Equity Market Comment 10/11/07

Another day trading dream today with an incredible range on the day and a sudden shift in short term sentiment.

S&P 500 broke the bearish diagonal triangle today so we should begin to see the pull back I have been talking about.

On the Ultra Short term, there is still some rally left in the S&P, but this will be a counter trend move and we have officially entered into the sell strength mode.

COCOA - SET TIGHT STOP ON SHORT POSITION

Tighten the stop up on the cocoa trade.

Much like the Corn and Soybeans, Cocoa looks like it could rally here and I don't really want to give much back on the profits we are carrying.

Right Now the Cocoa trades are returning better than 65%.

Place the Buy Stop at 1847. This will allow enough room to capture our profits if the market decides to take-off and also will allow the trade to continue in place should the last 3 day rally stall. There is a distinct possibility that today marked the end of a counter-trend rally, but better safe than sorry.

Option Trade on STLD - Filled at 4 1/4 NOV 50 Puts

The first option trade for the Blog was executed this morning at 4 1/4 and closed the day at

$4.40 For those of you who are not familiar with how options are priced, you simply multiply the quoted price by 100 and you have the trading price. So these November 50 PUTS were purchased for $425 per contract and closed at $440.

Keep a tight 17% stop on the option, based upon the execution price.

Therefore if you bought this morning and filled at 4 1/4 your stop is going to be placed at 3 1/2.

If the option goes this low then we will know something is not quite right with the set up and automatically limit our loss to $75 per contract.

All looks well however for STLD to get slammed and should that change I will send out an alert!

CORN - Place A Protective Stop at 349 4/8

Corn may very well follow the same path that the soybeans followed today, so move the buy stop down to 349 2/8 to lock in your profits. This price level for our stop is just above the 348 4/8 that has been strong resistance over the last 4 trading days. If the market can get through that level then it might just rally sharply and we need to be protected.

The most recent corn trade we put on went into the loss column today, but while I never like to see a loss, the other two positions are making up the difference and a whole lot more. The position that has been on since the summer has tripled and the September trade is sitting about 40% up, so all in all it has been a great money maker.

AGGRESSIVE EQUITY TRADING ACCOUNT

I will be scaling back the number of positions in the aggressive trading account starting with all long positions.

There simply are too many positions to monitor and the account is a little stretched with so many positions. I have not had to use margin yet, but it is getting close to that point so I know I am carrying too many positions.

I will be posting the sales tomorrow as I plan on getting out at or near the open.

Equity Market Comment 10/10/07

The Bearish Diagonal Triangle is still in effect as it came down to the bottom of the triangle and bounced today.

The intra-day decline and the severity thereof shows that this market is short term vulnerable.

The market action today was a day trading dream, capturing both the decline and the advance.
Better than 18 total S&P points!!

Remain hedged!

SOYBEANS - Stopped Out With A Decent Profit

Stopped out of the Long Soybeans trade today at 9.68 even.

Now I realize that the stop was for 9.54 4/8, but here is one of the problems with commodities.
When you have a gap up like we did this morning then you are getting the first available price as with a stop order, the price you place it is not necessarily the price you will get.

There was still a decent profit on all of the positions, but not nearly as good as if we had gotten out at the close yesterday, which I did debate about but did not do.

Anyway, we made money and the stop did what it was supposed to do as the beans look like they want to move higher again.

Lock In Your Profits On Soybeans

The beans had quite a rally today and produced a bullish 3 day chart pattern.

We have a nice profit in the bean trade and want to protect those profits, so place a buy stop to exit your short position at 9.54 4/8

There is a possibility that the first leg of this decline is over and a decent rally may ensue. If the rally does not materialize then we will continue to profit from the short position.

FOR YOUR VIEWING PLEASURE!

Equity Market Comment 10/9/07

RISING WEDGE PATTERNS SUCH AS WE ARE SEEING ON THE CHART OF THE S&P 500 (BLUE LINES) ARE A VERY BEARISH PATTERN AND ALSO VERY RELIABLE. THESE PATTERNS ARE TYPICALLY RECTIFIED WITH A SHARP FAST DECLINE.

If you had asked me 2 weeks ago if the equity markets would go to new all time highs before a correction came in I would have thought the odds pretty slim.

Well, sometimes slim odds come to fruition and currently we have a case in point.

The market put together quite a late rally in price today after the notes from the last FOMC meeting were released.

I continue to stress however that this is not a time for celebration, but rather a cautious stance is needed at times like this. I realize that it is easy to get sucked into rallies like this one and it is difficult to sit on the sidelines as stocks continue to appreciate, but I firmly believe your patience will be rewarded.

I remain hedged.

First Options Purchase For The Blog - Puts on STLD

The first purchase of options on the blog and it should be a good one.

After the Death Pattern on STLD, I placed 25% of my option position into play.
I was saving the other 75% allocation for an event such as we have now.

There are times with a death pattern that the stock will try one more run at new highs and it should fail. After this failure the stock will typically have a fairly sharp decline.

I will be purchasing the November 50 Puts at 3.90/4.10
This will put us better than 2 points in the money and enough time to capitalize on a decline.

Upon being filled on the order, I will place a 33% stop loss order on the options in case the stock wants to continue to rally.

Remember that there is significant risk with options trading, but there is also some very significant profit potential as well.

CLOSE THE LONG SUGAR POSITION

Close the Long Sugar position. 28% LOSS

The move is simply taking too long to develop and looks very labored and tired.
Usually this is a clear sign of a market that is about to make a swift decline.
I would much rather take the 28% loss then sit in this position as the price goes into collapse.

Aggressive traders could sell the March 08 contract short, however, I am going to pass on the short as I have many positions open right now. Perhaps too many!
I will be looking to pare back some of these open positions as all of them are showing a profit and some very handsomely.

Corn is probably going to be the next position I close as I have amassed quite a sizable position and the original position is showing a better than triple on my money.

Utilities Showing Weakness

All three of these Utility stocks are showing termination patterns and are calling for lower prices.

Will this be the blow that causes the broad market to finally correct?

Complacent Market Participants Usually Spells Trouble

The option players are very bullish as the chart below indicates.

This bullishness will be rectified with a decline of sorts.

Confirmation of a correction in progress will be 3 or more days in a row of closing lower prices.

FORD STOCK UPDATE

Ford confirmed its downtrend today and the odds of testing the lows at 7 1/2 have increased dramatically.

Once the stock stabilizes however it should have a tremendous rally with a double in the cards, but time will only tell us the true extent of the potential rally.

For now, remain out of the stock, but keep the powder dry!

Equity Market Comment - 10/8/07

While it was an extremely slow and thin day today, the market did carve out a mildly bearish pattern with the inside down day and no follow-through from the rally Friday.

I continue to anticipate a correction from the Mid-August Lows and 10/26 - 11/2 remains a key time zone for the low.

The reluctance of the price to break offers up a stronger possibility of a mini panic sell-off.

Keep the hedge in place, but be ready to buy after the correction.

U.S. Dollar - Bullish Move Underway

While it was a very quiet day in every market today, the dollar showed some great strength.

Looks like the Sell we got on the Pound and Euro was right on.
Now we wait and see if this is a secular turn or not.

If you have yet to get long the dollar or short the Pound or Euro, there is opportunity here as there will be at least an intermediate term move at the very least.