The Stock Market

[DarterBlue]

Identifying Market Tops: There is no precise way to identify market tops. At least if there is I have yet to find it. However, there are definite clues that the market gives prior to tops. Used judiciously, these are usually enough to get you out of the market and short if you are so inclined. The following is a list of things to look for:

1. A series of distribution days. What is a distribution day? It is a day when the market closes lower on higher volume indicating that big institutions which drive market direction are selling aggressively. I define a distribution day as one where the market declines by at least .3%. Less than that, to my way of thinking, is not compelling evidence of institutional selling.
2. Two or more negative reversal days in quick succession. What is a negative reversal day? For me, it is one in which the market opens up or goes up at least a 1%, but then reverses to close lower. A reversal day is a clear sign that many big institutions are selling into strength.
3. Two or more stalling days in quick succession. What is a stalling day? It is one in which the market opens up nicely, by at least .5% but then, despite volume higher than the previous day, fails to make further price progress. I regard such stalling days as stealth distribution by the large institutional market participants.
4. Several churning days. What is a churning day? It is one in which despite higher volume than the prior day, the market makes no price progress at all and closes either mildly down, mixed or very mildly up.
5. The breaking of critical support. When one or more of the major indices breaks the fifty day moving average, and stays below it, and is repelled when it tries to retake it, this is a significant hint that the market's direction has changed.
6. Breakdown of the market's leadership without replacement by new, credible leadership. When most of the major stocks that have led the market up start exhibiting topping patterns and no new leadership emerges, or the leadership that emerges is of poor quality, this is a clear sign that the market may be topping.
7. Huge price moves in many poor quality, highly speculative issues (ones in bankruptcy, those that lack sales, those that lack earnings, etc.) is a sign of froth in the market. Persistent, excessive froth is a bright red light that the market may be in the process of topping.
8. A combination of multiple of items 1-7 is particularly troubling and will normally represent a compelling sell signal

A secondary, but important, factor to consider when evaluating whether the market has topped is the current monetary policy being pursued by the Fed. Specifically, if the Fed is tightening by hiking interest rates or contracting the size of its balance sheet, it is likely that one or more of the numbered factors above will soon manifest themselves. This in combination with the numbered factors will likely result in a bear market. 

Course of Action when the Market Tops: What should one do when the market tops? That depends on what you can stomach. If you have no moral queasiness about shorting the market, then it should be shorted. The best way to do so is to buy puts on one or two of the market indices. Why puts? Bear markets tend to be violent erratic affairs. They also tend to be relatively brief, at least relative to bull markets. So, puts represent the best way of capitalizing on them. But you should be very conservative and should not go "all in" when buying puts. Why market indices and not individual stocks? In bear markets you are trying to profit from the direction of the market. Trying to figure out which stocks are going to fall the most should be left to experts that spend a lot of time trying to ferret out fraudulent financial statements. You will make plenty from puts on the indices if your market call is correct. 

What if I have moral issues shorting? If this is the case, you should just remain in cash until a new bull market emerges. 

[rockinl]

I took a big hit last week.

[DarterBlue]

4 minutes ago, rockinl said:

I took a big hit last week.

I am sorry to hear that. Overall, stocks were up last week. But the gainers were relatively narrow, not broad based. 

[imaGoodBoyNow]

30 minutes ago, rockinl said:

I took a big hit last week.

Especially airlines oil and energy sector 

[DarterBlue]

After opening slightly lower, stocks reversed higher and close broadly, if moderately, higher. In the process, the NASDAQ indices closed at all-time highs (the NASDAQ did not take out its day high, though). At the close, the range was from .31% on the MID Cap index to 1.22% on the NASDAQ 100. The NYSE composite was the second worst indices gaining .41%. Clearly, it was a day when technology dominated, especially larger technology. On the other end of the books, energy and cyclical issues in general, did not do so well. Advancing stock led by 8-7 and 6-5 on the NYSE and NASDAQ, respectively. This spoke to the narrow breadth evident on the day. So, what’s my take on the day. It is bullish. This marks the first time the NASDAQ has closed above 10,000 even though it has been above it two or three times before. If it can hold at these levels, the ceiling now becomes the floor.

 On a personal note, I had quite a good day. I closed up, $10,324 or 1.88%, performing clearly better than all the indices. My big winner was TEAM (Atlassian) up 7%, but ZM (Zoom) and the S&P Options also performed quite well. All the other stocks and the MDY also closed in positive territory. The only loser was the flier I took on the FRO July calls. These are now in grave danger of expiring worthless. But my investment in them was modest to begin with, so I won’t lose any sleep over it.

 

 

[DarterBlue]

@imaGoodBoyNow, NKLA, your electric truck company closed at $70 today. If it can get above $70.50 tomorrow, and stay above, it is probably going much higher. Why? It will have staged a powerful breakout from a rare but powerful pattern. If it does this, I could see it doubling in short order. And, despite misgivings which I will explain herein, I will buy it. 

NKLA is currently very expensive. It has essentially no revenues and is still a Developmental Stage company. Despite this it has a market capitalization in excess of the Ford Motor Company. For it to justify this market cap, things will have to work out for it in spades. 

It is clearly highly speculative and something I would not normally buy. I am unsure whether I trust its founder, and would not be surprised if it ends up being a flop. But market conditions are favorable for these kinds of speculative issue and the stock has traced out a very bullish chart pattern. So, there is that. 

Assuming it gets past $70.50 I will either buy a half position around $22,000 worth, or I will buy LEAP (long term) call options on it. If I go the option route, I will risk about $10,000 on them. 

[imaGoodBoyNow]

Hertz is almost $1,  anyone buying?

[DarterBlue]

32 minutes ago, imaGoodBoyNow said:

Hertz is almost $1,  anyone buying?

I tried to pass on sound advice to you. But you can't make a horse drink from the well that has good water. I have failed. Good luck buying bankrupt companies. 

[imaGoodBoyNow]

31 minutes ago, DarterBlue said:

I tried to pass on sound advice to you. But you can't make a horse drink from the well that has good water. I have failed. Good luck buying bankrupt companies. 

I wouldn’t touch hertz with a ten foot pole , especially after the CHK fiasco, just curious if anyone on here was betting on them to come back from bankruptcy 

[HSFBfan]

46 minutes ago, DarterBlue said:

I tried to pass on sound advice to you. But you can't make a horse drink from the well that has good water. I have failed. Good luck buying bankrupt companies. 

Nrgu is up today for me. Companies are starting to turn bullish on oil

[BUFORDGAWOLVES]

On 6/20/2020 at 1:23 PM, HSFBfan said:

this is not 1929. So to bring up the great depression is disingenuous of you. 

there goes your free market advice, dumbass

bgw

[HSFBfan]

Just now, BUFORDGAWOLVES said:

there goes your free market advice, dumbass

bgw

Its still not the great depression. 

Over 30000 by November 

[DarterBlue]

22 hours ago, DarterBlue said:

Assuming it gets past $70.50 I will either buy a half position around $22,000 worth, or I will buy LEAP (long term) call options on it. If I go the option route, I will risk about $10,000 on them. 

I bought 12 Leap Contracts, strike 110 on the January 2022s. Price paid was $10 or a thousand per contract. I also bought 12 shares of the stock for an account I trade for a friend who does not have margin features. 

Stock got past $70.50 fairly easily in the afternoon. We will see if this proves a winner. Total cost was $13,043.

[Troll]

On 6/23/2020 at 3:15 PM, DarterBlue said:

I bought .....

was only looking for info.

 

[DarterBlue]

12 minutes ago, Troll said:

Hate to say it..... but I was gonna post a (by end of month) reference (to check) for you yesterday...

Two shoes are/were supposed to drop...

I'm thinking that this (just announced) 'winner' shoe for the company, is what was needed to enable the other shoe 'loser' for the company to drop/'settle' (supposedly by the end of month). 

Not sure if that other shoe is baked into the cake now or not....but from a 'share price' that company 'loser' could be another big company 'winner'.....

Yes I would be interested in your thoughts on BAYRY

🤔

 

It has taken three months but Bayer AG has recouped almost all its bear (pun intended) market losses incurred Feb/mid-March. It looks very good technically, but still has the Roundup assets hanging around its neck. Usually, when there is significant litigation hanging over a company, I stand aside. It was a lesson I learned with Phillip Morris (MO) back in the 1990s. I suffered my first and only margin call owning that one. 

But for now, the market for bear stock seems to think either settlement costs are already factored in or won't be as high as previously thought. 

[Troll]

On 6/23/2020 at 3:45 PM, DarterBlue said:

It has taken three months but

 

 

thnx

[DarterBlue]

Stocks closed broadly higher on higher NASDAQ volume, but lower NYSE volume. At the close the range was from a gain of .12% on the MID Cap index to .78% on the NASDAQ 100. At day highs, the MID Cap index had been up about 1.5% while the NASDAQ 100 had been up about 1.4%. In short, the early rally weakened significantly over the last hour and twenty minutes of trade. That is the negative side of the ledger. The positive side is that both the NASDAQ 100 and NASDAQ Composite closed at all-time highs with both firmly over the 10,000 level which I expect will provide a measure of support going forward. On the day, advancing stocks led by margins of 17-13 and 6-5 on the NYSE and NASDAQ. What are my thoughts on the day’s activities? It was a bit disappointing that the indices weakened going into the close to close at day lows in the case of the MID Cap, and very close to day lows in the case of the S&P 500. With that said, overall, the day was mildly positive on balance. All indices closed in the black and the two NASDAQ indices continue to lead this market higher. Consistent with recent days, breadth was narrow, with gains mostly concentrated in techs.

 On a personal note, I was up only $1,411 or .25% today, underperforming the market significantly. My equity swung fairly widely, as at my peak I was up over $8,000 while at my lows I was up $56. Needless to say, I finished near day lows. Most of my positions closed in the black but well off day highs, with only TEAM and the newly purchased calls on NKLA which were bought at $10 per contract closing in the red. I purchased 12 contracts for $12,000. Additionally, I also purchased 12 shares of the stock for a small account I trade on behalf of a friend. Speaking of the options purchase, it was straight up amateur hour on my part. When I placed the limit order, there was an unusually wide spread of over $5 between the bid and the ask. I placed the trade near the midpoint of the spread, got filled quickly, proceeded to see the stock go up from the point of purchase, only to see the options lose .35 cents in value per contract by the day’s close. Clearly, this was a big mistake on my part, as I could have gotten a much better fill on the contracts. In short, the market maker put on his pot at my expense. I know better. Was this sloppy purchase indicative of a heightened sense of urgency on my part? If so, that is not a good sign for the market assuming my state of mind is reflected in a majority of market participants.

[imaGoodBoyNow]

@DarterBlue what’s. Your opinion on buying Warrants?? A lot of people buying NKLA warrants, I’m just curious on what the big deal with it is

[DarterBlue]

4 minutes ago, imaGoodBoyNow said:

@DarterBlue what’s. Your opinion on buying Warrants?? A lot of people buying NKLA warrants, I’m just curious on what the big deal with it is

Warrants are very similar to options in that they give you the right to buy the stock. The difference is that unlike options that are "created" by third parties warrants are issued by the company. If you like the company but want to keep the $ commitments low, the warrants are a decent way to do so, as they usually have a long conversion date, so you can hold them for a long time before you are forced to exercise them. Like options, you can sell them at anytime in the open market. 

[imaGoodBoyNow]

It’s officially a Kangaroo market

[HSFBfan]

4 minutes ago, imaGoodBoyNow said:

It’s officially a Kangaroo market

Its a record setting market 

[imaGoodBoyNow]

Just now, HSFBfan said:

Its a record setting market 

Well my portfolio would beg to differ

[Troll]

15 minutes ago, HSFBfan said:

Its a record setting market 

.....record.......🤣

No such thing LOLOL

Unless that is what you call replacing your 'losers' every year with some other 'winners'.....😝....

oooh lookie another index 'record' 🙄

 

...or didn't you know that's what the Dow and Nasdaq do ???

 

 

 

[HSFBfan]

4 minutes ago, Troll said:

.....record.......🤣

No such thing LOLOL

Unless that is what you call replacing your 'losers' every year with some other 'winners'.....😝....

oooh lookie another index 'record' 🙄

 

...or didn't you know that's what the Dow and Nasdaq do ???

 

 

 

Just meant nasdaq new record!!!!

[HSFBfan]

18 minutes ago, imaGoodBoyNow said:

Well my portfolio would beg to differ

Mine 2 but u gotta somehow get into the FAANG stocks. Taking off