Friday, January 29, 2010

Algo's in action.. SanDisk case study (SNDK)

Algorithms are all over the equity markets the past year whether you believe it or not. I would like to answer two questions for you in this post: What do they do? How do they operate

 What do algo's really do?
In a nut shell they are in place to wreak havoc on momentum traders.. well no actually they are designed in theory to "add liquidity" to a thin market, while reducing the spread between bid/ask. I personally do not care if the spread is a nickel if the price is stable and not going to be whipped around by 100 shares flipped back and forth 50 times in 1 second. The wizard behind the curtain really is using these algo's to race up offers or down bids ahead of decent size resting limit orders in the book.

Wednesday, January 27, 2010

The APPLE Ipad tablet .. sell the news! (AAPL)

Apple released the name and details of its new product the "Ipad tablet". Apple's stock fell off 5 points in a matter of minutes from what i perceive as a product disappointment. The wow factor really is not there, everyone and their mother is not going to go out and buy this thing, as of this writing they have not revealed the price point, but i'm guessing its gonna be pretty expensive putting it out of reach by many current Apple customers. I am personally a fan of the device, but does it do anything revolutionary, does it change how we will live and communicate? No. it is just another device which looks like a blown up Iphone(like all their new non computer products) nothing crazy. The device will really not add significant revenues to AAPL's bottom line in my opinion. A la macbook air??

Friday, January 22, 2010

Obama speaking in tongues? The top is in

Is the, "i am the greatest stock picker everything goes up lets get rich" party over? What is that i hear Mr. Obama are you speaking in tongues again?

Obama: "Err...Those Fat Cats are gonna pay!"

Sellputs: "But.....those fat cats with all the excess pocket change put you in office Mr. President."

Obama: "Now you see Mr. Sellputs i am a man of the people, im going to fix everything."

Sellputs: "If you fix the stock market us "fat cats" will not be able to fund campaigns.. left or right."

Obama (under his breath): "I know your right, Timmy has Goldman on our team."

Sellputs: "You bastard"

OK, ok enough fun already, the reality of the situation iswe are in a very different trading environment, i have been harping about all the BS upgrades and ridiculous stock promoting schemes for a while now. Maybe you can begin to see where i am coming from. The juicing of the markets by the federal government can only keep the party going for so long. The heart of our problems, real estate has yet to honestly recover, unemployment is still growing, many states are almost BK, many city governments are technicaly BK (cough Chicago). Yet US stocks have been bought with voracity completely forgetting where we came from? I believe it was all a big charade, a simple ploy to buy time for all these banks to somewhat clean their acts up though the real issues still exist. Heck we all know the fed is gonna stop buying mortgage backed securities at the end of the first quarter of this year.

Beyond all the not so obvious we have the obvious.. Whenever the government starts spewing rhetoric bashing banks, talking about regulation and reform, the market sells. No trader, fund manager or retail trader wants to be long stocks with crazy uncertainty about the future and the threat of changing the game. Think about it? Would you want to continue playing a game if halfway through the game the rules changed? i would not, i would take my chips to the dealer and cash out and wait. A lot of traders think this way, this is not good for stocks. When mutual fund mangers start puling the sell trigger things are gonna start getting loose. There was so much selling today the PPT team could not stop it, the PPT does not want people to think they are not in control. As soon as they lose control the party is over, maybe they knew they were at some point gonna lose control? Lets hope they have a plan B. LOL

As for the chart, the blue circle really is the focal point, we have clearly for the first time since the "bottom" we have broken the uptrend line. Next stop? who knows but im learning on shorts, once we start rolling its like a snowball, everyone gets scared and wants to lock in profits. Selling begets selling. Bring it on, i have been waiting.

Tuesday, January 19, 2010

Trading the first day of OPEX cycle, what to expect (SPY)

As you may or may not know this past Friday was Opex, we saw quite a bit of movement across the board. The result of a "fun" expiration is usually a very slow following trading day with options barely moving. The culprit for the lack of movement is lots of time value (theta) build into prices, you got the whole cycle ahead of you. i like to think the time premium built in is the, "anything can happen" extrinsic factor. Because of these factors options move very slowly unless you buy a better delta. Higher deltas though are more expensive, but the trade off is they will pay you more if the underlying gets a good move. If you buy a low delta say below a 50 you will be aggravated the underlying moves but you lose value in your calls or puts. A prime example of this today is buying lower deltas in CIEN X and APPL, they simply did not pay even though you had great underlying moves.

Friday, January 15, 2010

The market "feels" different. Patience is key (SPY)

Pretty vague title i know, but do you feel what i feel? The last week a lot has changed in my opinion in regards to price action across all sectors. The selling has been rotating sectors in a very pattern like manner. You saw the financial, AGs, Solar & commodity names selling off aggressively on relatively negative news regarding forward guidance and just overall overbought conditions. To the average joe this may mean nothing, but to me this is great information. This does not mean i am getting long or short it merely gives me more confidence in the the trades i make. Patience!

Wednesday, January 13, 2010

Rambus.. what gives? reading the price action (RMBS)

Once again today we saw more action to the downside in rambus, as previously reported there was a "fat finger" trade which was busted and rolled back. Why? I wonder that myself because it is clear there is selling pressure in RMBS, today the selling spikes were probably from the same firm or fund or whatever. Someone clearly wanted to get out of the trade because they felt that the outcome of the trial will be negative in regards to the PPS. To me all of the macro news means nothing, i just read the price action. I have no opinion or position in RMBS for the long term, if i start formulating an opinion chances are i will be wrong because i cannot control what happens over night. What i can control is my risk intra day and apply my tape/price action reading skill to help my profits. You to can apply the same skill set by understand the "signals".

Wednesday, January 6, 2010

Theoretical SPY chart foreshadowing a 2015 crash? (SPY)

I put this chart together after quite a bit of squinting last night. (Monthly) The chart is very rough and very speculative but has given me and hopefully you a good visual representation of the next five years trend. 

What makes this chart so appealing is both bull and bears get a piece of the action. If we continue this upward trend ignoring fundamentals we can very well move back to previous highs, market psychology will cause the bears to become bulls for fear of missing the next big bull market. 

Once everyone is a bull again fresh money will come into the markets pushing stocks even higher on top of the "hand of gods buying". Now that everyone is long and strong and down to get longer a systemic event will crater the markets in 2015? The fall will be on even higher volume causing precipitous selling like we have not seen before.

Monday, January 4, 2010

The Rambus "fat finger" (RMBS)

For all of you who witnessed in a few seconds you are probably asking what happened? how can this happen? Well first off NASDAQ stocks do not have specialists so if a huge order hits the market it will execute all the way down and or up the book. Which is what happened with rambus,(down) all orders were taken out on the bid.. more supply then demand simple . If there were a specialist this would not have happened. It appears the NSDQ is investigating, rightly so.. Im sure the trade will be "busted", or for those who do not understand.. The exchange will have your clearing firms roll back the trade like it didn't happen if they find issues. One thing i can tell you is whoever fat fingered that is probably cleaning his or her desk out.

Newer Posts Older Posts Home