Wednesday, April 16, 2008

Today's Thoughts

Relax guys, HAL was only up 1 percent today. Considering what the market did, I'd say I still have a good chance of making some money on this short play. You can say "I told you so" if I exit with a loss. For those that missed it, here is my HAL short entry and analysis. My stop has not been hit yet.

I have not exited my gold short either, although I do admit I am a bit nervous. Again, I ask the bulls, where is the volume?

Lots of bulls out in full force today, but where is the money flow? Volume today was not the type you want to see for a trend reversal. Combine that with the fact that we are still trading within a range (1320-1400 on the S&P), and you've got a classic bear market rally. Fun to play for a quick trade, but don't let it fool you.

I do wish I had placed more money in steel and some of the independent oil stocks. I got out of GTLS a little early. Should have taken partial profits.

My plan for now is to ignore the indexes and just trade good setups from both sides, long and short. There are some great long plays on pullback, and some equally fine short setups that just got better with this rally.

10 comments:

tradermd said...

I posted on my blog today and yesterday that the reaction to Intel and Wamu's numbers have been a pretty bullish sign (their numbers weren't all that great). Also if you remember between the August interim bottom of last year and October we basically continued higher on light volume. I'm pretty bullish right now. I see a lot of great charts on the long side.

If I'm wrong I'll definitely get stopped out and eat my words.

Just be cautious on the volume confirmation. There really is no perfect rally. Today's price action was impressive.

Anyhow, just some random thoughts.

Good luck

Bill aka NO DooDahs! said...

I noticed yesterday that you used a volume chart for the GLD; perhaps it would be more appropriate to use a volume chart for the futures contract, or a volume number (if you can get it) for the spot price of gold?

GLD doesn't necessarily represent the real players in terms of moving gold.

No personal positions, but my Rotational model portfolio is long GLD.

Vinay said...

I agree with your HAL trade; I just don't see this stock going much higher- so either we will get some sideways consolidation or the pullback that you expect.

On GLD, there are too many mixed signals here. If you look at the chart for about a year or so, you will see that there have been a few pullbacks and each pullback has been on decent volume. However, the upward trend has remained intact. The recent pullback in early March had pretty high volume as you have correctly pointed out, but that might just have been a case of profit taking after gold reached the $1000 mark.

The Market Speculator said...

TraderMD. You could very well be correct. We shall see. That's why I'm playing both longs and shorts right now.

Bill: The difference in this pullback is it broke support. The other pullbacks never did.

Vinnay: You guys could be right about gold. However, profit taking usually isn't on such extreme volume. Generallly buyers will step up at support levels.

Bill aka NO DooDahs! said...

Actually, Vinay had the comment about pullbacks.

You didn't address the volume issue - highlighting volume on an ETF that tracks some other underlying, which has its OWN volume that needs to be analyzed, instead of the ETF's volume.

I don't really have an opinion on your trade in GLD, since both you and my model portfolio could be right simultaneously, since you and it trade different timeframes - it's gonna look at GLD again in three weeks, long after you've likely exited (win or lose).

My comment is strictly on the use of volume for the ETF. I would have made the same comment if it had been USO volume, FXI volume, or DIA volume, it just happened to be GLD.

The Market Speculator said...

Bill: You are correct that it's not necessarily the gold metal it's tracking, but gold and gold miner stocks. They do seem to follow closely.

I trade stocks, not the commodity itself, so GLD works out nicely for me. As for the fact that GLD tracks volume of many stocks--I like that. I am not dependent on the whims of one stock.

Bill aka NO DooDahs! said...

I believe you are SIGNIFICANTLY misunderstanding the situation, as well as misunderstanding my statement.

GLD attempts to track the spot price of gold. The relationship to miners and mining stocks is secondary and economic. (GDX is the ticker for the ETF that tracks the mining stocks).

The spot price is influenced by volume in the spot, and somewhat by volume in the futures contracts.

The price GLD is moved primarily by market-maker arbitrage in gold prices, and only "tracking error" is introduced by retail traders using GLD as a proxy.

Therefore, using GLD volume to analyze the price movement of GLD will be MISLEADING, because the volume cues at signficant turning points MAY or MAY NOT be in GLD volume - those cues will be in the volume for the futures contracts and in the spot transactions.

This is true for almost ANY ETF. The correct volume cues are in the underlying, not in the ETF.

The Market Speculator said...

Bill,
My bad with regards to GLD vs GDX.

However, with regard to volume, I have not seen many instances in my trading where GLD's volume pattern varied much from stocks like GOLD, GG or BVN. If GLD is misleading, I do also watch a basket of gold related stocks that would clue me in. I'm going to cue your comments and keep watch of GLD volume versus gold related stocks over the next few months.

The Market Speculator said...

Bill,
What is it that has you bullish gold? Specifics not necessary, but what does your model clue you in on?

Bill aka NO DooDahs! said...

One of the model portfolios that I track is long gold. I get fairly specific in this post:

http://billrempel.com/2008/04/06/rotational-portfolio-is-overweight-commodities/

That portfolio has been long GLD since Dec 2007 and $78.13.

I personally trade one of the four models, and announce all trades before I take them. I am currently trading the Aggressive model for U.S. stocks.

My trading pace is slower than yours, so we could both be "right" about gold. Or both "wrong" if it stops you out and then turns to lose money before I re-evaluate the position. I hesitated to comment about the post, because I didn't want it to turn into a critique of the TRADE, just the volume analysis.