is under 20 and just turning up. Take no chances

Buy 100 shares GLD @ 88.93

Trade Update: IAU GLD

We were stopped out of the long side of our IAU GLD trade and are now naked short IAU. This is where I least prefer to be. I would rather get stopped out of the short side first. In the chart you can see that IAU may be trying to form the bullish W formation, so I will go long GLD again quickly above 91.00 and be happy to get out again below 90.

Alert: GDX

Metals are selling off. Now we will enter our hedge, a covered call.


Sell to open 1 contract GDX Feb. 40 call GDXBN @ 9.20