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The Anatomy of a Price Chaser

10/18/2015

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This market has an interesting way of conditioning traders to ignore fundamentals. Technical analysis, an entirely subjective discipline of looking at past trends and extrapolating into the future is looked upon as some sort of holy grail. I have watched these markets day-in and day-out for quite some time now and what I see is nothing but a flock of sheep: price-chasers. I watch financial social media and what I see is everyone Bullish after an up day and everyone Bearish after a red day. People seem to desperately  lack conviction. Traders ignore everything that is going on around them in the real world in favor of hyper-focusing on the lines on their charts drawn in in such fashion to support whatever confirmation bias of the day. I'm not saying that I am above playing the technical trap. The market is a chaotic system. What we are doing is nearly impossible. We are attempting to predict the future here. Not just what ultimately Will happen but also When it will happen. Unfortunately, our task at hand is impossible. Sure we will all have bouts of success and failures. The most important thing is to come out ahead in the long run, holding on to the bulk of the success and keeping failures small and manageable. Look, if trading was as easy as extrapolating trend lines on a chart, we would all be rich but it is not. I urge people to not look at something going up and chase price because the trend line is up. Ask yourself 'Why is this going up.' Many traders come to the conclusion that asking that question of why the market does what it does is ridiculous, searching for answers in this chaotic market will only drive you mad.. Perhaps they are correct in some respects but that is, and will always remain my mission. Im on the search for truth. It is looking at the why, the fundamentals that allowed me to forecast the demise of companies such as GPRO, YELP, & BABA. These companies all ended up crumbling even though it ended up taking much much longer than I originally anticipated. Which brings me to my next point: Patience.
The market is a feedback loop that rewards and punishes traders for the decisions they make in real time. The entire ecosystem the way it is currently set up is to exploit everybody's desire  for short term gains, easy-money. This is a misnomer. If there was such thing as easy money in the market, we would all be rich. If you go into battle with a short-term time-frame, with no macro view or fundamental bias to give you conviction to take a position, you are going to get eaten up by algorithms and spit up by a margin call. To extrapolate anything this chaotic system does in a small period of time into a longer period of time is a mistake. I think that many traders who have been attempting to navigate the endless intra-day whipsaws of the last few months will agree with me on this.

The main point I am trying to make here is open your eyes and minds to the big picture.  Don't get caught chasing price: In this market if it's just spiked one way or the other in a stop-run, chances are its about to spike the other way to wipe out everyone. With no direction from the Fed, the algos are in full-control and dominate the arena. The global economy continues to deteriorate rapidly. Behemoths are missing earnings and getting slaughtered. If every corporation misses and gets hit. It is an impossibility for the indices to stay propped up.
It can go up, it can go down, it can flop around sideways: In the short-term nobody knows. There is nothing supporting the Bull case but cheap money which is exactly what created the last two bubbles which both ended disastrously. Keep your eye on the big picture because eventually fundamentals will matter in a major way and when they do, many price-chasers will find themselves roadkill & the market is not so kind as to drag them to the ditch.
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Defying Gravity

10/16/2015

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The market never ceases to amaze me. Here we have the Economy visibly crumbling beneath our feet. Earnings recession, Massive oil builds. Major multinational corporations are missing earnings and blowing up. Just this week Walmart missed and plummeted 10% in a day erasing around $84B, one of the biggest down moves ever for the behemoth. 

The Feds hyper-accommodative monetary policy has poisoned the waters. The market rallies on bad news, sells off on good. Whipsaws. Directionless: with no leadership from the fed, algos dominate, all stops massacred.

This environment is treacherous. Major hedge funds are failing to navigate the chaos and are blowing up. The volatility is extreme. At night when all of the volume dries the PPT will work magic and rally 100s of points, only to see the entire rally vanish into official open..

What to do? What can you do? The market is too extreme and unpredictable to time. The next major downdraft will likely occur at random. A black swan with massive repercussions. Long Term Technicals still suggest we are in a downtrend. With the recent rally what has really changed? I am a fundamental trader at heart and the fundamentals only continue to deteriorate daily.

Protect Yourself. Survive the Interim. Stay the Course. 

The greater the fight, the more rewarding the victory!

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Violent Consolidation. Yields Pricing in More QE

10/4/2015

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Last week was a wild, tumultuous week. Underneath the surface we are seeing some pretty major changes. 
The Fed has lost all credibility after Janet Yellens 'inflation' speech. The Fed choked & did not raise rates when they said they were going to. As a result, the market is confused but could be showing early signs of pricing in another round of QE.
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I have been watching this chart of 10yr Treasury Yields for quite some time. It was looking promising that yields would begin to rise, but when the Fed didn't act: The trade began to unwind.
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A Market Hellbent on Chopping Everyone to Pieces. Price continues to violently consolidate its post-crash range with many violent reversals.
You can see watching real-time price action that stocks have somewhat linked to the dollar in recent weeks. Meaning, when stocks go up, the dollar also goes up. This is an interesting relationship to me, one that seems somewhat paradoxical as a rising dollar should in theory put a lid on equities.
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The BDI remains weak with momentum showing signs of rolling over underneath the daily pivot point. The shipping industry continues to show no signs of economic strength.
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I remain Bearish on Oil prices. However, oil has been working through it's own violent consolidation with intense intraday whipsaws. I'm staying away from oil until support finally gives out.
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We can see that for the last Quarter Bears have been Beating Bulls quite brutally. However, recently Bulls have managed to hold prior support levels & are attempting to push us up through a fast zone. If successful, we may potentially see a very fast and violent move into areas of strong resistance around WLSH 2100
Look, at the end of the day, what is coming is inevitable. The Centrally Planned Ponzi-Bubble will implode and stocks will head much lower. However, price action is compelling enough for me to lay off the short side in the short-term, at least until Bears once again wrestle away initiative from the Bulls. & begin to break us lower.
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Rip Cord

10/2/2015

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Today I pulled the rip-cord.

The whipsaw was the most violent I have ever experienced.

I have underestimated the resilience of the Bull.

The market is rigged by the government/Fed/ppt/citadel

The downdraft is unstoppable.

However, I do not know When the move will occur.

I'm getting caught in traps of ramping up my risk w/ more base capital.

The moves in oil have whipsawed every day. I am worn down.

Likely the move is coming soon but impossible to know when/how it will go down...

The employment data was atrocious today.

The world is mired in an economic global depression yet the markets remain near all time highs...

How much longer can they prop this up before it breaks once again & violently legs down?

I remain long soft commodities however am now waiting cautiously & patiently for the next big drop...

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3%+ whipsaws in the major indices today. Massive & violent reversals!
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The length of the consolidation and the frequency/violence of the intraday whipsaws in stocks & oil is grinding down market participants.
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Soft Commodities, especially sugar are coming back to life. I remain long CC SB ZC & ZW
The lessons from this experience are:
1.) Eat a good breakfast before you begin trading to ensure you are mentally & physically prepared for whatever the market may throw at you, because truly anything can happen.
2.) Be careful of position sizing. Just because you have more money does not necessarily mean that you should be increasing your risk exposure. 
4.) Do not underestimate the resiliency of the Bulls. The Bulls have the Fed/PPT/Citadel HFT algorithms on their side.
The Fed & their loyal banking cartel created this bubble and know full well it is the largest, most dangerous bubble in human history. When the bubble pops it will be truly devastating. However, timing the exact moment of the collapse is nearly impossible. TPTB will do everything in their power to prop it up for as long as possible.
It is still dangerous to be leaning too short because when volume dries up the algos can somehow work these massive short squeezes. The overnight volatility has been extreme.
I had been trading fantastically using my hedging strategy but in this dangerous market environment, one slip up can have devastating consequences. Despite today's whipsaw, my account remains above the high water mark & well above the lows of the oil massacre two weeks ago. I have stepped aside from potential danger. This experience will mark a higher low in my trading account & I will go forward with caution onward & upward to new high$
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    R. J. Sullivan IV

    Equity Research
    Portfolio Management
    ​Trading

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