Tuesday, March 31, 2009

Eagles, "Hotel California" (Live)

Trader F with the spray. Well done.

The RO Report, "Tilt" Edition

At 2:30, Judy ran through the back door yelling for me to come downstairs. At the time, I was short 2000 SPY. Our daughter was covered head to toe in hives and freaking out.

30 minutes later, the hives disappeared and I returned upstairs to find myself stopped out of my SPY at the high of the day. After that, I plain tilted. I turned a boring day into a bad day.

End of story.

The RO fared a little better. Out of 31 traders today, 19 were gross positive or 61%. 4 traders made over $1,000 gross, while 5 traders lost over $1,000 gross. I was a Manservant, #27 of 31.

"Lucky Pierre" - Trader F, $11,080 on 567k shares traded.

2. Trader A, $1,393 on 258k shares traded.
3. Trader P, $1,113 on 15,000 shares traded.
4. Trader G, $1,019 on 61,248 shares traded.
5. Trader E, $628 on 27,400 shares traded.

"Chambermaid" - Trader C, -$5,129 on 639k shares traded.

2. Trader B, -$2,947 on 662k shares traded.
3. Trader 10*, -$1,102 on 0 shares traded.
4. Trader H*, -$1,087 on 25,300 shares traded.
5. Trader S, -$1,045 on 86,400 shares traded.

Your Camel

You have lost your camel, my friend
And all around you people are full of advice
You don't know where your camel is,
But you do know that these casual directions are wrong.


Monday, March 30, 2009

Condo Fucks, "What'cha Gonna Do About It?"

I owe Trader A a song... he sprayed, but I split too early to get his song choice. I don't think this is his style...

The RO Report, "Bears Are Lame" Edition

No volume behind today's move... you'd think after such a massive run that once the market broke a bit the bears would be out in force.

Instead it felt more like a buyer's strike.

Face it, the price and volume action on this recent rally has been absolutely perfect. If you're bearish, fine, but so far I'm not convinced.

I caught some excellent waves post close. Not that you care.

Anyway, the RO got a bit ass-slammed today. Out of 33 traders today 13 were gross positive or 39%. 3 traders made over $1,000 gross and 7 lost over $1,000 gross. I was #8 of 33. I'll take that anyday.

Note the rare George Michael. When a trader's swing and daytrading account are the bottom two accounts for the day...

"George Michael" - Trader H*, -$11,924 on 17,300 shares traded.

2. Trader B, -$7,545 on 1.3 million shares traded.
3. Trader P, -$7,186 on 458k shares traded.
4. Trader D, -$6,848 on 214k shares traded.
5. Trader &, -$3,912 on 50,000 shares traded.

"Lucky Pierre" - Trader A, $26,641 on 284k shares traded.

2. Trader F, $5,307 on 142k shares traded.
3. Trader C, $5,283 on 680k shares traded.
4. Trader K, $906 on 29,800 shares traded.
5. Trader V, $890 on 52,964 shares traded.

Making Some Changes

I've been busy/lazy, okay? Leave me alone.

I am in the midst of making some changes to this blog. I will be stripping it down and pimping it out, so to speak.


Friday, March 27, 2009

Tuesday, March 24, 2009

A Short Hiatus

An old friend will be visiting for the next few days. There is also a nice swell heading our way which means plenty of surf. As a result, I will not have time to do my regular posts.

I'll "twit" an RO update here and there and have my Friday links up. You can follow me on Twitter by clicking here.

Enjoy your week.

Monday, March 23, 2009

Saosin, "They Perch On Their Stilts"

Trader A spray selection. What a day!

The RO Report, "Chiprechaun" Edition

Did you see that exclusive Geithner interview on CNBC today? The man looks like a mix between a chipmunk and a leprechaun. We rallied 500 points today due in part to his magic plan, but going forward I think he should do less TV and more radio. It's hard to look at the dude and take him seriously, is all I'm saying.

Anyway, you can't complain about a 500 point rally. The price and volume action in this market has been perfect since the March 6th bottom. If you've been stocking up on grain and guns and telling your friends to "tune into Glenn Beck" I hope you feel a bit silly today. But like I said, someone needed to bottom out the market, and Fox specials about revolution in America could be the new tell...

The RO kicked ass. Out of 32 traders, 30 were gross positive or 94%. And the two accounts that were negative on the day were both robots. 18 traders made over $1,000 gross and not a single trader lost over $1,000 gross. I was #18 of 32.

Give it up for "Trader A." He's really distinguishing himself in this market. Nice spray.

"Lucky Pierre" - Trader A, $163,706 on 1.6 million shares traded.

2. Trader D, $75,888 on 1.2 million shares traded.
3. Trader Z, $37,983 on 967k shares traded.
4. Trader N, $28,409 on 261k shares traded.
5. Trader P, $23,521 on 1.8 million shares traded.

"Chambermaid" - Trader 10*, -$380 on 500 shares traded.

2. Trader M*, -$324 on 0 shares traded.
3. Trader Y, $1 on 16,900 shares traded.
4. Trader H*, $59 on 0 shares traded.
5. Trader Q, $61 on 22,200 shares traded.

Geithner "Toxic Asset" Plan To Be Released at 8:45

And so we're getting a huge rally in the futures. Let's see what they look like at 9:00am. It's always fun to compare how the market anticipates news versus how it reacts to it when it's released..


Here is the Treasury's press release of the plan. The futures are off their morning highs but no huge sell-off.

Sunday, March 22, 2009

Sunday Space

"Dripping water hollows a stone."


Friday, March 20, 2009

Vetiver, "Everyday"

The RO Report, "Twatter" Edition

I barely traded today. Made some money early and decided not to fuck around with it being a witching day and all. And I was fine with that, until I saw how much the RO made.

Damn! I was #18 of 29.

Anyway, I'm out of here. Have a good weekend all.

"Lucky Pierre" - Trader C, $27,378 on 803k shares traded.

2. Trader Z, $25,042 on 830k shares traded.
3. Trader B, $10,942 on 576k shares traded.
4. Trader N, $10,841 on 341k shares traded.
5. Trader A, $10,823 on 427k shares traded.

"Chambermaid" - Trader T, -$1,078 on 3,400 shares traded.

2. Trader 9*, -$1,073 on 500 shares traded.
3. Trader M*, -$573 on 0 shares traded.
4. Trader $, -$517 on 18,200 shares traded.
5. Trader Y, -$266 on 13,600 shares traded.

Week In Review, "ShittyGroup" Edition

The US Is Facing A Weimar Moment

Some of you may know what the "bangbus" is... you know who you are. Anyway, now there's the "helpful bus." This clip is somewhat safe for work, but you wouldn't want to have to explain it...

I've always thought that figs were evil... pure fucking evil. Now I know why.

Shell Owes Pension $6 Billion, Kills Solar and Wind Projects.

Chocolate Skittles: Like Being Mouth Raped By Candy.

Speaking of mouth rape... Tyler is back from vacation and printing money.

The Reformed Broker redefines some common financial terms to better suit the times.

Okay, let's get back to mouth rape, shall we? NYSE to pay traders for adding liquidity.

Am I the only stock blogger not selling anything? Jesus. Question... what should I sell?

LOLFed explains what B-O-N-U-S really spells.

I haven't watched hockey all year even though I'd say it's my favorite sport to watch. More of this and I might watch more... (NSFW)

UPDATE: I'm on Twitter now. Why? I don't know... all the cool kids are doing it. Follow along if you need more noise in your day.

Thursday, March 19, 2009

MOP, "World Famous"

For Trader D going positive on the year.

The RO Report, "Not My Day" Edition

I didn't sleep well last night and woke up in a sour mood. I made a few early boneheaded trades and put myself in a hole. I surfed and had a shitty session. After surf, I was getting a coffee (paper cup you anonymous assholes!) and there was a hot chick at the counter. She said, "You have something in your hair." I reached up and felt and when I looked at my hand, there was some white stuff on it... a bird had shit on me.

That's what kind of day I had.

Luckily, the RO had a better day. How they managed to do so well in this chop is beyond me. If any of you care to share your days, please do so in the comment section. I wonder if the RO outperformed most prop shops today.

Out of 32 traders today, 21 were gross positive or 66%. 12 traders made over $1,000 gross and 2 lost over $1,000 gross. I was #29 of 32 or, a Manservant.

"Lucky Pierre" - Trader A, $15,670 on 118k shares traded.

2. Trader B, $13,226 on 362k shares traded.
3. Trader D, $13,101 on 248k shares traded.
4. Trader H*, $5,821 on 46,900 shares traded.
5. Trader F, $5,358 on 87,200 shares traded.

"Chambermaid" - Trader C, -$10,626 on 416k shares traded.

2. Trader &, -$2,592 on 58,400 shares traded.
3. Trader P, -$674 on 225k shares traded.
4. Trader S, -$592 on 30,900 shares traded.
5. Trader Y, -$287 on 11,000 shares traded.

The Styrofoam Cup

After a recent visit to my mother's house, Judy and I decided to get coffees to enjoy on the drive home. My mother lives near a nice, old-fashioned village with the type of Main Street you can't walk down without seeing friends and neighbors. I parked in front of the bagel place and opened my door.

"No, wait a second," Judy said as she peered out the passenger side window at red block letters reading, "HOT BAGELS." "I think there’s a slightly nicer coffee place on the other end of town."

I re-entered traffic, and after a red light and a couple of near "cell phone wrecks," I pulled into another parking spot near where she thought the coffee place was. But there was no obvious coffee shop, just a clothing store, a pizza place and a florist.

“Just get out and walk around a minute,” she said. “It’s there.”

I opened my car door and stepped out into the Main Street traffic. A woman driving a white Cadillac Escalade and, yes, talking on her cell phone, nearly ended my life. I made it onto the sidewalk, walked a few hundred feet from the car, found no coffee shop, and walked back to the car.

Through the windshield I saw Judy leaning over the front seat playing with our daughter who was in her carseat. When my daughter saw me approach, I ran up to the car door and smushed my face against the window making "farty noises." A woman walked by and shook her head in disapproval but my daughter went wild with laughter. Judy rolled down her window. I put my hand on the roof of the car, leaned close, and dropped the bad news, “I see the place you’re talking about, but it’s out of business.” "Okay," Judy said, "Just turn around and we’ll get it from the bagel shop.”

Now there are a couple of things in life that I am rather stubborn about. One is that I’ll never, under no circumstances, pull over to ask for directions. The other, is that I hate to retrace my steps.

“No,” I said. "We’ll find another place. There are loads of bagel shops around here.” Judy rolled her eyes.

Outside of the main village now, there was nothing but depressing strip malls, newspaper-strewn roads, auto collision shops, self-defense centers, gas stations, and chain stores. Everything was gray. I saw a flock of Starlings lined up along the top of a large green road sign and a flock of Pigeons roosting in the shelter of an overpass. I noticed sagging electrical wires hanging from their splintered telephone poles. A dog with three legs hobbled along the shoulder of the road, stumbled and landed on its little doggie face. A flock of crows watched hungrily as it struggled to regain its footing. A man in a wheelchair wept.

The situation appeared hopeless but I desperately wanted a coffee. It was time to make the easy decision and get on with our trip. Against all of my better judgements and instincts, I pulled into a Dunkin' Donuts Drive Thru and narrowly missed hitting a confused-looking old woman who was wandering around aimlessly in her pajamas.

"Get out of the fucking road, you hag!" Judy yelled from the car window.

"Damn Judy, chill." I said. She really has no patience for old people... Anyway, just then she realized where I was going for our coffees and her jaw dropped in amazement. "What are you doing?" she asked. "Nothing," I said. Keep playing with Chela. Chela chirped from the backseat, "What Mommy? What Mommy?" And then, "Mommy, why is that lady in her pajamas? Does her nose bleeding?"

I pulled up and a man’s voice, heavy with accent, crackled through the brown speaker of the Drive-Thru menu. “Hello! Welcome to Dunkin Donuts, may I take your order please?”

I ordered the coffees. However, immediately after I placed the order, I took a good look at the pictures on the huge menu. Cups of Dunkin Donuts coffee posed alongside various breakfast items... here with an egg sandwich; there, with a bagel. In each of these pictures the coffee was pictured in a styrofoam cup, with a little curl of steam, shaped approximately like a question mark, rising from the surface of the coffee. The styrofoam cups bothered me and my conscious stirred. I thought of a local wildlife refuge near my house and a display they have of certain items and how long it takes them to decompose.

The display is simple. It starts with an orange. A small white sign over the orange says, "Two weeks." Next to the orange is something that takes longer, like a chicken bone, and it says "Two months." To be honest, I don't remember how long it takes for each different thing to decompose, okay? But I do remember that the sign over the styrofoam cup reads, “NEVER.” Styrofoam never goes away. Not in this lifetime, not in the next, never...

I had yet to pull away from the window and I decided I had to act.

“Excuse me?” I said to the menu.

“Yes sir?” crackled the brown drive-thru speaker.

“Can you put those coffees in paper cups? Or do you only have styrofoam cups?”

An unsteady pause told me that taking this dude out of his normal transaction conversation was not a good idea.

“I’m sorry sir…" The man sounded impatient. "You ordered two coffees, correct?”

“Yes, I just don’t want them in sty…”

“Okay then sir," he interrupted, "please drive around.”

“No, wait," I persisted. "See, I don’t want the coffees if they’re in Styrofoam cups.”

“Okay sir, now you are saying that you do not want the coffees.”

“No, I want the coffees, I don’t want the cups.”

“I do not understand sir.”

At this point I stepped on the gas, tore around the drive thru, and gave the worker “the business” with my left hand. The man slid open the drive thru window and yelled, "Fuck you! Fucker man!" as I pulled back onto the depressing road.

Judy looked alarmed. "What the hell are you doing?"

“We'll find a place with PAPER cups!" I yelled in a sort of crazed tone as I swerved to miss a cluster of people protesting a larger cluster of hispanic day-laborers.

However, it wasn’t so simple. At this point, our options had become severely limited. We pointed the car towards the expressway and hoped to find some welcoming little shop that we had somehow overlooked on our many trips. In the rearview mirror I caught Chela's eyes. She was smiling and singing, "My Favorite Things" from The Sound of Music.

To be continued...

Wednesday, March 18, 2009

Yo La Tengo, "The Summer"

So many hot naked chicks in this video it's hard to know where to start...

The RO Report, "Free Money" Edition

There was no St. Patrick's Day hangover for the RO today.

I don't really understand what all the economic news means. All I understand is market movement. The fact that we ripped, I mean RIPPED off the FOMC news at 2:15 and held most of the ground into the close is very bullish.

This has been one hell of a bear market rally. But it's important to realize that we're still only at 7500. It could still have legs... we have been so beaten down. And really, although the shorts are getting squeezed here, they haven't felt enough pain yet. I kind of feel that this rally is going to end with a real blow-off top at some point. Of course, that's a very non-scientific feel I'm offering...

Anyway, the RO kicked ass. Out of 32 traders today, 26 were gross positive or 81%. 13 traders made over $1,000 gross and 3 lost over $1,000 gross. It's important to note that the 3 who lost over $1,000 gross are all swing accounts... active traders were rewarded by the market today. I was #12 of 32. Okay.

Solid days by a number of traders.

"Lucky Pierre" - Trader D, $27,985 on 1 million shares traded.

2. Trader B, $21,466 on 413k shares traded.
3. Trader Z, $17,032 on 429k shares traded.
4. Trader C, $12,583 on 847k shares traded.
5. Trader N, $8,993 on 131k shares traded.

"Chambermaid" - Trader H*, -$5,246 on 11,400 shares traded.

2. Trader 9*, -$1,224 on 2,300 shares traded.
3. Trader 10*, -$1,021 on 0 shares traded.
4. Trader F, -$559 on 289k shares traded.
5. Trader 4*, -$215 on 0 shares traded.

Dollar Crushed, Gold Rips

Dollar shits.

Gold shines.

Another Person Who Shouldn't Trade

Position sizing is important, so don't take on more than you can chew. If you do you could quickly fail.

Backyard Dancing Body Slam - Watch more Funny Videos

I don't have a history post for the day, so instead I'm going to switch on CNBC and get all "old DT" on you.

UPDATE: Fuck that. I can't torture myself by writing snarky posts about CNBC today. It's too nice outside. I'll be back for the FED news. Don't churn.

Tuesday, March 17, 2009

Bon Iver, "Flume" (live)

Trader P didn't spray today, he wasn't even #1, but he deserves a song for his execution today. Well done, P.

The RO Report, "Pot Of Fucking Gold" Edition

Seriously, is there any holiday that has more gay overtones than St. Patrick's Day?

Let's all wear the same color, worship midgets and rainbows, search for magic prizes and parade. I'll forget about the green bagels and green beer... if ever there was a beard, it's the green beer.

Anyway, I'm busy this evening and need to run. No, I'm not going to drink green beer, I'll leave that to you idiots. I'm going to a poetry reading. Okay, that's a lie too. I'm not telling you where I'm going, how about that?

The RO did very well. Out of 30 traders today, 24 were gross positive or 80%. 11 traders made over $1,000 gross and 4 traders lost over $1,000 gross. I was #11 of 30.

"Lucky Pierre" - Trader A, $19,934 on 235k shares traded.

2. Trader P,
$15,933 on 1.2 million shares traded.
3. Trader D,
$6,713 on 145k shares traded.
4. Trader Z,
$5,175 on 279k shares traded.
5. trader J,
$2,458 on 59,300 shares traded.

"Chambermaid" - Trader H*, -$8,518 on 1,700 shares traded.

2. Trader C,
-$3,598 on 133k shares traded.
3. Trader B,
-$2,738 on 37,000 shares traded.
4. Trader T,
-$1,923 on 2,400 shares traded.
5. Trader 9*, -$449 on 1,000 shares traded.

Here's your St. Patrick's Day heatmap... all green.

Fuck Glenn Beck

And anyone who watches his shit.

David Ryan: Market Wizard

Let's just get one thing on the table to start... the subtitle of the David Ryan interview is "Stock Investment as a Treasure Hunt."

Anyway, I didn't realize this at first, but it was a good plan to profile O'Neil and Ryan in quick succession because Ryan works for O'Neil and is a disciple of the CANSLIM method. In fact, there seems to be absolutely no daylight between O'Neil and Ryan when it comes to trading style. Still, this is a great interview and it avoids being repetitious because Ryan fleshes out the stock selection process under CANSLIM quite nicely.

Ryan also offered a whole list of good books to read. I am going to list them here but not link them, as I plan on signing up for the Amazon Associates program and I ask that you buy them through the widget I'll have up by the end of the week. Of course, you should already be reading Market Wizards...

So, here goes, David Ryan's reading list...

William O'Neil, "How to Make Money in Stocks"
Nicholas Darvas, "How I Made Two Million Dollars..."
Edwin Lefevre, "Reminiscences of a Stock Operator"
Jessse Livermore, "How to Trade in Stocks"
Richard Love, "Super Performance Stocks"
Kermit Zieg, "Profile of a Growth Stock"
Marty Zweig, "Winning on Wall Street"
Stan Weinstein, "Secrets for Profiting in Bull and Bear Markets"
Frost & Prechter, "Elliot Wave Principle"
Beckman, "Super Timing"

Again, since Ryan is using the CANSLIM method, timing the entry is of utmost importance. He states that if the trade is going to work, it most often begins to work immediately. If the trade starts to fail, meaning the stock re-enters the base from which it was breaking out at all, Ryan sells half his position.

Because he is so quick to take a loss, Ryan only has a gain on a trade about 50% of the time. But as he explains, he is still able to turn a pretty good profit...
The maximum loss I allow is 7 percent, and usually I am out of a losing stock a lot quicker. I make my money on the few stocks a year that double and triple in price. The profits in those trades easily make up for all the small losers.
Ryan is a proponent of keeping a trading journal and says that the most important advice he has for new traders is to learn from their mistakes. Only by understanding why you entered and exited a trade can you pinpoint trading errors and learn from them.

I'm not going to outline the CANSLIM method since it is well-known and detailed elsewhere, but Ryan does walk Schwager through his stock selection process and I found it very interesting.

For Ryan, the most important aspect of CANSLIM is the relative strength reading. That's what he starts with and he says he often buys stocks with a 99 relative strength rating which means at the time of his purchase, they are outperforming 99% of all other stocks trading on either the NYSE or NASDAQ. This is why CANSLIM is sometimes coupled with the phrase, "Buy high, sell higher." They are not interested in "beaten-down" stocks or in issues trading below $10 a share.

After relative strength, Ryan is most interested in the EPS rating. For this, he compares the near term earnings performance of a stock with its 5-year average earnings performance.
I look at the five-year earnings growth record and the last two quarters of earnings relative to the previous year's levels. The quarterly comparisons show you if there is any deceleration in the earnings growth rate. For example, a 30 percent growth rate over the last five years may look very impressive, but if in the last two quarters earnings were only up 10 percent and 15 percent, it warns you that the strong growth period may be over.
All throughout the stock blogosphere, you'll find gay dudes and possibly women posing as men, drawing fib lines and coming up with price targets for their trades. That's great, but I like Ryan's "fast and loose" method instead... witness the following exchange between Schwager and Ryan. I wish I could say it was a "heated exchange" but alas, it is quite dull.

Schwager: Do you pick an objective on the stocks you buy?

Ryan: No. I usually wait until the stock runs up, builds another base, and then breaks down. That is when I liquidate.

Schwager: Do you have a pumpin' sex life?

Ryan: Yes. I go to bars, meet women and get them drunk. That is when I take them home to introduce them to my "pet snake."
And let me mention one last time that if there is a criticism to be made about the CANSLIM method, it's that you'll often get stopped out of positions. So if you don't let your winners run, you will ultimately have a difficult time. Ryan offers the following clue to help investors avoid getting "whipsawed."
You can tell a lot by volume. If the volume doubles one day and the stock moves to a new high, it is telling you a lot of people are interested in the stock and buying it... [Conversely,] if the stock moves to new high ground, but the volume is only up 10 percent, I would be wary.
Altogether, I really enjoyed re-reading the O'Neil and Ryan interviews. It got me thinking about CANSLIM again, and how it will be nice to swing trade again once the market settles down a bit. Perhaps I'll resubscribe to the IBD afterall...

Monday, March 16, 2009

No Age, "Eraser" (Live from Juan's Basement)

This song is all about buildup.

The RO Report, "Mindful Gardening" Edition

In my attempt to improve my trading, I have been leaving my desk more. Sounds fishy... like in order to trade better I'm not trading at all, but that's the plan.

If nothing else, in the last 6 months I've learned that there are markets worth trading aggressively and markets that are better left untouched. With the SPY basically in the middle of support and resistance and the XLF hitting resistance I decided to let the second half of this day go.

I spent the day outside, gently digging up moss and replanting it elsewhere while chanting. Sometimes, if I felt my heart rate increase, I stopped to drink tea and eat rice. Eat that, Zentrader! Okay, perhaps that's taking it a bit far...

Anyway, the RO had a decent day. Out of 29 traders today, 21 were gross positive or 72%. 9 traders made over $1,000 gross, and 2 traders lost over $1,000 gross. I was #11 of 29, not bad for a day spent gardening.

FOMC meetings Tuesday and Wednesday. I plan on getting more gardening done...

"Lucky Pierre" - Trader D, $7,555 on 318k shares traded.

2. Trader H*, $6,877 on 0 shares traded.
3. Trader 10*, $2,771 on 4,500 shares traded.
4. Trader 9*, $2,667 on 1,800 shares traded.
5. Trader C, $2,422 on 214k shares traded.

"Chambermaid" - Trader Z, -$7,557 on 278k shares traded.

2. Trader A, -$3,791 on 126k shares traded.
3. Trader 8, -$460 on 10,800 shares traded.
4. Trader L, -$300 on 9,000 shares traded.
5. Trader Q, -$172 on 7,600 shares traded.

William O'Neil: Market Wizard

Back when I started to trade, I read the IBD religiously. I'd sit there in the JP Morgan building downtown and read it from cover to cover. I even read the articles about commodities and bonds just because I was trying to absorb everything that was new.

William O'Neil started the IBD in 1982 and to understand it and the "CANSLIM" investing method that it promotes is to understand his history. Unfortunately, it's also to understand his politics... which is why I ultimately unsubscribed.

But political opinions aside, O'Neil's story is great and if you haven't already, I would suggest the following book that he published in 1988: How To Make Money In Stocks (4th edition to be published this June). In fact, a good portion of the Market Wizards interview excerpts from that book and actually, I was disappointed that no new ground was turned for me about O'Neil in the Market Wizards interview. But there were a couple of gems.

First of all, O'Neil is a plainspoken, no-frills kind of guy and I've always thought his story is great. He had $5,000 in 1962 and made 3 great back to back trades where he pyramided his profits perfectly and walked away at the end of 1963 with $200,000. With that, he purchased a seat on the exchange and started his own company. What's not to like about that?

He did loads of research which led him to discover and believe in truth-gems such as "it is one of the great paradoxes of the stock market that what seems too high usually goes higher and what seems too low usually goes lower."

This is why he promotes buying breakouts from "sound" bases. He loves charts. Even if a stock meets all of the criteria from the CANSLIM method it needs to be breaking out of a base for O'Neil to purchase it. As he explains,

You don't want to anticipate a breakout from a base because a stock may never break out. You can buy too soon as well as too late. The idea is to buy when there is the least possibility of a loss. If you buy within the base, the stock will frequently fluctuate 10 or 15 percent in normal trading action, and it is very easy to get shaken out of the position. But if I buy at exactly the right time, the stock i susually not going to go down to my maximum 7 percent stop-loss point.

Entry is the most important aspect of O'Neil's method. And if you get in a stock, make a quick 20% and get out, O'Neil says the thing to do is not bitch about the money you left on the table when you see it go even higher.

The secret to winning in the stock market does not include being right all the time. In fact, you should be able to win even if you are right only half the time. The key is to lose the least amount of money possible when you are wrong. I make it a rule never to lose more than a a maximum of 7 percent on any stock I buy. If a stock drops 7 percent below my purchase price, I will automatically sell it at the market--no second guessing, no hesitation.

So then Schwager excerpts the 18 mistakes that investors make from O'Neil's book. I'm not going to reproduce them here, that would be boring. Instead, go buy and read O'Neil's book.

It's a book that every stock trader should definitely own.

BLOG NOTE: Because the O'Neil interview was rather short I decided to publish this today, and tomorrow or Wednesday I'll publish the David Ryan interview.

Sunday, March 15, 2009

Sunday Space

"Money doesn't talk, it swears."

-Bob Dylan, "It's Alright Ma, I'm Only Bleeding."

Friday, March 13, 2009

Built To Spill, "Car"

I wanna see movies of my dreams.

The RO Report, "Birthday" Edition

It was a pretty crazy week around here. The SPY had nearly a 10 point range and finished at the high, I went from being down on the year to green, and Jon Stewart taught Jim Cramer that you can be informative and funny at the same time.

You have to either hand it to the bulls or wonder where the fuck the bears went... I'd say that after the bounce on Tuesday that the market has acted pretty perfectly. Still, despite the good action I lowered my exposure in my swing account.

We're still in a bear market.

Anyway, it wasn't a good day for the RO. The market basically churned around. One bright spot was the volume, which came in over 1.5 billion again. So out of 26 traders today, 15 were gross positive or 58%. 5 traders made over $1,000 gross and 6 lost over $1,000 gross. I was #4 of 26. Happy.

Tomorrow is my birthday. How about you show me some love by Digging some of my old articles if you haven't already? One. Two. Three. Thank you very much. Have a great weekend and I'll see you all on Monday.

"Chambermaid" - Trader H*, -$5,469 on 11,000 shares traded.

2. Trader D,
-$2,444 on 203k shares traded.
3. Trader Z, -$2,127 on 131k shares traded.
4. Trader A, -$2,054 on 87,000 shares traded.
5. Trader C, -$1,950 on 188k shares traded.

"Lucky Pierre" - Trader 10*, $1,451 on 800 shares traded.

2. Trader E, $1,351 on 63,400 shares traded.
3. Trader F,
$1,188 on 55,409 shares traded.
4. Trader S, $1,031 on 23,200 shares traded.
5. Trader T,
$1,008 on 3,600 shares traded.

Week In Review: Jim Cramer versus Jon Stewart Edition!

The little blue guy represents you.

High-speed rail finally coming to the US. Of course, California leads the way.

Sure unemployment is soaring but the Treasury Department needs lots of help and fast. Send resumes.

People still like the dollar... Funny. I remember back in the fall, people on "the Fly's" site were saying we'd be on the Amero by now.

The problem, according to this humble blogger, is that poverty is just too much fun!

Wow, Washington makes a promise and then reneges... first time ever!

The Reformed Broker, a man who knows all about anal rape, gives Bernie Madoff some advice about which prison gang to join.

Look, if you ever get pulled over for drinking and driving, don't use the old "It's cool, I'm a country" excuse.

Remember that dude from Overstock.com who was always talking about naked short selling? He seemed way into conspiracies and stuff? Here's what he founded to expose the financial media... Deep Capture. Obviously, he didn't think about the unfortunate double-entendre possibilites of that name.

There is a bottom to the market. You can find it at foreclosure auctions all across the country.

Brian from Alphatrends imagines what a possible bottom might look like... the part that is ensquared (is that a word?) in yellow is fictional, but I like it.

How can you not link a site called Gloomberg News?

Finally! The Condo Fucks have a new album out. It's called Fuckbook. Okay, actually it's one of my favorite bands, Yo La Tengo in disguise. Best fake band name ever?

Thursday, March 12, 2009

Arcade Fire, "Rebellion (Lies)"

The RO Report, "Melt Up" Edition

Everyone is suddenly talking about changing the "marked-to-market" accounting standards. This is upsetting because it's really taking away from the whole Jon Stewart/Jim Cramer war.

11pm tonight! Comedy Central! Don't miss it!!!!! But hey, if you do, no big deal. I'll post the interview with my Friday links tomorrow.

Anyway... so what does this potential change mean? Art Cashin used a great analogy this morning on CNBC to help us idiots understand. I'll paraphrase...

He said, imagine if the dude who lives down the block from you has all sorts of financial trouble and is desperate to sell his house. He's a real shithead. The type of dude who doesn't clean up after his dog. Anyway, because he's desperate, he is forced to sell his house/trailer below market value. In short, the dude gets fucked. But you're cool... you pay your mortgage each month and have a 3467 credit score. Say you want to sell your house. Should you be forced to value your house at the same value as the fucked up dude?

Basically, changing the marked-to-market accounting standards means that no, you don't have to value your house the same way the fucked dude had to value his.

Why am I writing about this here when all you people want are the numbers? Because it pertains to the market action today. Who the hell wants to be short the market and specifically financial stocks if they're about the change these standards? Apparently nobody.

Welcome to the great short squeeze of 2009!

The RO had a great day. Out of 31 traders, 27 were gross positive or 87%. 14 traders made over $1,000 gross and only 1 trader lost over $1,000 gross. I was #14 of 31, very happy considering I was down for 95% of the trading day. Trader A continues his hot streak.

"Lucky Pierre" - Trader A, $32,949 on 434k shares traded.

2. Trader D, $21,756 on 786k shares traded.
3. Trader Z, $19,738 on 532k shares traded.
4. Trader B, $13,446 on 749k shares traded.
5. Trader C, $9,200 on 588k shares traded.

"Chambermaid" - Trader J, -$1,011 on 116k shares traded.

2. Trader F, -$873 on 149k shares traded.
3. Trader Q, -$272 on 3,200 shares traded.
4. Trader 8, -$122 on 44,200 shares traded.
5. Trader G, $48 on 8,200 shares traded.

Stock Market Trend Analysis 3/12/09 from brian shannon on Vimeo.

Another Person Who Shouldn't Trade

Contrary to popular belief, trading is not gambling.

null - Watch more free videos

Okay, now to address a small blog issue. I have not published a history or an around the house post in a few weeks. I blame daylight savings.

UPDATE: I would like to point you all in the direction of Trader X's blog this morning. A long time reader of his has passed away and they are seeking $5 donations to help pay for his daughter's college education. Think about what you almost considered paying for "the PPT" and go donate.

Wednesday, March 11, 2009

Wu-Tang Clan, "Protect Ya Neck"

Trader D sprayed today, but he left the chat room without giving me a song. RO members understand that getting on the wrong side of D can be a painful experience... in fact, the last time we had a disagreement about him spraying, he protested and boycotted my blog for a couple of months. So I'm playing this one safe and playing a song from a band I know he likes. Worst case scenario I have screwed up and will have to offer a public apology or something... also, I gave it a pink border.

The RO Report, "Digestion" Edition

There's only one way to view today in the context of the last year: an utter and complete victory for the bulls.

The XLF finished positive, tech was positive, the transports were up and the market finished flat after pulling slightly negative for awhile.

Now what we need is a little follow-through action in the next few days. We filled the gap today that was formed at the end of February. It would be nice to see us close above that level soon to trap some bears. They're not going to get worried just yet though... I realize that.

Anyway, the RO was doing well and then got a little ass-blasted into the close, so we close mixed.

Out of 31 traders today 20 finished gross positive or, 65%. 6 traders made over $1,000 gross and 6 lost over $1,000 gross. I was #12 of 31, or happy to get out of the afternoon alive.

"Lucky Pierre" - Trader D, $13,336 on 389k shares traded.

2. Trader A, $5,720 on 236k shares traded.
3. Trader B, $4,848 on 219k shares traded.
4. Trader C, $1,721 on 301k shares traded.
5. Trader 9*, $1,512 on 1,400 shares traded.

"Chambermaid" - Trader P, -$11,487 on 336k shares traded.

2. Trader Z, -$3,148 on 262k shares traded.
3. Trader J, -$2,423 on 107k shares traded.
4. Trader K, -$2,416 on 87,000 shares traded.
5. Trader V, -$2,323 on 104k shares traded.

Stock Market Video Analysis 3/11/09 from brian shannon on Vimeo.

Poll: How Should I Take Revenge On My Neighbor?

The first thing I do each morning is open the window blinds.

Well this morning I opened the blinds to see my neighbor walking his dog on the street in front of my house. The dog sniffed here and there and then ambled over to a wooded area on the side of my lawn and took a dump.

My neighbor stood there a second, looked in both directions and then walked away from the steaming brown pile which was quickly nestling its way further into the earth, my earth, with each drop of rain.

The motherfucker didn't pick it up!

So I ask you all a very important question. What should I do about this?

Please vote in the poll over on the right. It will only be open until Friday at which time I will act.

1. Take the shit and deposit it on his lawn.
2. Take the shit, bag it, and set it on fire on his stoop.
3. Leave a short letter in their mailbox asking them to curb their dog.
4. Put a sign on the lawn saying curb your dog.
5. Do nothing and worry about more important things.
6. Start flirting with his wife

Michael Steinhardt: Market Wizard

Let me start this post with a minor criticism of Mr. Schwager.

He begins this interview by schooling Steinhardt on what he perceives to be the difference between a trader and an investor. I thought this a bit strange and annoying; aren't we reading this book to hear what the traders think about shit? Sometimes I feel Schwager inserts himself into the interview too much, as if he wants to impress upon the reader (or the person he's interviewing) how much he knows.

There was a time when I thought I would get into journalism. I remember reading a book by a reporter (the name escapes me) who said basically, "Look, if you're doing a story about a kid who rides a red tricycle, whatever you do, don't get on the red tricycle yourself and wave to the camera at the end of the report."

Perhaps if the subtitle of this book was "Conversations with Top Traders" and not "Interviews with Top Traders" I wouldn't notice it as much. It's a minor criticism, but it crops up now and again throughout the book and always bugs me. I guess I find the best parts of Market Wizards are when the interviewee is allowed to give nice long responses full of little trading anecdotes and aphorisms.

Anyway, the point is that I didn't get much from the whole first portion of the interview because I was distracted by Schwager, but by the end I came away thinking it was quite good.

Steinhardt is different from the other traders we've read about thus far. Take the following quote from him about risk for example: "My attitude has always been that to make money in the markets, you have to be willing to get in the way of danger." While there have been a few traders who didn't even want to talk about trading disasters and "war stories," Steinhardt seemed to revel in these, which I found refreshing. Why? Because it's just natural to talk about these things...

Overall, I got the feeling that while Steinhardt might be a bit of a dick, (Schwager mentions his firm has high turnover and that he plays bad practical jokes on people) he had a real "feel" for the markets and that most of his trading was intuitive, locked up in his own psychology, and based on his own personal feelings about a situation. Instinct and art were much more a factor in his trading than science, and he would probably be a very difficult guy to sit next to and learn from...

He was one of the first hedge fund managers and they get into a long interesting discussion about the benefits of hedge funds versus mutual funds. I won't get into it here but I came away thinking that the investing populace as a whole would be about 1000 times better off if there was more of a balance between mutual funds and hedge funds. They're just so much more flexible... mutual funds seem horribly dated to me and I can't imagine after the trainwreck of the last two years that someone won't attempt to put together a hedge fund for the "small guy."

As a hedge fund manager, Steinhardt talks often about his "exposure" to the market; or what percentage of his capital is tied to the long side of the market, and what percentage is tied to the short side. This was interesting because I realized that many traders in the RO (particularly D and B) are obsessed with their "exposure" and I guess they're trading like hedge fund managers...

Steinhardt says his main trading principle is "variant perception" which is a fancy way of saying that he's a contrarian. But he highlights a very interesting subtlety about being a theoretical contrarian and having to deal with being a contrarian at a practical level...

In order to win as a contrarian, you need the right timing and you have to put on a position in the appropriate size. If you do it too small, it's not meaningful; if you do it too big, you can get wiped out of your timing is slightly off. The process requires courage, commitment, and an understanding of your own psychology.

This sums up what you need to think about next time you start shorting a stock that is spiking "too much" in one direction or the other... most important is commitment. If you're going down that road, be prepared for the pain and stick to your position, otherwise you might find yourself getting tied to the emotional aspect of it all and blow out at bad prices. I can't tell you how often I've done just that.

And like many of the other traders interviewed by Schwager, Steinhardt talks about the importance of learning from your mistakes.

There is a very good investor I speak to frequently who said, 'All I bring to the party is twenty-eight years of mistakes.' I really believe he is right. When you make a mistake, there is some subconscious phenomenon that makes it less likely for you to make that same mistake again. One of the advantages of trading the way I do-being a long-term investor, short-term trader, individual stock selector, market timer, sector analyst-is that I have made so many decisions and mistakes that it has made me wise beyond by years as an investor.

This post is rather long already. Knowing that many of my readers (at least the Anonymous ones) are blessed with very small attention spans, I will simply end this post with two more Steinhardt quotes.

Steinhardt's advice to a layman:
Recognize that this is a very competitive business, and that when you decide to buy or sell a stock, you are compteing with people who have devoted a good portion of their lives to this same endeavor. In many instances, these professionals are on the opposite side of your trades and, on balance, they are going to beat you.

Steinhardt's elements of good trading:
Good trading is a peculiar balance between the conviction to follow your ideas and the flexibility to recognize when you have made a mistake. You need to believe in something, but at the same time, you are going to be wrong a considerable number of times. The balance between confidence and humility is best learned through extensive experience and mistakes. There should be a respect for the person on the other side of the trade. Always ask yourself: Why does he want to sell? What does he know that I don't? Finally, you have to be intellectually honest with yourself and others. In my judgement, all great traders are seekers of truth.
Next week we discuss a trader who definitely influenced me (though not my politics), William O'Neill, founder of IBD.