The Who, "Squeeze Box"

The Shorts Get Squeezed

I have a hard time going back on a day like today and making sense of my trades.

I mean it's tough to remember that at 12:30, it felt like we would be dining in hell again.

Just a few short hours later, people are ready to max out their credit cards and buy properties in Florida.

The stock market is filled with humor if you look at it in the right way. Basically, people are silly. "Human nature" is hilarious.

Anyway, the good news for me is that I didn't wait for the big afternoon rally to start making money. I was up $2000 by 10:30 due largely to an unbelievable long in FED.



This was a good and bad trade for me. Good in that I held 200 shares for the full 4 point move. Bad in that I sold out of another 500 shares between $32.40 and $32.80. But looking at the positives, I caught this one right.

You'll recall that a couple of days ago I posted stocks with high short interests. These were the stocks I was focusing on should we get a rally. This strategy really paid off. I know loads of stocks ripped today, but the moves in FED, JLL, CNS and ABK were ridiculous. Just having it in the back of my head that these stocks had heavy short interests helped my confidence level when trading them.

In short, my recent focus on research seems to be paying off in terms of helping my confidence level. I'll keep at it and the lame "good morning" posts.

So I sat on my $2000 early morning gain for the better part of the day. I churned a bit making a losing money, but not too bad. After giving back in the middle of the day recently, I cut my size so I wouldn't get too hurt.

The afternoon rally worked like this. At first, it really started on low volume and I was only a little involved. but take a look at the volume spike at 2:50 or so...



That spike told me not to worry too much about the 1x2 quotes on my screen. There were robots buying the market. They didn't show up in individual stock quotes, but they were there buying stocks with abandon.

So I started buying stocks with abandon. Not really... I'm still taking it easy... but I bought enough for now.

My two best afternoon trades were in OMG and JLL.

OMG was a break of the downtrend play. Here's a 30 minute graph where it shows up nicely.



I picked it up around $51.25 or so. It was a choppy trade, so I got shaken out a few times and had to reenter. It was pretty, but I made $700.

JLL was also a downtrend play, but it had the added benefit of being a short-squeeze play.

Here's the daily.



Unfortunately, I only had a couple hundred shares of this one. This stock trades thinly and frankly, it freaks me out a little. So, I took it easy.

Anyway, like I said in the VO post, I have a feeling trading could relax a bit up until FED day next Wednesday. That's not saying too much though since trade has been absolutely nuts. I just don't think we'll be trading over 2.5 billion on the NYSE again for awhile and I also think the VIX has topped out for awhile.

Still, it's earnings season and there's still lots of uncertainty and headline risk. Should be plenty of opportunities.

Here's the stats:
P&L, $6442
Best, FED, $1677
Worst, MEE, -$119

45,600 shares traded.
34 stocks traded. 25 winners, 9 losers

Virtual Office, $11,247. Dow, +298.98, 12,270.17.

Me, $6442 on 45,600 shares traded.
Sanglucci, $2900 on 39,000 shares traded.
Evolution, $1028 on 12,200 shares traded.
OBAT, $681 on 12,800 shares traded.
Dehtrader, $248 on 7180 shares traded.

Wincity, $18 on 200 shares traded.
Retardo, no trades.
Akalawoo, no trades.
Denarii, -$70 on 1600 shares traded.

DAMN!

The market rallied 600 points from the bottom on unbelievable volume to close up 300 points on the day. This was the catalyst. The bond insurers getting a bailout.

A trader's paradise.

As "obvious" as the rally seemed at 3pm when the robots couldn't hide their volume with diced up 100 share orders, it was nonetheless somewhat hard to hold. Stocks were taking fairly wild swings, shaking traders out left and right. Of course, if you bought early enough, you had an easier time holding... if you missed the early part of that rally it was probably somewhat frustrating.



A short term bottom is in. Unless we get hit with disastrous news, we should be somewhat safe here... if the FED cuts by 50bp next week, we could be off to the races for awhile... if they don't we could revisit the lows. We'll see.

This bonanza may tail off a bit now. Still, with earnings season upon us there should be plenty of opportunities. It's all about January 30th and "Ben the Beard."

Bush Inspires Confidence In The Economy

Art Cashin Reacts To Rate Cut

Letterman Thinks "Dr." Brady Barr Is An Idiot Too

(h/t Kawika)

Good Morning

Time: 6:42
Mood: Good

HPT Lessons Learned

By now, most have you have seen HPT's dramatic blow up video that I posted here the other day. Unfortunately, youtube removed it because he dropped the f-bomb about 3000 times in 10 minutes. Incidentally, I think it's silly that youtube allows kids to post videos of them beating each other up but will remove a video for using the word "Fuck."

That's seriously stupid.

Anyway, check the video below for what HPT learned from his blowup.

Also, kudos to him for using his now wideranging Internet exposure to tout a few charities. Not like I'll donate or anything... but still, it's nice.



And finally, check Tim Knight's parody video of HPT. FUDGE!

White Stripes, "Black Math"

Stock Market Volatility

You all know the story by now... the Dow gapped down 464 points at the open and then rallied madly back for the next hour and a half.

It nearly went positive for chrissakes!

Then it based for the rest of the day and churned unsuspecting traders into a head spinning oblivion. Unfortunately I was one of those traders. I gave back half of my profits from 11 to 4.

I'm still trading small size and still getting used to my system. I've been using more limit orders lately, but this morning I should have used market orders. I missed a lot of good trades because stocks just went straight up that first half hour and my limit orders were never hit.

I've been trading 9 years and I'm still learning... go figure.

Anyway, I'm shot. Immediately after the close we went out with a group of friends who all have 3 year olds... If the market doesn't finish me off, surely the 3 year olds will.

Here's the stats:

P&L, $1707
Best, BBD, $451
Worst, AG, -$208

51,200 shares traded.
32 stocks traded. 19 winners, 13 losers.

Virtual Office, $4176. Dow, -128.11, 11,971.19.

Me, $1707 on 51,200 shares traded.
Dehtrader, $1214 on 4540 shares traded.
Sanglucci, $1010 on 27,800 shares traded.
OBAT, $143 on 3200 shares traded.
Denarii, $102 on 700 shares traded.
Misstrade, no trades.
Wincity, no trades.
Retardo, no trades.
Akalawoo, no trades.

Well it was one for the ages.

I feel like a mook now... a rookie trader in an office full of animals. I was basically low man today (in my real office) while multiple traders made tens of thousands of dollars. 2 traders made over $50,000. Most everyone made the lions share of their money by 10:30.

It's frustrating. However, it also gives me hope that there is going to be lots of money to be made for a long time. The traders are in control of the market.

We traded huge volume on the NYSE today, over 2.5 billion shares. Also, the VIX skyrocketed over 37 today before settling down at around 30.80, still up over 3.5 on the day. Could that have signaled a bottom? Maybe... however, I'd be surprised if we don't test the lows. While it felt like the market rallied today, we still closed down substantially.

It only felt like a rally because we opened down 500 or so...

You can't overstate the importance of the FED meeting on the 30th. Will "Ben the Beard" do it again?

It's at least interesting and fun to be a trader again, that's for sure.

Quick Note

"Life with diabetes is about 'going for it!'"

FED Cuts By 75 Basis Points

Futures still down 40.



Dollar tanking.

When Will The Rate Cut Come? & Black Monday Revisited

Meanwhile, here are some posts from back in October, back when everyone was celebrating the 20 year anniversary of Black Monday.

WSJ Online Remembers 1987.
Black Monday, Terrible Tuesday, Wussy Wednesday.

Finally, Alphatrends pulled the graphs from the FED cuts after 9/11 to show how they effected the market. When the FED threw the first surprise cut on the market, it didn't help. People still sold. The second cut put in the bottom.

Check it out.

Good Morning

Time: 6:47
Mood: Nervous

High Short Interest Names

The following stocks have high short percentages. The numbers in parentheses next to the symbol represent the short % of the float. All numbers are from Short Squeeze. I have rounded the numbers up or down accordingly.

The reason I'm posting these is because should we get some type of panic bottom, short covering could be huge. I remember from reading Reminiscenses of a Stock Operator that Livermore looked to cover shorts on huge events or down days.

Also, I just went through the stocks on my screens, not all the stocks on the NYSE. If anyone knows of other good stocks to trade with high short percentages, please share. I didn't include the homebuilders, because I generally stay away from stocks that trade below $15 a share.

Here's some stocks that could see substantial short covering during a market bottom.

VMC (11) RWT (33)
TNH (11) JLL (11)
TRA (18) MBI (37)
PMI (19) PCR (16)
MTG (25) AMG (21)
ABK (35) LAZ (14)
FMD (30) GHL (39)
FED (69) CNS (27)
DSL (59) BSC (16)
UA (32) LNN (16)
AGO (13) ARE (12)
AIT (11) AXE (10)
AZZ (9) ANR (11)

Inflation

Since a lot of people seem to be expecting a surprise rate cut now, let's talk about a potentially larger problem than a stock market meltdown.



FUN!

Stock Market Crash of 2008?

Just something interesting to think about. Last week, the S&P 500 lost 5.4%. That was the worst weekly drop in over 5 years.

Guess what? Right now the futures are down 60 points. That's almost another 5% overnight and a 10% decline in the last 5 trading days.

Meanwhile, the IBD is busy speaking truth to power. Read below.

Individual stocks continue to tumble. Stocks that led the market's most recent rally have fallen especially hard. It's odd, then, to see analysts upgrade leaders that have started breaking down.

Research In Motion, (RIMM) Potash (POT) and Fluor (FLR) each garnered upgrades Friday. All three stocks fit the profile of the leader that has started to crack in heavy volume.

Analyzing the market's past winners shows how and when leading stocks top and start to roll over. These diving leaders are exactly the sorts of stocks you should be selling to protect your capital. Yet Wall Street continues to tout these names.

No one can know with absolute certainty which way the market will turn from day to day. But it's worth remembering the lessons of the past.

When Cisco Systems, (CSCO) Microsoft (MSFT) and others started selling off in 2000, many analysts urged investors to grab them each time they fell to new bargain prices. Those that heeded that advice learned a painful lesson: When the market goes into a downtrend, the only absolutely safe place to be is in cash.

Trying to outsmart the market has proven fruitless lately. Even defensive stocks like utility, food and beverage firms have gotten slammed. As it stands, this market has few, if any, safe havens.

HPT Caught In This Mess

This is hard to watch. If you've traded, you've probably had a moment like this somewhere in your past. (h/t mdawsz)

Warning: harsh language.... NSFW.


Stock Futures Trader Having Rough Day - Watch more free videos

HPT, keep your chin up and read your blog from back in August, the last time this happened. You'll come back. You will.

More on the huge global market decline here.

UPDATE: It's a shame, but HPT's video was removed from Youtube. I'm guessing because of the harsh language. Funny... you can post a video of 14 year olds beating the shit out of each other, but you can't say the word "Fuck!" How idiotic.

Futures -43.00

I hate to disrupt the holiday with some bad news, but look out below!

The Dow futures are down 300. That would mean an open at around 11,800 tomorrow.



Here's what Bloomberg has to say about the "rout."