San Diego Housing Bubble News and Analysis

1070

1070?

Naw, I think it will go to precisly 1068.5 and then stall.

:-)

I'm joking. I hope you're right. You could be right. The only instinct I'm feeling is that this current fool's rally will go "substantially" above 900. We are already at 916.

So far the rally has been good to me. My oil stocks (BP, COP, MRO, PBR, UCO) are up 10% to 20% in less than seven days. (makes me wonder if I should dump 'em)

My Wells Fargo is up 27% since purchase on 11/20/08. My 2X gold ETF is up 10% in a few days.

I bought SDS at S&P500=900, so that one I'm already losing money on...as the S&P500 has moved up to 916.

However, I'm still about 60% cash. I'm keeping lots off the table for now, waiting to see if opportunities come that I haven't anticipated.

Based on my review of the COT report as well as someone else's who is more of an expert with it than I am, it has become clear that the PPT is behind this rally. Nobobdy else could carry the kind of losses that the large speculators seem to have by buying this whole downmove except the PPT. As a result it is possible it could be a very sharp rally. Guessing price levels is going to be tough, Fib analysis I think is very erratic in general, but it calls for 1025 which is .50 to the Aug High or 1093 which is .618 to that same high. This is SP 500 futes. I won't make a trade based on those but will watch price action if we reach there to see if a reversal is setting up. You might also want to watch the 200 day MA which I think is worthless but alot of institutions makes plays at it.

Somehow, someway, I also have the instinct that this rally has *something* behind it that could push it above the 1,000 mark.

Thanks for educating me on the PPT! I had to go read up on what the hell that is, and feeling a bit foolish for not having known of its existence.

Not so sure it can make it to 1000, but if it does, I'm shorting the hell out of it. This is all hype and emotion. Big Obama is not going to save the economy although I do believe that he will do whatever he can to slow the bleeding. It will plug holes, but we are in big trouble. Something tells me this rally is going to stall out soon - somewhere between where we are now and 950 on the S&P. Watch the bond market for clues. Thought yields would rise a lot more (as bond traders participate in the rally) - they didn't.
If anyone takes a few minutes to think about Obamas proposals, they will realize it is going to take a lot of time to implement and a hell of a lot of money. We are in crisis mode right now and not thinking at all about the ramifications of the actions we are taking. Wait till all those bills start to come due...then what...how the hell are going to pay for all this? Keep the printing presses going.

When you see large funds category of COT report heavily long during a decline you know it is the PPT that is a very abnormal pattern, they are normally the drivers of the trends, not opposite. You basically have to have bottomless pockets to do that, and only one group of people have that, the good ole US Government. They hide in accounts at the big houses like Goldman for example. Any other funds would have capitulated out like we are seeing in commodities right now, when faced with losses that big.

Market now showing some difficulty going above 900.

Markets looking to close DOWN at least 2.5% for the day. My 2:1 short bets on the S&P500 are looking good - very much in the money, at least for the moment. Not sure what the rest of the week will hold; we have not yet seen that BIG DOWN day (over 5% down) that this year has been the strong signal that we've fallen over the top of each these fool rallies.

Maybe I should have stopped hesistating and simply doubled-down my short bets when the S&P500 touched 918 yesterday.

It seems this year it is the bets that are pessimistic and short the market that seem to usually pay off.

Congrats stocktradr...probably a very good bet! I don't think it is going to be quite so easy on the short side as it has been. However, I have not gone long on anything yet. I prefer to wait till the market is bid up to a ridiculous point, then go short. Has worked out well so far. Plus, all the news (especially surprise news) that has come out, has been negative. I cannot think of one positive surprise news piece in the last several months except for Obama's news conferences lately. Everything keeps pointing to things getting a lot worse. On another note, how do you think the market reacts to the auto bailout if/when it passes? gl

My instinct ALL DAY long today is I need to get out of my short index positions, with just a few percent net profit. I think this fool's rally has more upside. We got anticipated approved of the automakers, plus we got anticipation of Obama's big infrastructure spending plan.

You might be right. I was tempted to open a short position, but want to see how this plays out now. Bulls think this is a normal consolidation pullback after a great run...and they may be right. At the same time, I think this market is OVERVALUED. Get tired of hearing that the market is so undervalued. Hope they run it up to 1000 or more on the S & P, so I can short with more confidence.
I'd recommend a stop, but as you know those 2 x ETFs can whipsaw around like crazy. I've been warned not to put a tight stop on those ETFs, but I've found I get burned when I don't. At the same time, have missed out on some big moves, but have protected my capital. Good luck...enjoy reading your posts.

I dumped ALL my short index positions this morning when saw chance to get out and still make enough to buy a Starbucks Latte, on that trade in ProShares "SDS." Glad I still have the shirt on my back.

So, yes, I saw the markets were not headed down so I covered my short positions and ran like a scared rabbit.

I'm now convinced this Fool's Rally has some real get-up-and-go left in it.

Lets talk about shorting indexes again when we see the S&P500 getting intimate with 1,000, or 1,050

ALL my current positions are LONG, except this morning I did buy a 3% of portfolio position short the 7-10 year treasuries, using the short fixed income ProShares ETF. Laugh, go ahead. I've started to nibble, and I'll keep adding to my short Treasury position over the next six months. PREDICTION: within six months we will see the top of this bubble (low yields) in short-term US Treasuries. 3-month bill rates going NEGATIVE! Gimma a break. You need me to tell you that this is a great opportunity to short a bubble? I hope not.

Today the market is adding more to nice previous gains I have in my 30% of portfolio position in multiple oil stocks, and a 2:1 leveraged bet on crude. Example, I'm up 35% on PBR in FIVE days (thanks to the Chinese falling in love with Brazilian oil after I bought it). I'll take that as my Christmas gift from Santa. I love that greasy black oil when prices are moving my direction.

I also dumped all my gold positions at $810/ounce this morning. That was a GUESS that this is still NOT the real rally we've all been waiting for; gold price is still under the dark hand of deflationary pressures brought by this lovely economic depression.

Check out the producing gold and silver miners during the last 5 trading days. Always out performing the indices by 100% and resisting most down trending. Very strong indictors! And, they're at pretty much all-time lows. I'm up about 60% in less than 2 weeks. But I'm no day trader. I think these guys have at least one year in them.

I will be looking to short this rally as it approaches the 10000, 1000 levels. Tempted to try the triple short funds. Anyone have thoughts on these? I know they're only a few months old.

If I went with the triple short funds, I'd be getting too cocky. Better to stay a little humble when placing my bets!

"SDS" has been good to me this year. Paid me more than my day job pays this year, which trust me is six figures. I'm sticking with 2:1 leverage of "SDS."

SDS is the double S&P short? Perhaps I'll do a split allocation? 66% double shorts and 34% triple shorts. I am a very strong believer that this rally cant go much past 1000. We're headed into a depression and the next slew of earnings reports should kick the sheeple squarely in the crotch. IMO.

What is the deal with today's market? Can't it make up its damn mind to rally, or otherwise to fall? This is pathetic. Someone needs to give it a bitch-slap to set it off in one direction so we can make some damn money day-trading this bie-otch!

:-)

Where's that "Obama-tism" we've been told by the pundits would push these markets up and up! I should never listen to the talking head moron pundits on Bloomberg and CNBC!

And where the heck did this morning's $46 oil go? Now we are back to $43/bbl. The Christmas presents Santa had for me (rising oil stock prices) are disappearing from under my tree.

Peterb, I love that word "sheeple" I think I'll start using that handy phrase. Yes, America is definitely a land of sheeple.

Hang tough on this rally. It did not voilate 8637 today, but nor did it clear 9026. SO it's still in a growth wave. BKX held about 45 as well. Good indication it's got legs. Just a little given back. Healthy, really. Rally indicators are gaining strength.

As I have repeatedly stated in here futures resolve concerns relating to liquidity and bad fills on stops. ES futues are the best bet and what pros use or itleast the Spy's, these other vehicles are poor choices for this.

It's amazing the nonchalance with which triple digit futures moves are treated these days, especially given the current level of the Dow. Unless the futures are limit up or limit down, it's just another day.

"futures"
?
But all my money is in 401K and ROTH. I don't believe I can trade futures, which are distinctly different from options.

I do trade index options and equity / stock options, but for betting on the indexes, at least the leverage with the ProShares ETF's is conveniently clear: either 1X or 2X, and now others offer the 3X. That is cut and dry. Options are not. Those ETF's are just managed collections of shorts and option positions anyway.

My big regret about the options is that obviously I should have just bought the waay out-of-money puts ahead of the big October fall off the cliff. I knew that crash was coming (as did others on here). Many of those out-of-money puts on the indexes were initially priced at $0.10 to $0.50 and some ended up paying even 50:1 returns. Ahh, hindsight is 20:20.

So, yes, there are defnitely situations where it is more efficient to bet with market instruments OTHER than the ProShares ETF's.

Options that are deep inthe money usually have a delta near to 1. That's a good way to play them. You can usually get the deal for about half the stock price.

Future's are an animal I dont know much about and move with amazing speed and leverage. With ETF's it's slower world where I dont get the short squeeze as well. I dont ever stay in them very long anyway. I guess if I really understood futures better it may be a way to go. But I've heard the ES is not the kind of thing to be in very often.

stocktradr...probably a good move to get out for now. Even with only a small gain, it is better than losing money. Yes, I am waiting for spx to get up closer to the 1000 level. Low volume close to the holidays makes it easy for the market to be manipulated and I suspect the market will trend up. However, also wouldn't be surprised if this rally stalls out ~ 950-960. Will be interesting to see if the market sells off after the auto deal passes?? (Maybe after a big pop?)
Haven't touched the triple ETFs...don't think they really track triple anyway. The double inverse ETFs also are not long term holds...great for a short trade if we have multiple down days/weeks in a row.

You can trade futures in an IRA, if your broker permits it. The leverage gained with futures can be staggering. I believe index futures can be leveraged up to 20x intraday and 10x overnight. Your account is marked to market daily, so technically, you are not using margin when trading futures. Using 10x+ "leverage" in an IRA account is a good way to go broke (especially holding overnight).

What is 1x leverage?

The "bear" Proshare ETF's and those like it do NOT hold short positions (at least not SSO/SDS), nor equity options. They tend to hold index futures and swaps.

The ETF's are easy to use for typical retail investors, and you are essentially trading futures/swaps contracts indirectly, via a stock (kind of ironic that your trading a stock that is a derivative of a futures contract, which is a derivative of a stock index...).

The 2x and 3x ETF leverage is really just a *daily* performance goal, the actual tracking over weeks/months can be substantially different. I don't trade futures, but I'm assuming that this tracking issue is less. I occassionally trade the 2x ETF's (SDS/SSO), as they are fairly liquid & SDS obviates the hassle & cost of shorting, I stay away from the others for the myriad of reasons previously mentioned.

I think you're confusing efficiency with maximum profitability. If your timing is off with a leveraged ETF, you still have an investment, with an option, you may lose all your investment...

I think the point Chris and others have made is that there are more efficient ways to use leverage then just 2x or 3x ETF's. The alternatives (std. broker margin, futures, options) each have their pros/cons. The primary factors are account type (tax status), position type (long/short), margin interest rate, trading characteristics (liquidity/slippage/trading hours), time premium, amount of leverage, & ease of use.

This is how I view the benefits of each, as it relates to index trading (assuming you have a high probability of success & appropriate risk controls to justify leverage):

*Std. broker margin w/ non-leveraged ETF:
Pros: ~2x overnight, can currently get cheap margin @ <2% per annum. Allows you to buy the most liquid ETF's (SPY, QQQQ) at 2x leverage without the tracking or slippage issues of ProShares. Pays dividends, low expense ratio. Tracks the index exactly, very active options. Ability to use 4x leverage intraday.
Cons: Unable to use in IRA's. Rising interest rates make margin less attractive, shorting ETF's causes additional interest, margin calls.

*Leveraged ETF's:
Pros: Easy to use, just as easy to go short or long, major ones are fairly liquid. No margin interest charged for leverage or on short positions. Pays a dividend. Moderate expense ratios. Able to use them in IRA's, LT cap gains apply.
Cons: May track poorly over time (thus defeating their usefulness), the minor ETF's are thinly traded.

*Options(long):
Pros: Defined risk, ultimate leverage, just as easy to go short (long put), ability to use in IRA's, no margin calls. (LEAPS have additional benefits, including long time horizons, LT cap gains status)
Cons: Time premium decay, time pressure, poor b/a spreads & liquidity (especially ones further from ATM or non-front month), high volatility causes excessive premiums, the more leverage (deeper OTM) - the greater the probability they expire worthless, no dividends, option pricing adds complexity.

*Futures:
Pros: High leverage, very liquid, just as easy to go short as long, ability to trade almost 24 hours, ability to use in IRA's, may track index better then juiced ETF's (at least near expiry), no margin interest, ability to use a fraction of capital to match full investment in cash index (with balance gaining interest, though I'm not sure if FV discounts this). Better ST tax treatment.
Cons: No dividends (though FV may factor this in?), added complexity with fair value, marked to market daily (margin call), LT requires rolling at expiration.

I've never traded futures, so Chris may have more input on their pros/cons & tracking correlation to cash index.

What is 1x leverage?

There ain't no such thang. 1X is not leverage. My mistake.

I think the points by cooperthedog are very good, and this is how I learn so much on this forum.

Our education and ability to make money in the financial markets definitely progresses stage by stage. I'm at an early stage where I look towards futures as a valuable tool I need to understand, because this year I'm painfully aware of the limitations of my current toolkit. For example, I cannot trade after hours which obviously makes for huge risks when I hold lots volatility-sensitive positions overnight! I've been watching the futures trade after hours and thinking, "I need to learn how to trade futures, and trade them in ways that manage the risk associated with futures. That way I can also better manage the risks of events that hit the finanical markets in the after hours/overnight hours"

In a way I at least already passively use the behavior of overnight futures to help me anticipate the next day's market. I always get up early in CA so I can check the futures before the markets open in NYC. I feel as if I'm going to the party blind, unless I have a clear picture of the index futures before the US markets open.

PPT is something that a person who has lost money will talk about.

I lost? It's gotta be conspiracy!

"trust me" LOL.

Just call it a million while you're at it. FYI, six figures is kind of average/bare minimum in SD as a professional.

As per your usual MO another stupid comment about something you don't understand.

Just keep being yourself, fading people like you is how I make my money, I wouldn't change you for anything. I wish I had a picture of you so I could toast you every time I make another killing in the markets fading you, while you post a poor me I lost ..... in so and so. You are pathetic but please don't change.

Not aimed at you Stocktrader everyone knows who this is directed towards.

Don't get too hung up on futures being different than stocks, they work the same, just are more liquid. If you can trade stocks and ETF's you can trade futures. Alot of people are afraid of them for some reason, which I can't understand. I am more afraid of stocks due to the lack of liquidity in them vs futures and the patterns are not as good.

ES is just like trading the SPY but has better fills and round the clock access basically.

Yikes, the markets sure showed today they could finally turn south and break through that 890 (S&P500) resistance floor we thought had been established.

The short-term market direction remains very difficult to read and predict. I sure thought this Fool's Rally had the momentum to hit 1000 or 1050. Maybe not. It didn't look good in the second half of the trading day.

I hate to see the markets move down like they did today when I'm NOT MAKING ANY money on it! (Remember, early this week I dumped my 15%-of-portfolio position 2:1 leveraged short the S&P500 ETF.)

Well at least I kicked butt on oil stocks today. Wow. PBR hit 50% net appreciation (gained in under ten days) before it fell back a little at the end of the day, as overall stock markets fell back

I have very mixed feelings about holding onto my basket of oil stocks (that are showing on average 30% gains over just ten days). I kinda think oil price will pull back again, probably next month.

Is this a case of buy on the rumor (anticipation that OPEC cuts production in Dec) and sell on the fact (OPEC has now stated they WILL cut production again!) ??

For now, I hold onto the oil stocks, and cry in my Starbucks over fact that at the low of $40/bbl I only moved 20% of my entire portfolio into oil stocks. I should have gone with about 50% of portfolio on THAT bet. I mean, come on, $40 oil. How could I go wrong betting on that?

So was 900 a "lower high"?

Moreover, is the "reflation" trade once again the "deflation" trade?

So was 900 a "lower high"?
Moreover, is the "reflation" trade once again the "deflation" trade?

I cannot believe I'm going to respond to this.

Look, sure we are all guessing. You analyze the news and the markets and make your best guess.

Since Nov 12th, the S&P500 clearly had established a ceiling (on fool's rallies) of 900, and when rallies hit 900 they sharply retreated.

Until this week, where the S&P500 didn't pull sharply off 900, but instead traded flat, managing to stay above 880...even in the face of several bad news items this week...

So we thought this bitch was forming some kind of support at 900, to make a run on up to 1000 or 1050.

But that theory kinda got shot today when markets sliced down through 880.

Keep in mind this is all just guessing and speculation about what number this current fool's rally will reach, to try and sqeeze a few more percent out of the rally, before we go short.

As for the overall S&P500 trend for the next six months, we need not guess about that: we KNOW it will go much lower than these levels. So one could argue it is just best to stop stalling and just get on the short side of this rally.

I will assume your "reflation" remark is about oil. Yeah, I think that OPEC will not have much success (beyond what we've seen in last ten days) in reflating the price of oil, meaning that I am GUESSING that *whatever* value OPEC manages to lift oil prices back up in next few weeks, it will NOT hold, and will pull back to at least $40/bbl.

But all these random guesses (and hot air) should not distract us from the Big Long-Term Themes.

Oil will be over $200/bbl within five years. Count on it. Unless the WORLD is still in economic recession five years from now, but even a die-hard pessimist like me doesn't anticipate THAT.

The point is that these are ridiculously low prices for oil stocks. Maybe I should shut up and stop speculating about selling them over some trivial pull-back to $40/bbl that might (or might not happen) in the short-term.

So then focus on holding (for at least five years) these stocks and view any near-term pullback on oil price as a chance to double-down buying more oil stocks.