Thursday, July 31, 2008

ES vs ER2

Check out that divergence-

CRAP, I guess I quit trading to early again. I did that all this week.

Interesting to note the wider trading range on ES compared to ER2.

Today, Governor Schwarznegger is lowering pay to all state employees to minimum wage and some people that are temporary employees are getting fired. This is all part of the governors' plan to tighten the state budget. That really sucks.

Frustrating Day

Today was a very frustrating day for me. I traded everything today. Bonds, gold, Crude Oil, the stock indices, and the Euro. I'm quiting an hour early because I'm, well, frustrated and don't want to make any stupid mistakes. The morning began with some decent scalps and then getting stopped out on ES 2 ticks away from the morning HOD. That ticked me off.

Next up, the EURO got completely faded after the morning report of the US GDP report that was lower then estimated. Who ever bought the top on this got royally screwed. I bought near the bottom of the day and got stopped out, but made another trade later to trim some of the loss. This trade was probably the most frustrating as I watched the 2yr note make a new LOD at 9:21AM, while the EURO just sat and did nothing for me. I sat in this loser trade down about $150-$250 for over 2 hours. It sucked, but it panned out. The Euro will undoubtedly bounce to 1.558 now that I exited my long. I should have probably traded E7 or made a forex trade instead of a trade on the Euro future contract to lower the P/L swing and my emotion involved in the trade.

ZF versus YM. I got some decent scalps on both of these trading them in an inverse correlated fashion.

At least I'm positive on the day. The Euro is creeping back above where I sold out as I type, but I could care less at this point, as I'm going to the GYM to release some of this negative tension. Believe it or not most of my profits came from long scalps on Gold and Crude oil.

Wednesday, July 30, 2008

Trading Links

Big Picture- Basically all the financial firms and Brokers are a bunch of liars

Can't find shares to short (What a bunch of BS)

Boogster see's a car accident and Talks about quiting day trading.

Trading success and Testosterone
- This article has me thinking, maybe I have too much testosterone. (Nah, fuck that shit)

OBAT notes proprietary firms getting into blogging
and that the TOP TRADERS work there asses off and that he has a lot of work to do. (I'm lazy too)

Tyson talks about his EDGE-

Crude Oil Rally

Crude Oil Rallied, there was a bigger than expected decrease in crude oil and gas inventories.
Bond Futures Rallied, there is a clear inverse relationship between bonds and stocks still.
I had a bad headache and left my desk at 8:30am. Soon after I left volatility came and I missed some great moves. It was probably for the better though.
I got short ER2 when the Oil number was released only to see ER2 drop a couple ticks and then spike and stop me out, meanwhile, YM dropped 60 pts, I was very frustrated after seeing this move. I should have known better that the divergence between the two was a setup for short on YM and not ER2. I was also long the Euro before the oil number and I made $100 on that trade.

Tuesday, July 29, 2008


Today was leg day at the gym. I did a video of Squats, front squats, and lunges.
Check out BEAST MODE ACTIVATED for the new videos.

MER classic Gap Trade

A classic opening Gap trade. News came out last night that MER was selling 200 million shares to raise capital to stem its losses from its CDO's.

I'm sure swing traders are having a difficult time trading these markets with 1 day down 240pts and the next day completely reversing its losses.

I actually made money from 2 short scalps. I also had a good long on ZB off the bottom but sold way too soon. I actually tried to trade a long bounce on the Euro, but it never worked out as Crude Oil is weak and money is flowing back into the US dollar.

I shorted ZB last night. This trade was up as much as $700, but I wasn't around to cover it at the time. This trade was based off my bullish bias for 30yr bond yields rising. Bond Yields are near resistance from last June, so my bias is more neutral until after the next FOMC interest rate decision.

OPEC President & Oil price forecast

Where is Crude Oil headed?
$100 or $150?

The OPEC president made comments last month stating that oil prices could go as high as $150 to $175 this summer.

Although OPEC President Chakib Khelil did say this, if you listen to his interview from May at the last OPEC conference, his reasoning was based on a falling us dollar, money moving out of stocks into commodities because of a recession in the US, and the FED lowering interest rates.

Fast Forward to today, the OPEC president made comments that oil prices are still abnormally high, and OPEC member nations should not cut supply if they continue to fall as the oil market is now in balance. Algeria's oil minister, also said that oil prices could fall to $80 or just below in the long-term if the U.S. dollar continued to rise and geopolitical anxieties eased.

As you can see from this chart, the Euro has been declining (US dollar rising), which may be a reason for the recent decline in crude oil prices.

Not only is Crude Oil pulling back, but all of the commodities that were the superstars during the first quarter of the year have pulled back substantially.

It's interesting to note that the Oil Bull; T. Boone Pickens, has a Wind Energy Plan to help solve our Crude Oil consumption problem. Basically he says the US consumes 25% of the world oil and we well save 300 billion annually (import costs) if we build wind farms in the middle of the country. Although Pickens says that Crude Oil is a problem, last report was that he was still long Crude Oil.(Who knows what his definition of Long is?)

Merrill Lynch diluting stock

Merrill Lynch to cut mortgage-backed securities-
The world's largest brokerage, struggling to right itself as the credit crisis continues, said it will issue more than 200 million new common shares as part of the deal. Merrill said it will write-down $5.7 billion because of additional losses on the sale of mortgage securities and hedging contracts.
(By Joe Bel Bruno, AP Business Writer)

MER drops $10 in 3 days. You don't think someone knew something do you?

Since MER sold Bloomberg LP for $4.43 billion, Bloomberg now has a youtube channel. If they were smart they would allow embedding of their videos.

I was watching Bloomberg, and it turns out Bill Gross is bearish on the Euro, and he thinks the FED will hold off raising rates until the housing mess has passed. He also thinks that there will likely be 50-100 banks to fail before the housing mess is over with based on what the FDIC already said.

Monday, July 28, 2008

30yr bond and Mortgage Rate outlook

30 yr Bond Yields- I'm slightly bullish on long bond yields short term, and very bullish long term. After the housing mess, the FED's priority should be to fight inflation and to raise interest rates. Mortgage rates are already on the rise.
Long Term view of 30yr Bonds
Mortgage rates- I doubt we will see 30yr fixed mortgage rates go below 6% again.
FRE weekly Mortgage rates
Mortgage X also has some great historical charts for interest rates

IWM (Russell 2000 ETF) - The Russell has been relatively strong compared to DIA and SPY the last couple of weeks. I'm preferring intraday long trades on ER2 (IWM) over YM (DIA).
SPY- Volume is light on this pullback, which could make a bullish case for another bounce up in the market. One of my intraday setups is to look for pullbacks on light volume and to enter long, but this occurs during strong uptrends. Whether or not this is a buy setup will surely depend on the fate of the financial sector (XLF) and whether or not the oil sector holds up (XLE).
FXI- I'm pleased to see that they did a 3:1 stock split July 24. This will make it a better trading product in my opinion.

Another Down Day

Covered bonds are going to be issued by BAC, JPM, WFC, and C.

Balance Sheets-
Wells Fargo
Bank of America
Washington Mutual

Missed the first 2 hours of trade. My short on ZB worked, but ER2 never bounced to a profit.
I did bad not following my signals, but I did good by keeping my stops and not letting a winning trade turn into a big loser.

Pair Trading

Trading is hard.

Inverse relationships between XLE and XLF

Sunday, July 27, 2008

Washington Mutual Stock of the week

Surely, Washington Mutual(WM) will be the stock to watch next week, if not for the next 3 months as we all wait and see if WaMu can survive the current mortgage crisis.
WaMu: Liquidity Options Running Low- Mr. Mortgage takes a deeper look at WaMu
Remember when JPM was thinking of buying WM back in January? Washington Mutual is 1/3 the price it was then.

WAMU WHACKED- from the NY Post-
Summary- WaMu stock is going down
CEO says they are well capitalized (40Billion)
WaMu may be audited by the government-sponsored Federal Home Loan Bank
WaMu is mad they WEREN'T on the SEC short sell BAN LIST

I have to agree with this last question.
Why wasn't WaMu on the short sell ban list????
They have Goldman Sachs on the list? Why?
I'm sure you all know the answer to this question.



I was asked about Citigroup. Here is a my reply.

I don't care about Value or company fundamentals. All I care about is the price and where its going. That's all that matters when I buy or sell a stock. I'm just a guy that trades from his home. I'm not an analyst for individual stocks, but if I had to guess, I would say we are not out of the woods regarding the current housing crisis tied to many banks. Washington Mutual will go before Citigroup if there is a major bank that fails. I thought Goldman Sachs statement a few weeks ago, telling investors to SHORT Citigroup was outrageous (C was trading at $17 then). The fact that C was on the SEC banned naked short list is good for the company stock price. If you held a gun to my head and told me I had to choose to buy or sell C, with a holding period of 1 year, then yes I would buy, I would buy deep in the money LEAP Calls. Possibly averaging in at small pieces at a time. I said BAC was a buy when it was at $25, before it dropped to $18., now BAC is at $29.
I have a macro look in my trading because I trade bond futures and stock indices. My outlook is for bond yields to rise,(Bond futures down), and possible bounce in the stock market in certain sectors, probably financials. 30 yr mortgage rates are on the rise. I'm thinking of switching my 401k to a bond based fund, instead of the 50/50 bond/stock ratio that I currently have that is losing money. Without a doubt, the FED will raise rates within the next year, possibly the next meeting, and mortgage rates are going to rise too. The double edged sword of rising mortgage rates and declining housing prices that is occurring has me worried.



If you got time, more videos ranting on how terrible a shape the US is in. I can honestly only take so much negativity. I feel like a stock market crash or a major bank run is imminent, which probably means the exact opposite is going to happen and the market is going to rally. Instead of looking at charts I'm reading articles and blogs about the housing mess.

Saturday, July 26, 2008

New Ron Paul Video

Ron Paul talks about the housing bailout bill just passed

Hat tip to Mr.Mortgage

Here is how the Senate Voted. Only 13 Republicans opposed the Bank/irresponsible borrower Bailout bill of 2008:

Grouped By Vote Position YEAs —72
Akaka (D-HI)
Alexander (R-TN)
Baucus (D-MT)
Bayh (D-IN)
Bennett (R-UT)
Biden (D-DE)
Bingaman (D-NM)
Boxer (D-CA)
Brown (D-OH)
Brownback (R-KS)
Byrd (D-WV)
Cantwell (D-WA)
Cardin (D-MD)
Casey (D-PA)
Chambliss (R-GA)
Clinton (D-NY)
Cochran (R-MS)
Coleman (R-MN)
Collins (R-ME)
Conrad (D-ND)
Craig (R-ID)
Crapo (R-ID)
Dodd (D-CT)
Domenici (R-NM)
Dorgan (D-ND)
Durbin (D-IL)
Feingold (D-WI)
Feinstein (D-CA)
Gregg (R-NH)
Hagel (R-NE)
Isakson (R-GA)
Johnson (D-SD)
Kerry (D-MA)
Klobuchar (D-MN)
Kohl (D-WI)
Landrieu (D-LA)
Lautenberg (D-NJ)
Leahy (D-VT)
Levin (D-MI)
Lieberman (ID-CT)
Lincoln (D-AR)
Lugar (R-IN)
Martinez (R-FL)
McCaskill (D-MO)
McConnell (R-KY)
Menendez (D-NJ)
Mikulski (D-MD)
Murkowski (R-AK)
Nelson (D-FL)
Nelson (D-NE)
Pryor (D-AR)
Reed (D-RI)
Reid (D-NV)
Roberts (R-KS)
Rockefeller (D-WV)
Salazar (D-CO)
Sanders (I-VT)
Schumer (D-NY)
Sessions (R-AL)
Shelby (R-AL)
Smith (R-OR)
Snowe (R-ME)
Specter (R-PA)
Stabenow (D-MI)
Stevens (R-AK)
Sununu (R-NH)
Tester (D-MT)
Voinovich (R-OH)
Webb (D-VA)
Whitehouse (D-RI)
Wicker (R-MS)
Wyden (D-OR)

NAYs —13
Barrasso (R-WY)
Coburn (R-OK)
Corker (R-TN)
Cornyn (R-TX)
DeMint (R-SC)
Ensign (R-NV)
Enzi (R-WY)
Grassley (R-IA)
Hatch (R-UT)
Hutchison (R-TX)
Kyl (R-AZ)
Thune (R-SD)
Vitter (R-LA)

Not Voting - 15
Allard (R-CO)
Bond (R-MO)
Bunning (R-KY)
Burr (R-NC)
Carper (D-DE)
Dole (R-NC)
Graham (R-SC)
Harkin (D-IA)
Inhofe (R-OK)
Inouye (D-HI)
Kennedy (D-MA)
***McCain (R-AZ)
Murray (D-WA)
***Obama (D-IL)
Warner (R-VA)

McCain and Obama didn't Vote as they had more important things to attend to.....

WaMu Worry


As a Washington Mutual Customer, I really am worried about this company. Why weren't they on the list of stocks the SEC banned from naked short selling this past week?

Looking at the Credit Default Swaps On WaMu, has me worried.

U.S. regulators have seized two more banks, is WaMu next?

Calculated Risk looks at the coming bank failures. If this turns out to be anything like the failures during the S&L crisis in the '80s and early '90s, we are merely at the tip of the iceberg of the bank failure crisis.

Friday, July 25, 2008

Sumo Stance DeadLifts

New Video of me at Beast Mode Activated on Sumo Stance Deadlifts

Guess what the Shirt says?

July 25 Trades

Traded for 40min mid-day. Traded 5 contracts.

Long ZN, Short ER2. (I exited ER2 too soon; however, I re-entered short via YM, also, I expected my ZN trade to work out sooner but gave it time and exited at my sell signal)

Stock Bond Euro Intermarket Relationship

July 14-24, 2008 (The general theme is bond futures and the Euro trade in tandem while at the same time inverse to the stock market)
July 14

July 15

July 16

July 17

July 18

July 21

July 22

July 23

July 24

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