Wednesday, November 26, 2008

Cheering on the optimists

This week's rally has caused a short-term spike in optimism, and if this bullish sentiment can just hang on for several more trading days, then I will finally have an opportunity to buy into GRZZX and make low-risk money on the next market slump. So please - everybody stay cheery!

19 comments:

Dan said...

Ready and waiting with powder.

adventurerneil said...

Hey Jody,

Can I ask what your target is for shorting? I was considering getting into SRS today at $120, and trying to sell it next week with a modest 20% gain. I backed out at the last second, because ultrashorts aren't the kind of thing I want to hold overnight in this market, even though I'm 95% sure the market is headed lower in December. Just too conservative with my hard-earned cash...

-Neil

Jody said...

I don't have an S&P 500 price target right now - I'm mostly waiting for the sentiment indicators to become firmly optimistic.

Dan said...

Jody -
One thought. If GM gets a bailout the market will rally. Being on the short side should this event take place could have a negative effect.

Your thoughts?

Jody said...

A little more rallying with some optimism is exactly what I would like to se. The end of an optimistic rally is the perfect time to get into GRZZX.

Dan said...

ok, thanks! Well we got another 100 pts put on the DOW today so we may get an opportunity. Next week will give us more clues on where its headed.

Dan said...

Jody,
When a position is taken in GRZZX will it be done without any kind of a stop loss?

Just want to check before the time comes.

Thxs!

Jody said...

GRZZX is a mutual fund, and therefore doesn't trade like a stock, so I don't think it's possible to set a stop loss or any other type of price-dependent order.

Dan said...

Jody,
Are there any short term trading fees associated with GRZZX. And why GRZZX over SDS again please?

Thx!

tomflint said...

Jody, Dan -- as you may already know, SDS is an ETF trading twice the inverse of S&P500. It correlates quite well with GERRX. But SDS trades like a stock.

http://finance.yahoo.com/q/bc?s=GRZZX&t=3m&l=on&z=m&q=l&c=sds

-Tom

Jody said...

There is an extra trading fee if you spend less than 5 days in GRZZX

I'm avoiding SDS because I think there's a risk of a meltdown in the derivatives market.

Dan said...

Not much optimism out there. Things are very very bad.

wooderson316 said...

Two comments.

First, I am beginning to think the trend you are looking for that will cause you to invest will not happen for a long time as the market continues to move with extreme volatility within a trading range. So either you need to be ok with being a shorter-term trader or realize that regardless of what sentiment indicators look like, you'll be in cash.

Second, the meltdown in the derivatives market would have happened already if it was going to happen.

I believe you have a lot of great insight, but you are either costing yourself money by being so ridged, or you are leading people on by acting like you may possibly invest in the relative short-term.

I hope you allow this comment.

Jody said...

The problem here is that there are some readers who clamor for daily updates (like Dan), and there are those who don't want to hear anything until I actually make a purchase or a sale (like wooderson). The only thing I can give to the daily people is a running commentary on what *might* happen, and I can see how this gets interpreted by the action people as "leading them on."

I was already contemplating this over Thanksgiving break, and I think it would be best for me and for the blog to substantially reduce the number of posts that I write. Preferably I would restrict them to buy and sell signals and "big picture" articles such as the buyback bubble and bear fund comparisons.

Oleg said...

Jody,
I hope you won't restrict the posts just because someone disagrees with them. These, as any investment advise over the Internet, are "use at your own risk". I hope the readers here understand this. I am curious about your insights and the reasoning behind buy/sell decisions. A shortened version of the posts with just buy/sell signals will diminish the discussion and creative feedback, like wooderson's.

Oleg

wooderson316 said...

Jody,

I actually like your in-the-middle commentary and I'm fine with hearing from you whether you've made a purchase or not. My point is to your point about the two types of people you describe and your communication with them.

Your commentary is always loaded with maybes about when you will do something, and a lot of people seem to ask when you will do something. I am saying it may be a good idea to say, "Lookit, I'll do XYZ when (set of circumstances) occurs", or, "Until (set of circumstances) occurs I'm in cash and I'm staying there."

I'm much more interested in your thoughts on what you watch than what you do with that information.

Tim said...

Jody

Looking at the market over the past year one can see that there was a lot of borrowed money investing in the market. Do you know how much of the market is currently bought with margin?

I think this falls under a good big picture question.

How is the economy in the area where you live. Are you noticing a slowdown?

Anonymous said...

Another big picture question: Do you think the economy will get better before the market does? I think not. If you wait you'll be late. If your timing the market with only sentiment and avoiding price analysis (ala cover at 1200 and fail to reshort at 1044) you miss not only the end of the bear market but the first 25% of a bull run or sucker rally whatever your preferred termonolgy is. For the readers that need more price analysis you could recommend slope of hope or evil speculator who openly share proprietary info.


FYI direxion funds w/ 3x leverage have performed well but with a larger bid ask. I suspect they would fail well before the proshares.

Good luck to everyone.

wooderson316 said...

re: Margin in the Market

As of late Feb. 2007 there was approx. $286 Billion worth of margin in the market. One would only think that by Aug. of 07 and possibly even Oct. 07 that the amount grew from that.

re: Economy or Market recovers first

The market is typically ahead of the economy by six to nine months. That was not true in the 2000 - 20002 market, but that market was significantly overvalued. Those two statements have a lot of loaded language in them, so make of it what you like. None of us have the faintest idea if history will hold sway or if the anomaly of the economy recovering before the market recovers will be the scenario.