Its that time again - Shorting

Discussion in 'Trading' started by eagle488, Dec 7, 2006.

  1. Ok, here is the short version:

    Arabs- They have too much invested in development. 25% of the worlds 125000 cranes are there right now. They cant let oil fall any lower or risk default on development loans. They spend 62 million an hour on cranes alone.

    Bernanke- He wants to control inflation, but inflation is clearly driven by oil prices. He doesnt see it that way however so he is going to raise rates to control inflation.

    Oil- Short term factors had driven down the price over the summer like the election, hedge funds unwinding position and a lack of hurricanes. Short term factors are now over and Arabs have an interest in raising oil prices.

    S&P500/DJIA- They both have an inverse relationship with the price of oil. As oil goes down, these two indexes go up. Many other indexes loosely track with the DJIA/SP. As oil goes back up, these two indexes will go down and other indexes will follow along.

    Small caps growth- These stocks are not driven by energy prices, but they are driven by interest rates and liquidity. As oil goes up again, inflation goes up and Bernanke raises rates or keeps them where they are at. Some small cap growth had come back from the summer until now and that is because they were betting that interest rates would be lowered next year. I dont see how they could be lowered at this point, I do see an argument for them being raised.

    Consumer Staples&Defensive stocks- Bid up too high and are also effected by the price of oil. As oil goes up, these will be hit too.

    In conclusion, market may trend higher for a few more months, but will undergo a dramatic 10% correction eventually. Nasdaq stocks will be hit even harder, possibly 20% or more.

    All of the above that I stated, everyone knows all this. In January, most people will sell their positions because of the possible coming storm. That will be the first area of weakness. The reason why they dont sell right now is for tax reasons.

    The only possible avenues I see are
    1) Go short or puts
    2) Go into cash
    3) Look at stocks that have been sold off right now for tax reasons such as Earthlink and go long at start of January.
    4) Ride up the positive momentum for a few more months until shorting. That is, if there is positive momentum.
    5) Look at loosely traded OTC stocks for possible longs that no one pays attention to. I like Praetorians recent OTC picks such as HEMA.

     
    #61     Dec 10, 2006
  2. "S&P500/DJIA- They both have an inverse relationship with the price of oil. As oil goes down, these two indexes go up. Many other indexes loosely track with the DJIA/SP. As oil goes back up, these two indexes will go down and other indexes will follow along. "

    classic example of the fallacy of "recency"

    in RECENT history, oil and stock prices have been inversely correlated to some extent. heck, i've scalped that relationship numerous times...

    however...

    LONGTERM, they are POSITIVELY correlated. iow, stock prices have gone up with oil and down with oil. that's on a longer term basis - 100 + years, for instance

    that's just something to keep in mind. they do not have to continue to be inversely correlated
     
    #62     Dec 10, 2006
  3. I just read about some guy that bought a million shares of grow at 6 dollars and now its at 60.
    -That mans name was Lee Majors! He then lost it all in real estate and an ill fated attempt to buy sands casino.
     
    #63     Dec 10, 2006
  4. As is my way... POOL gap down 10% this morning!
    Will MA be next?





    stonedinvestor



    12-07-06 08:34 PM
    I've been putting together a fierce short list I hope to make my first ever short sale soon! Just as an experiment I really don't like the mindset. Anyway two that caught my eye are Itron & Pool.
    These former POWER MIDCAPS...I used them often in past years they are all stars trust me--their charts are really starting to look ugly! A break of $45 for ITRI would be Katie Bar The Door time! 3 month chart is especially horrifying. POOL did one of those bad things it caught an upgrade with a huge price target labored up like 50 cents and then was met with a deluge of sellers. Ugly stuff. Break of $39 not good. Tied to housing.

    Jarden JAH is on my list(another thread) and believe it or not I've begun work on the behemoth MASTARCARD. This is probably the first time you will have heard anything negative about this stock. It's just a hunch now, I've got to do my research but I bet this comes in for a big fall. COF Capital One Nasty Chart as well. I hope to have my list finalized by the end of the year. Now's too quick we all know the computers are talking to each other-- as long as 1400 holds on the S&P we are ok.

    Something bad is brewing in the sub prime loan market... I hope it all holds off till after the holidays!
     
    #64     Jan 12, 2007