Thursday, May 12, 2005

Confusion

Remember that New Order song at the beginning of the Blade movie? Yea thats my theme song today. I'm listening to it right now. So are my neighbors =)

I had 2 "Eureeka!" moments over the last 3 days about where this market is headed. The first was when I tried to short more QQQQ's on Scottrade the day before the 103 point down day on the dow. Guess what happened? They rejected the order because there were none available to short! At that point I had just bailed out of most of my longs and picked up a few more shorts in a flurry. But getting that short order rejected put a stop to my selling. After pounding away at the order a few times and getting rejected every time, I realized something. If every Joe on Scottrade is short, who's left to sell? There is talk abound about non-specialist shorting being at the highest level in years, and I believe it. Once the public is in on a move, you can bet its days are numbered.

Ok, confusing so far. But it gets worse. Today I started trying to hedge myself long and bought the TZOO breakout this morning and the NSI dip to its 10-day MA. About an hour and a half later, at almost the exact same time, I got stopped out of TZOO and CYCL. I had bought CYCL yesterday on a low-volume, gentle dip taking it close to its 10-day MA, but as you can see on its chart, the volume picked up substantially today and it couldn't hold the 10-day MA.

So I'm looking at this raft of shorts, and two small long positions (ARRS and NSI) when TRID starts to break out. It was on my playbook list from last night. The breakout looked suspect, but if you're in a position to put a stop about 1% below your buy price, its hard to go wrong. Well sure enough, I got stopped out and TRID continued lower, making a bearish reversal candle on big volume. So this is when I had my 2nd epiphany: don't be trying to get longs because the market is telling you its not going up yet.

A little later in the day, the market started falling more rapidly, but firmed up at the close. Very confusing behavior. It wouldn't be hard to make money right now if the easy squeeze money in stocks like TZOO, TASR, MSO, GRU, ANTP, and DCAI wasn't already taken off the table. Well, there's still SIRI and probably a few others I need to hunt around for, but in the mean-time I'm probably not going to be adding any more shorts until the market has a NASTY day (except maybe XOM =). It is too unclear what direction the market is likely to take for me to be risking much. Bill Cara is confident that the fed will continue raising interest rates, the speculative money has dried up, and bond yield curve is flattening. Best to lay low I'm thinking.

2 Comments:

At 11:27 AM, Blogger Sulli said...

QQQQ is on the Reg SHO List.

 
At 12:43 PM, Blogger jontait said...

Well Sulli, that is indeed interesting. If I were a billionaire bull in over my head, I guess I would probably also fix it so the QQQQ would be on that list.

 

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