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DarterBlue

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Stocks closed broadly higher across the board today. The gains were substantial and the averages closed very close to day highs. The fact that stocks could rebound from yesterday’s Trump induced selloff speaks volumes for the underlying strength of the market. The day’s range was from a gain of 1.59% on the NYSE to 2.14% on the Russell. The only thing lacking from the action was a lack of volume, which was lower on both major exchanges. Advancing stocks led by margins of 11-4 on the NYSE and 3.5-1 on the NASDAQ. Aside from the lack of volume, the only other red flag is the fact that stocks are now more overbought than they have been since mid-May. Thus, it is quite possible that a pullback may be in order. However, if we get one, the odds favor it being brief with swift resolution to the up side. This is pretty remarkable given the dysfunction in Washington.

On the day, I sucked wind. This is not surprising given I am net short. I was down $9,199.51 or 1.57%. Small gains in ZM and NEM were swamped by losses in the Puts. The puts are now down $35k. I have been very undisciplined with this trade as it should have been covered on Friday of last week. I have no one to blame but me, as the market told me it wanted to go higher that day, when all but the NASDAQ indices rebounded well. Given the fact we are oversold, perhaps I can recoup a small amount of the losses over the next two days before closing the positions. But close them I must unless something very dramatic occurs before the end of the week.

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Stocks closed broadly higher on lower volume. At the close, the gains were relatively modest. However, this belied very good breadth as secondary stocks led the rally the range was from a gain of .42% on the NASDAQ 100 to 1.14% on the NYSE (since when has the NYSE ever led gains). Advancing stocks led by margins of a bit more than 3-1 on the NYSE and a bit more than 2-1 on the NASDAQ. Secondary and old economy stocks led the way. If the rally was to be believed, it’s as if Covid-19 had magically gone away and the economy has reopened for business. Aside from the lower volume and the fact the market is now more overbought than anytime since mid-May 2020, in the early stages of the rally, everything was quite bullish.

On the day, I lost $6,544 or 1.13%. My two long positions netted to essentially zero as small gains in NM offset small losses in ZM. The losses were all in the PUT options which continued to give ground. The MDY puts lost $3,380 while the QQQ puts lost $3,136. Cumulatively, they have now lost $41k, fast approaching the 50% maximum tolerable loss. I have managed this trade very badly, as I should have exited last Friday. The game plan is to exit tomorrow and not carry it into the weekend. You would think a very overbought market should give me cover to do so without further losses. But in bull runs overbought can remain so for a long time.

 

 

 

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Today I got out of my 54 PUT contracts on the MDY and QQQ. The net proceeds were $54,865. The cost basis was, $103,049. I incurred a loss of almost $49k on the position. This was an all around bad trade. The timing was bad, as I should have waited for a strong rally before making it, thereby reducing my cost basis. Especially bad was my failure to exit a week ago when all but the NASDAQ indices rallied strongly after being down big time at the open. 

Today, Trump has upped the ante on the second stimulus. It is pretty clear after the event that the smart money knew he was going to do it. This puts a lot of pressure on the Dems to agree. And that is the basis of the market rally. 

 

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Stocks closed broadly higher on higher volume. Also, the leading indices, the NASDAQ and NASDAQ 100, closed at day highs. However, unlike the rest of the week, the broader market did not do that well today. At the close, the range was from a gain of .24% on the MID Cap index to a gain of .1.51% on the NASDAQ 100. Advancing stocks were literally tied with declining ones on the NYSE but led by a 10-7 margin on the NASDAQ. The action was market by Trump increasing the ante to %1.8 trillion of stimulus as a counter offer to the Democratic leadership. Perhaps this was leaked earlier in the week as the market kept rallying despite no clear indication that a deal had any chance of getting done before the election. The market continues to be overbought. However, in a powerful up leg overbought can remain that way for a long time.

On the day, I finally exited my terrible PUTS trade. I ended up losing nearly half of my stake in it, a loss of under $49,000 on a stake that was over $103,000. Other than incurring further losses on the PUTS, my two long positions, ZM and NEM, did well on the day. ZM was up nearly 3% while NEM was up 1.8%. I ended up losing $3,932 or .69% on the day. I had my worst week of the year by a bit, losing $30,995, all of which was attributed to the PUTS and then some. With the losses this week, I am now back to where I was during the last week of July. Thus, my gains for the last 2 months and a week have been surrendered. I have no one else to blame for this than me. I got a clear signal to get out on Friday last week when the market, with the exception of the NASDAQ, shrugged off Trump’s Covid-19 diagnosis. Whether it did not care about him or it figured out he would survive, it decided the illness was inconsequential. That I kept the positions and lost another $32.5k in them is a lesson learned the hard way. The most important lesson of this Game is to take your losses quickly before they get damaging. Clearly, I failed to do this and am back to being up just $81.4k on the year. So, what’s my next move? I need to ponder it carefully. It is tempting to go long as the action this week has been very encouraging from a bullish perspective and I have potential positions that should gallop. However, the market is overbought (I will be entering the game late), and with the elections less than four weeks away, who knows what kind of market moving madness could occur between now and then? I will take a close look at all my indicators and my potential buys and make a decision over the weekend.

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My view of the state of the Markets, October 11, 2020: So, on Friday I closed my PUTS at a huge loss. This action should have been taken a week earlier. Not only did I lose over an additional $32k on the PUTS, but just as importantly, because I was short, it constrained my ability to enter the market early last week, since I never stive to be market neutral (to me market neutral means being in cash, not hedged.) Well, as of Friday’s close, the market is significantly overbought. The last time it was this overbought was in late May. That was cleansed by a combination of volatile down days in late May, coupled with June being a largely sideways month. With this as the backdrop, what do I intend to do now?

Despite the uncertainty surrounding the upcoming elections, and the resurgence of the number of new Covid-19 cases, technically, this market is signaling that it wants to go higher. I could howl till I go blue in the face, and I could not change that fact. Either the markets have accommodated themselves to the fact of a Biden Presidency or they believe in an October surprise. The former is supported to some degree by the fact that alternative energy companies went literally perpendicular last week, while oil patch companies remain mired in a bear market. So, if I firmly believe that the path of least resistance is higher, then I need to be long.

With the above said, I am mindful of the fact that this new leg up is being led by a different set of stocks: largely utilities and smaller capitalization issues. It is not that the technology stocks have rolled over. But it is that they do not seem (at least for now) to be leading anymore. Also thrown into the mix is the fact I intend to take a trip out west two Friday’s from now (after early voting of course) through the end of the month. So, here is what I intend to do: I will keep the two positions I currently own, ZM and NEM. In addition, I will add three positions either on the first meaningful pullback this week or if the market goes sideways, then I will add them Thursday. The strategy attempts to mitigate, to a degree, the negative effects of a sharp down day due to the current overbought conditions. I will not expand my long exposure beyond five positions due to my perception of the existence of many uncertainties.

The potential buys will come from: SOXX (semi ETF); LOW and DHI, which I sold during the September market weakness; CROX or DECK, to increase my exposure to the retail space; JD, which I sold way too early; and TMO, which I was viewing as a potential buy before the market weakness. I would also include a solar stock or two in the list, but the leaders have gotten so extended this past week, that there is no reasonable entry point currently available. If upon my return from the deep west, the market is still strong and shows no adverse effects from the election results (or lack thereof), I may expand my exposure at that time.  

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1 hour ago, BUFORDGAWOLVES said:

Darter was straight up good brother and real tolerant of the village idiot over here. 
 

bgw

Correction, village idiots....

So, how many brothers  left?

Nobody has the balls to answer. 
 

DD, Fly and Darter.... your best friend SportsNut got ban hammered. 
 

It reflects the toxicity here. 
 

bgw
 

ps. Darter couldn’t stand NoBalls, Conchita and somebody else can’t remember. 

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42 minutes ago, BUFORDGAWOLVES said:

Correction, village idiots....

So, how many brothers  left?

Nobody has the balls to answer. 
 

DD, Fly and Darter.... your best friend SportsNut got ban hammered. 
 

It reflects the toxicity here. 
 

bgw
 

ps. Darter couldn’t stand NoBalls, Conchita and somebody else can’t remember. 

@Blueliner @TheMaximumHornetSting

 

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57 minutes ago, BUFORDGAWOLVES said:

Nobody has the balls to answer. 

 

Speaking of not having the balls to respond....

(as you have self proven LOL)

Perhaps that is the problem....you know....

with the posters you seem to be missing.

giphy.gif

 

 

 

PS: Maybe you should ask THEM....lol

BTW: not sure why you expect everyone else to be responsible for the acts of other posters...

that's pretty silly actually 🤣

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