Harvey Danger, "Flagpole Sitta"

Footage is from Evil Dead II. Blood on the streets, indeed!

"Smart Money Is Buying This Market" - Maria Bartiromo

I figured it was a good idea to post that weekly graph of the futures. As you can see, we're just about where we were on January 1st, 2007.

It's a different story for the Dow. It's still up a few hundred points for the year.

Anyway, it was a wild day for stock trading yet again. With Hurricane Dean looming in the Caribbean and huge companies like CFC having serious trouble, this volatility shows no sign of ending. I'll say that at least in my mind, it feels like our entire financial system is about to collapse. So far, I don't think stocks have fully priced in that type of fear. I think it will take that type of fear induced capitulation plus some financial companies opening up their books and letting people know how deep the sub-slime is to hit some type of bottom... that, or some type of FED bailout in the form of a deep rate cut. But whatever, I'm a trader.

Here's my best stock of the day, UBB.



Ironically enough, I missed the short that melted the stock from 2pm into the close. I made my money on the long side, between 9:45 and 10:00. I actually think that's a really good thing because it tells me that I'm very open-minded about the market right now. I got crippled for a couple of months after the February panic because I could only see shorts. So I'm happy that while the tone of the market is overwhelmingly bearish right now I managed to pull good money from the long side.

At the same time that I caught the UBB long, I also made good money on corresponding longs in AB and CNS. It was all about the financials rallying at that point of the day due to some Fed action. Again, I'm not an economist so I really don't know what they did. But, I don't care. As a trader my job is to react to movement in the market, not to necessarily understand what's causing the movement.

In fact, often the more you know as a trader, the worse off you can be. Because when you know too much, you can start telling yourself stories. And when you start believing your stories you can get stuck in bad trades. The only story you pay attention to is the price and volume action.

Another thing I didn't understand was the movement in AMG today. And wow, my timing was also awful in this stock. Basically, it was spiking up and down a point at the time as you can see on the 5-minute graph below.



I really got sucked into him today and made bad trades over and over. All of them were on the short side. The stock was just choppy today and I shouldn't have been trading it. I think I was watching it because it's my best stock on the month. However, I need to remember that the past is gone forever. Just because I made money in him a week ago means nothing about my ability to make money in him today, or tomorrow.

Anyway, the futures are down a bit again overnight. FXY is trading $86... it doesn't look like we're close to going down just yet. However, I'd expect some type of little rally attempt soon.

Here's the stats:
P&L, $2509
Best, UBB, $1131
Worst, AMG, -$998

shares traded, 39,600
27 stocks traded, 20 winners, 7 losers
193 trades

The "Tick Fairy"

I'm not talking about NYSE "ticks", here, I'm referring to the tiny disease ridden parasites that thrive where I live.

This past weekend, I filled up my daughter's inflatable pool and placed it on the back patio. She was splashing around, talking about farm animals and puppets and generally having a blast.

That's when I noticed a small black dot under her right armpit.

"What's that under your armpit?"

Immediately, she scowled at me and tucked her arm tight against her body. Taking a look at the "black dot" let alone prying it off, would not be easy. She sensed trouble... "I want Mommy!"

Thus summoned, Judy came outside and in her sing-songy voice said, "Let me see what's under your arm, honey!" My daughter tersely replied, "No! You will not look under my arm!"

We stepped into the house. Extreme cajoling and perhaps force would be required here. I quietly closed all the windows.

In the next 45 minutes, the myth of the "tick fairy" was created. This particular fairy collects dead, blood swollen ticks and in return, gives little children gifts. What does she do with the dead ticks? She collects them in jars and juices them. This juice, in turn, powers her little fairy-mobile with which she delivers her presents.

While we improvised this rather disturbing story, my daughter looked at us with a face that more or less said, "Wow... that's completely messed up" but importantly, let us remove the tick.

The tick fairy brought her a little doll, that of course, was made in China.

NOTE: Daily post will be late.

Virtual Office, $4822. Dow, -167.45, 12861.47.

Me, $2509 on 39,600 shares traded.
HPT, $2100 on 109 contracts traded.
Evolution, $343 on 10,000 shares traded.
OBAT, $180 on 5800 shares traded.
Denarii, $32 on 1000 shares traded.
Bubs, -$342 on 2600 shares traded.

Despite the fact that Maria Bartiromo must have said 10 times today... I'm sorry, must have shrieked 10 times today that the "smart money is buying the market here" the market dropped almost 200 points. Ah, Maria...

But, perhaps it's true. We really don't know. I mean, I don't have friends in high places like Ms. Bartiromo does, but I do have stock software. What that software shows over and over again, is that this market sells off in high volume. When it goes up, it goes up in light volume. That's not a sign of strength.

I guess there are lots of idiots out there selling this great market.

Anyway, the VO continues to show strength... the majority of traders in the VO keeps making money in the face of all this volatility. It's a traders market to be sure. I certainly don't want too much overnight risk.

We'll see what tomorrow brings. The headline risk to this market is gigantic.

NOTE: My daily post will be late tonight. For now, I'll bump my first post of the day, "The Tick Fairy."

Sweet Jumps

In need of some humor.

The Path Of Katrina vs. The Path Of Dean

Katrina.



Dean.



I just did this comparison out of curiousity. I really want to go on vacation next week but I'm afraid oil is going to freak out. In the next few days this picture should become clearer.

Anything can happen at this point.

Stock Market Volatility

Funny.



We wake up today and hear that the FED is doing "repo action" or something like that. I'm not an economist... I don't know what they're doing.

But take a look at the futures! You see that spike up? That's when CNBC reports that the FED "cancelled their repo action."

Everyone thinks, YAY! The FED doesn't see the need for more liquidity, everything must be "okay!"

Ah... but what about that spike down? That's 5 minutes later when CNBC says that the FED cancelled the "repo action" because of "technical difficulties" and that they'll be doing it, but just a little later.

Makes for an exciting morning.

The Beatles, "Hey Bulldog!"

I'll go mainstream on your asses for a bit.

Thornburg Mortgage CEO On CNBC

Erin interviewed the CEO of Thornburg Mortgage on Kudlow and Company today.



As you can see from the above graph, TMA hasn't been on a hot streak lately. In fact, it looks like the company is blowing up. It was halted just before the market closed today and they came out and said that they'd be paying their dividend late in response to "significant disruptions in the mortgage market which resulted in the sudden and unprecedented decline in the market prices of its AAA-rated mortgage securities that began on August 9, 2007 and subsequent increase in margin calls related to its repurchase agreement financings on those securities."

Sounds great! Well, for whatever reason, the stock is bid up a dollar after hours. Perhaps everyone thought they were going to announce bankruptcy. The graph sure looks that way.

So Larry Goldstone, CEO was interviewed by Erin. I have to give her props, she asked him hard questions.

She asked him, "So, is Chapter 11 next?" No, he said... Chapter 11 doesn't solve our problem.

She said there were a bunch of rumors out there that mentioned they were going under. He said that "80% of the rumors are untrue." He continued, "We have been able to meet all of our obligations. We are navigating our way through this process."

Goldstone said that "companies are not funding their loans" and that we are in the midst of "a severe credit crisis."

Erin asked him if his lenders were "forcing them to liquidate" to which he replied in part, "They are making it difficult for us to rollover financing."

Perhaps the most important quote I took away from the interview was Goldstone stating that they "cannot finance mortgages using any of the vehicles they've used over the last 14 years."

Erin pressed, "So how can you continue as a going concern?" to which Goldstone replied, "We have been selling securities in our portfolio. If we had to sell all of our securities, even at these 'bear market prices' we'd still have $14.28. So we're coming back, we just have to rebuild."

Erin asked, "But what if there is no buyer? Then the value is zero!" to which Mr. Goldstone replied, "That's just not true. There are buyers of mortgages."

I'm not sure how the interview concluded, because I had to split. A friend with a boat, took us out to enjoy the good weather. The market could melt, but still, I'll take boat drinks.

TMA closed at $7.61. After hours it's trading up at $9.48. Not spectacular, but still, quite a bounce.

Come Back Mojo!

Perhaps it was my lack of sleep but today I just missed out on the volatility.

I mean, when the Dow is down 200 points, you expect to be able to find and execute some decent trades. Today, I saw a lot of choppiness and I just wasn't convinced that my positions would follow through for me.

So, I lightened up my position sizes and played defense.

I mean, really, you have to be playing offense in this market. You need to be aggressive with your positions if you want to make decent money. However, there are times when you may not be feeling it for whatever reason (like you slept in a tent in your daughter's playroom) and you just need to be smart about it. You can't force trades.

So here's my best stock of the day, TFX.



I got short at $74.25 and added all the way down to $73.50. I actually thought this trade would work out much better, but the stock ran into some buyers and I was forced to cover. I missed the second short of the day around noon because I was in full on defensive mode at that point. I stood by my rule of not trading between 12 and 2 today because I just saw lots of chop with little follow-through.

My worst trade of the day was in FED.



I was short when he decided to rally from 11 to 11:30. He basically tore my face off. Now, I'm short overnight. I fully expect to lose money in my overnight short. I am not allowed to make money in overnight trades. God won't allow it.

Anyway, these last 2 days of trading make me really want to take that vacation I've been planning on. However, Tropical Storm Dean may make that an impossibility. Not because I was planning on going to Puerto Rico or anything but because this hurricane could really mess with the price of oil.

We'll see. For now, I've updated the sidebar with a website that is tracking the storm's progress.

Here's the stats:

P&L, $117
Best, TFX, $493
Worst, FED, -$543

shares traded, 24,800
19 stocks traded, 9 winners, 10 losers
141 trades

NOTE: The CEO of TMA will be on CNBC soon. I'll post a synopsis... of sorts.

Virtual Office, $820. Dow, -211.18, 13025.51.

HPT, $500 on 26 contracts traded.
OBAT, $401 on 3600 shares traded.
Bubs, $304 on 1100 shares traded.
Me, $117 on 24,800 shares traded.
Denarii, no trades.
Misstrade, no trades.
Evolution, -$574 on 38,400 shares traded.

Well, volume was a little higher than the totals for yesterday, but still light compared to last week.

Bad news is still hitting this market. Today, Sentinel made a request to halt redemptions from it's fund. As I type, Thornburg Mortgage, TMA, is halted for trading due to pending news. Perhaps it's good news! HAHAHAH! Right. Anyway, it's tough out there...

It was a really wishy-washy day in the VO... no one really made or lost too much.

Let's see what tomorrow brings. Will the Dow hold 13,000? Will those who voted in my "poll" that the Dow would hit 12,500 before 14,000 "win?" We shall see.

NOTE: Meanwhile, if anyone subscribes to the WSJ online and wants to fill me in on the link made to my site from a comment made on this article I'd appreciate it. I'm not a subscriber... You can either email me or place a comment here. Thanks.

UPDATE: I just figured it out... The Wall Street Journal was probably just fishing for a link from my site. Pikers. Still, my request for information stands.

FLASH: Bank Run!

That's right. Trish Regan of CNBC just used the words "bank run" to describe what's going on in the credit markets.

Responsible financial journalism at its best.

Perhaps she should start yelling again...

Rumor has it that she also enjoys going to movie theaters and yelling "FIRE!"

Global Century Investments

Here's a funny S&L skit on Financial Advisors. (h/t- d.g morris)

Camping

First of all, I monitored the weather channel all day and didn't see one prediction for a thunderstorm.

Nonetheless, as we were setting up our tent, wondering about all the clouds, a thunderstorm, with lots of lightning cancelled our excursion.

In the end, we got home, wet, and pitched the tent in the playroom.

I didn't sleep well.

Jack Kerouac, "On The Road (passage)"

Music is lagging in the poll. Let's try some spoken word stuff.



NOTE: This isn't a "passage" out of On The Road. Instead, it seems like a bit he wrote about why he wrote On The Road.

Felt Slower Than It Was

First of all, the day started out on a high note when I read that Karl Rove was resigning. I've dispatched an email to him to see if he'll guest blog while I'm on vacation, but so far I haven't heard from him. Surely, he is an avid reader of "Dinosaur Trader," so I'm hopeful.

Anyway, my take on today is that I was lulled to sleep early because of the "low volume" and thus, I fell into the trap of telling myself a "story" and took myself out of the game mentally. It pays to be mentally aggressive when trading... today I was not.

I started off getting smoked in my over-weekend short in TFX.



As you can see, it traded straight up 5 points. I was short 400 shares. Of course, I covered before $80, but still, it was unpleasant. Luckily, I stayed with this one and got short again in the $79s after it topped out. I ended up making all of my money back and then some, closing up $339 on the stock.

Another early trade was a long in CNS. I noticed on his daily graph that he was breaking above a downtrend line that I drew.



So, I bought and caught a nice 80-cent rip from $32.70 to $33.50.



On the downside, I screwed up BEN today... big time.



I started getting short around $124. My final cover of the day was up at $126.67... just before it collapsed. Frustrating. Luckily, I was trading it with only 200 shares at a time and thus limited huge damage. Still, losing almost $500 on a stock when you're trading with such small size means you messed up.

Besides that, I traded quietly today. I say that it felt slower than it was because there was a lot moving. I got stuck telling myself a "story" again, based on how I "felt" rather than looking at stocks "as they were." What I mean, simply, is that there were a lot of opportunities that I missed today because I lost my aggressive edge. I got lulled to sleep.

But take a look at any financial, at LZ, FLR or DSL and you'll see that many stocks had multiple-point ranges today. If you were awake, there were lots of trades to be made. If today meets the new definition of a "slow day" I'm happy to be trading.

Anyway, it's good to start the week with a gain especially since the day dawned on a down note. Happily, I have no overnight exposure and I can wake up tomorrow going into the market flat.

One word about tonight... I'm camping out on the beach to catch the tail end of the Perseid meteor shower. Camping with a toddler... this may end up working itself into a post.

Here's the stats:

P&L, $637
Best, CNS, $366
Worst, BEN, -$490

shares traded, 14,000
11 stocks traded, 7 winners, 4 losers
86 trades

Virtual Office, $819. Dow, -3.01, 13,236.53.

HPT, $700 on 28 contracts traded.
Me, $637 on 14,000 shares traded.
Bubs, $148 on 200 shares traded.
OBAT, $136 on 10,404 shares traded.
Misstrade, -$155 on 1200 shares traded.
Evolution, -$647 on 24,000 shares traded.

I may be completely wrong, but I think volume was the lightest it's been in a couple of weeks. There was still a lot moving, but with all the clamor of the last few sessions, it "felt slow."

I was lulled to sleep as well, however check out a few charts and you'll see there was plenty to trade.

Anyway, we've traded up for like, the last 7 Mondays or something silly like that. With low volume, I wouldn't exactly call today a huge success for those bullish on the market. The market simply inhaled and exhaled today... it took a breath.

I expect this week will "give more." Stay tuned.

NOTE: Thanks to all who have already voted in the new poll.

Vetiver, "Angel's Share"

Okay, so music isn't getting the most votes over there on the "poll" to the right but that's cool. Like I said, this site is about getting you to listen to good music and to get everyone you know to stop spraying pesticides despite the fact that it looks like "just another stock blog." I'm a Jedi.

Slowly your old, decaying thought patterns are changing and you will conform to my ways.

Anyway, mellow summer day. Mellow song. Enjoy it.

Freaky Hybrid Trade Of The Day! LNN!

I mean, yeah, the open is always more volatile, but this shit ain't right!

The stock opened at $44.86 on a 1500 share print. Next trade? 100 shares, over a point higher up at $45.95. So, yes, you're reading that correctly. A big buyer moved in with 100 shares and moved the stock over a point.

Baffling.

In the next 10 minutes, the stock traded a little over 6000 shares and dropped 3 points. Most of these trades were for 100 shares each. In other words, the stock freefalled on no trade volume.

Further, after the stock bottomed out at $42.85, it took only 1000 shares to jolt it back up to $44.48. In fact, that analysis is generous. It took 900 shares to move the stock from $42.85 to $43.55 (absurd in itself) and then 100 shares to move the stock from $43.55 to $44.48 (completely freaky).

So another full point on a 100 share trade.

Gaps in liquidity anyone?

Please, visit Ray's blog and let your voice be heard. If you're an old NYSE trader his site may be the only good outlet for you to voice criticism about the Hybrid and have any hope it's being heard.

Slower

Not that we could sustain the volatility forever, but today's stock action is markedly slower.



Volume has dropped significantly from Friday's levels. Today's "bounce" has all the markings of an "oversold rally," "short covering," or a "dead-cat bounce." Take your pick.

My guess is that unless the bears come out in force in the afternoon session that we'll just slowly grind into the close. But of course, anything is possible. We could have another 3:30 buy program rally that drives the market back to 13,500. Expect the unexpected.

As for me, I got a little smoked in the TFX short that I held over the weekend. I think I've covered most of the loss elsewhere, but I'm having a pretty dull day overall. I'm taking it easy here during the "lunch hours" and I'll keep an eye on things in the afternoon.

Overall however, I'm more than happy to have a chill day of trading to just catch my breath.