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Hi Gary,
Saturday, November 15, 2003, 3:51:15 PM, you wrote:
GAS> Sweet analysis. Couple of questions for you if you've got the time.
Thanks, and sure, but remember this is one girl's opinion. BTW,
thanks for the file.
GAS> <I put on shorts serious shorts 6 days ago, the first real serious
GAS> shorts I've done probably in 3 months.>
GAS> This would put your entry on 11/7 or so. Was this driven
GAS> by the gap down on the prev day?
Actually had a bunch of signals go red on Monday intraday. By the
close I had some nice profits, and they became very big on Tuesday's
open. I rang the register at the open for about 75 percent of the
shares, and intraday for slightly better on the rest.
It was a very good thing I cleared the decks, too, because those
shorts came roaring back by the end of the day on Tuesday. Not all
the way back of course, but well above the opens, and by Wednesday
they were testing prices back in the Monday zone. I did feel this
break coming, but in this market you just cannot overplay a short
unless you want trouble, especially in one of the hottest sectors
(banks) and in one of the more volatile (brokers). Moreover, these
shorts did not come at the top of the market, which is the classic
sucker's play. They came well enough down from the top that you
*must* respect the potentially powerful combination of dip buyers and
short profit taking. Shorts who are late taking profits are shorts
who have to press the panic button. You don't want to be one of
them, and you certainly want to be out before they get nervous.
Also, this ^225 neckline around 10,200 had not been violated yet in
any real sense, and until it is, whether I think it will end up being
violated or not is unimportant. Keeping my wits about me and managing
trades responsibly are what is important.
Give you an example of how wild it was here this week (you can work
out the percentage moves and see they are large): 8306 (Tokyo
Mitsubishi Financial Group). Shorted at 734,000 on Monday afternoon
(Friday's high had been 767,000, closing at 765,000), covered at
688,000 and 680,000 on Tuesday (open, then intraday). By the close,
they had run it back to 727,000 for the high, and it closed at
716,000. The day's low had been 672,000. Overstay your welcome on a
short in a market like this, and it's pain. Stupid thing closed
Friday at 745,000 off a 765,000 high (!), and stupidly, I did NOT
re-short it yesterday(!!). It will open Monday around 710,000 or
less, I'm guessing. Coulda, shoulda, woulda.
GAS> <Monday shorts covered on the open Tuesday made the
GAS> entire month in one night last week>
GAS> Was closing the position driven by the windfall resulting
GAS> from the gap or something else you saw?
The windfall. The volatility. (See above again.) The chance of a
bounce (which we got) at around 10,200. There is no such thing (in
my mind) as a short "investment" anyway (I mean shorting as a type of
investment, where you sit on it for quite a while). The only time
that would apply might be after the Fed decided that inflation was a
big worry, and put up rates with the pure intention of snuffing it.
In markets like this year's, shorts are just 'smash 'n' grab' events
for me; you really do have to be careful with the way these markets
have refused to buckle. As I say, this was the first serious shorting
I've done in a while. Everything this summer of any size has been
long. So, I hit it right, and I ran off with the cash. That is what
you have to do with shorts, especially in a stubbornly bullish
market. Wait. Wait. Wait some more, to put them on. Then if you get
the big windfall, you *must* take it before it disappears. Dip buyers
still abound for the time being, and the shorts who don't realize
that or who don't expect it will panic as well, and you can really
get a nasty wake-up call in a hurry.
GAS> <I want to buy around 9,600, and I surely
GAS> expect to see that level. Between 9,400 and 9,600 might qualify as a "grail" buy>
GAS> Are these fib driven (50% = 9600, 62% = 9400) or something
GAS> else. Intesting to note that 9400 has some support going back a
GAS> ways. Anything in particular price pattern wise or other that
GAS> you'll look for at these levels?
Well, I do pay attention to Fib, but only because others do.
Personally I'm less than convinced about the "naturalness" of the
numbers -- there are too many of them, and retracements are so often
going to stop "near enough" one of the levels to make a good case for
the theory, almost by random chance.
I like to look at the obvious, and then figure it is maybe just a bit
too obvious.
This 10,200 level has held three times, and the fourth time is not
"the charm" I suspect. The 10,000 level just isn't where these things
play out -- very round numbers are for the suckers; you *will* be
tested on your psychological ability to hold under pressure if you
buy there, I find. So the next logical place for me is somewhere
around the July-August range, and that 9400 to 9600 area looks very
inviting to me. I also think it will scare a lot of folks, which I
also like. (I'm cruel.) ^^_^^ But *everybody* can see this, I'm sure,
so I'm prepared for slightly lower levels, levels that start to
engender doubt about the whole structure of the "bull market",
especially with people who are rather new to the market. That is
where I think it holds, which takes us all the way back to that June
area. And guess what? A perfect Fib 5/8 retrace from the 4/28 low of
lows to the 10/21 intraday high puts us at exactly (drum roll,
please) 8992.8 basis the ^225 (Hello, June!). So, we could easily
have a H&S, easily do a full measured pullback from the neckline (to
about 9200), and *still* be in a technical "bull market" with a less
than 5/8 Fib retrace. I would not even be surprised to see them take
out that Fib line intraday, or even with a close or two. I'd be 100
percent long at that point however, given no major changes in the
dollar, terrorism, oil prices, etc., and I'd be prepared to hold to
about 8100. (I would make a really large, intermediate term bet
there, one that could cost me a lot of money if I were to be wrong.)
I suspect a lot of other folks would too, though, so I really doubt
we will get that low (the full Fib 5/8 retrace). But we sure could.
Of course I could end up being absolutely wrong about this. But on
the short side I don't "invest" anyway, so I won't get cooked. This
thing could hold just under 10,000, say around 9800, and we could be
off to the races again. I just don't think so, and I'm emotionally
ready for a steeper decline before the boat rights itself. These
heavily margined longs here are *extremely* vulnerable right now.
Vulnerability has a way of being exposed, and then exploited, from
what I've seen over the years. So I'm waiting for now.
None of this is rocket science, and if you read this closely I've got
numerous levels I'm watching, and some places where I'd test the
water and others where I'd be more aggressive. It's just basic chart
reading, and paying attention closely. In a word, it's experience, I
think. Human beings almost always get better at activities they do
over and over again. It is our nature. ^_^
There are just some places where I am not at all inclined to test
long right now, and this 10,200 area was one of them. This area
(actually slightly higher) was dangled as *huge* bait here on
Thursday after the big move up in the US on Wednesday. Our open
Thursday was the high (at least on the ^225 futures). Market was too
weak to even bluff a move above the open on Thursday, and I should
have been all over it yesterday on that basis, probably. Nobody
catches all the moves though, and people that try to just burn up or
burn out. Something catchable will come again. Always does. I'm good
at waiting. It is my secret weapon. ^_-
Best,
Yuki
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