Another day market showed weakness at close

Markets:

1. Market was up 1% most of the day, but closed up 0.6%, again showed less bullishness at the close.
2. Tomorrow we have lot of economy data, and it can push it higher or lower decisively.
3. I think it's going lower to finish the correction next few weeks.
4. But if it's going higher decisively, it can prove the sharp drop last week is just a one day wonder, which I doubt it.
5. I didn't do anything recently and just sit and wait. I'm in the camp think this market is going lower, much lower in 2007.
6. But I need market to confirm what I believe, recently I got a little bit ahead of myself, it's really risky being too comfortable with my positions.

PM shares:

1. Two days in a row, gold index ^GDM were sharply higher during the day, and closed much lower at close.
2. It shows even weaker showing than general market, that's one the of reason I don't trust this rally after correction, seems like anytime it can turn lower. But this is the sector I watch.

Uranium:

1. URZ, FRG and EMU all recovered most of the recent loss, beats all sectors and stocks I watched.
2. I like them in the long run, but again think they will turn much lower if market turns. Keep watching.

RIMM showed nothing significant today, continue to turn lower in one hour and shoot up in another, pretty much track the market.

Market showed weakness at close

Market:

1. Market closed lower today. It started to sell into close right around 3PM ET today, this is a pattern three of the last 4 trading days:
2. We also have very weak close on last Friday and Monday. Tuesday is the only exception without weak close.
3. I think major funds are using any rally to sell. So my intuition of further down side may still be right, unless there are good news to move the market, otherwise I expect a slowly lower movement in the next few weeks or days, with at least one big and powerful down leg to indicate the end of this movement.

RIMM delayed its regulatory filing again, stock closed at 135:

1. In the never ending drama of delay of filing of RIMM today, the lawyer said following:
2. "I would be reluctant to hazard a guess on the date, but it's very close to being completed," Robert Staley, a lawyer for RIM, told an Ontario Securities Commission hearing on Wednesday regarding the work that remains to be done.
   "The company expects to be current in its filings very shortly."
   He also said that if the company's filings aren't up to date by April 11, it expects to file preliminary fourth-quarter results, as it has done in the past.
3. And the reports continued: At Wednesday's hearing, the OSC said that if RIM isn't current in its filings by June 1, it would have to appear before the commission again on June 5. The OSC has said RIM is co-operating.
4. So, it's possible that they can delay the filing until OSC is mad at RIMM, but so far OSC is happy, so the drama started last Sept. can last another 3 months, or if they want, another 3 years. Since for them "very shortly" means a few days, weeks, months, or years.
5. I'm sure they'll report "supplemental information" to "additional preliminary" results when they officially file with OSC and SEC, like they forget another $100 million dollar somewhere due to "technical mistakes".
6. To say it's a joke about the way RIMM played OSC and SEC is an understatement! And so far SEC and OSC are happy! I don't know when they'll be unhappy.
7. And in a research report today, Merrill Lynch analyst Vivek Arya sang the praise for RIMM again, the $165 target is not changed. BTW, if RIMM reaches $165, he'll move it to $200. This is what RBC analyst did 9 days ago( raised target from $145 to $180), right before the market selloff.
8. It's frustrated to play a overvalued stock like RIMM with patience for more than 4 months, and still nothing to show for it. And I am patient, for these who jumped in to short since early Oct. when it shot up from $80 to $105, they're crashed.
9. There is no fundamentals behind its rise, just speculation and momentum, plus early shorts added to the fuel by covering, which brought in another round of buying by momentum players and shorts.
10. However, this cycle is closing to an end: RIMM failed to pass $140 in three attempts in as many months.
11. I see longs on RIMM get burned eventually, just don't know when, and it will be very painful for these who hold RIMM shares at the time of the crash.

Market bounced back

I added one commentary in "Financial Article" section from professor Nouriel Roubini's blog, he has 10 predictions on the economy, if 5 of them turn out to be true, we maybe in bear market this year and early next year.

Market bounced back today on overseas gains:

1. Nasdaq up 1.9%, led the major index.
2. Gold ^GDM index up 3.5%, SSRI, PAAS, AEM, AUY, IAG, SLW, GLD and SLV all were big winners today.
3. URZ, FRG and EMU all were even stronger than the PM shares.
4. Short ETFs got crashed today with QID down 3.7%.
5. RIMM got 1 point higher, nothing major there.
6. I think today's bounce prepares us for another down leg. A correction and bear market always rewards buyers to keep them in the market, if everyone is leaving the market, then it's a bottom. A sharp rally is one way to keep people in to drag price lower over time.
7. Yes, it may rally again tomorrow, but I think the start of the next leg down is within weeks, if not days.

What's next:

1. There are two cases to play out in the future:
2. One is a short term correction (10-20%) and bull market resumes.
3. Second one is the start of a bear market into 2008.
4. If it's a correction, then I should sell ultra short ETFs when all are settled in a few months, like end of May or sometime in the summer, and move them into PM and uranium stocks.
5. But if it's a bear market, then I don't see PM and uranium stocks to be a great plays either, PM and uranium stocks may do better than general markets, but may still lose value over the bear market. Energy and oil will suffer as result of economy slowdown, it will affect commodities as well.
6. I don't know which one will play out, so I'll watch and wait.
7. There are two individual plays in this environment: one is high fliers like RIMM (BIDU) put; another one is mortgage puts on financials.
8. I think if RIMM(down 7% from all time high) is to catch BIDU (down 22% from YTD high, even after 4.6% gain today), we have at least 15% to go. I do not see any justification of its valuation this high, at this stage of the market. I don't think it can hold this price for long, it's just a matter of time. The time for momentum stocks is over.
9. RIMM will be less than 100 sometime this year, and maybe in the 60s this year or in 2008. Let's see.

A resilient market

The market performed relatively well today, considering it's another rout in world markets led by 3% decline in Japan and 4% in Hong Kong, but market took less than 15 minutes to bounce off morning lows and stayed well off the low for most of the days, until last 30 minutes which finished at the low of the day. There is NO black Monday, like someone eagerly called!

Market:

1. Nasdaq dropped the most, closed down 1.2% at 2340.
2. I added another QID position right at the open, bad entry, very bad.
3. I hope it's a bad entry only, not a wrong trade. Wrong trade always costs you money, bad entry only reduces your profit.

RIMM:

1. RIMM had the bad news out, reported 250 million charge (initial estimate is 25-45 million), Chairman out as a result, yet it recovered from low of 131 to close at 134. This is a stock the defied all reasons.
2. There is only one explanation to this, the major funds are still in it, they'll prepare for a graceful exit. As a matter of fact, several analysts called it a nonevent today, one even shamelessly gave credit to RIMM's management for option probe? Wow, people can spin any news any way they want, but I'm not buying.
3. BTW, once the news is out today, after two days(I don't know if this is still the rule), insiders can sell again. They stop selling for more than 6 months, so there are millions shares unlocked, I have to say, watch out below.
4. Even with market get a bounce, I see RIMM below 120 at the end of March, but I'm wrong on this one for a long time, it may even rally tomorrow to scare the weak shorts.

Sub prime mortgage and Yen carry trades:

1. I knew the sub prime mortgage weeks ago, even wrote in my blog and added articles about sub prime in the "Financial Article" and "Market Trend" sections; I knew NEW and NFI weeks ago, read articles about them, did NOTHING.
2. Today NEW was off 70% and 40%. That's lot of money, you can short, you can buy puts, where is my research on this and idea?
3. I'm too focused on PM and overall markets, obsessed with RIMM, result: I am totally blind to the sub prime mortgage plays.
4. Please, when read articles, think, think, and think some more. You can make lot of money out of it.
5. Even the Yen carry trades and markets initial reaction was wrong, I didn't research, even though I know FXY is the proxy to trade the unwinding. I did NOTHING!
6. So today, to make up my mistakes, I added small CFC and CNB puts. Yes, they are not sub prime mortgage plays, but I think it may spread into other mortgage business. Yes, it's late, but I decided to enter it so I can monitor them, and even be profitable. Actually, even today's return is more than 10%, since they both ended much lower than when I bought them early today.

PM continued its diving today and ^GDM lost another 2.5%. Now I think it may have a nice bounce tomorrow, but I didn't do anything today since I'm too focused on ultra short ETFs.

What's next:

1. I think the down side is not over, use rally and bounce to sell, not buy.
2. Will manage March puts, rest put options are OK.
3. Still expect another blog down leg to occur in the next few weeks, or new few months.
4. Market may bounce a little bit, go side ways, then I expect it's going down again, matching the same magnitude (5-7%) from last week.

Black Monday?

1. Stocks in Asia fell sharply in early afternoon trading, at 12:20 AM EST.
2. If they closes sharply lower for Monday, that will serve as a catalyst for more drastic selling on wall street, may even trigger large scale of selling.
3. There is a small chance it's a black Monday, but it's probable it will close 2-3% lower on Monday.
4. I still think at least another 5-15% down side on Nasdaq. If it's 5%, it's a minor but quick correction; if it's 15%, then it's a 20% correction form this year's top, may indicate a recession is in place.
5. The stock markets has correctly predicted the last 8 recessions in U.S. There is only one problem: there are 12 bear markets during these 8 recessions. So it's possible that a bear market doesn't guarantee recession.
6. So now we have three likely cases here:
7. A small correction(10%) and the bull market resumes after a few months.
8. A sharp correction(20%) and the bull market resumes after a few months.
9. A bear market.

Week review

Market, the start of the correction?

1. For the week, Nasdaq lost 5.9%, Dow dropped 4.2% and S&P 500 fell 4.4%. Most of them are from Tuesday's big and sudden drop.
2. I think this is the start of the correction, the beginning, not the ending of it. I expect another 5-15% in the next few months, bottom is summer time.
3. As I said in last week's Market Trend section, there are too many risks not priced in the market, and this week, people started to price these risks in.
4. There was a worry about black Monday, which caused the sell off again on Friday. If you check the history about Oct.19, 1987, the black Monday as we know it, there is a sudden 4% drop the previous Wed., before the black Monday. This time, we have a sudden drop on Tuesday. Lot of similarity between now and then. So another big drop can't be discounted.

PM and Uranium dropped hard:

1. GDX dropped from 41.83 to 37.80 this week, 10% drop. ^HUI fell from 357 to 323, 10%. That's just the index. I think this is due to the gain in PM stocks, and people start to protect profit, just like in any big sell off, PM goes with the market, not against the market, initially. Last May and June, we had the same behavior, I learned this time.
2. AEM, IAG, SSRI, PAAS, SLW, GG, AUY, GRS, all the PM stocks I monitored dropped like a rock. Here goes the hedge against market drop by PM shares.
3. FRG, URZ,EMU and CCJ lost more then 10%, some cases, 20%. There is no place to hide.

The actions this week:

1. I did great this week, one of my best weeks. Not because of I knew this is coming, but because my quick action on Tuesday to liquidate.
2. I sold almost all the positions on Tuesday, including PM shares, and add short ETFs and QQQQ options on Tuesday, great move.
3. I sold rest of the PM and uranium shares on Wednesday.
4. I added QID and SDS on Thursday and again on Friday.

RIMM's price movement:

1. It's down to 136 from 140 a week ago.
2. This is mainly due to the upgrade on Monday, which pushed the price from 140 to 147. Actually, one comment on this blog said the peak for RIMM is 147. I hope you caught a big fish!!!
3. RIMM dropped 5 to 136 on Friday. Puts premium jumped in front of the Monday news release.
4. I think RIMM will catch the market and drop big next few weeks.

What's next:

1. I'm looking for another 5% drop for the market. So I'll view any strength and rally as selling opportunity, not buying opportunity.
2. And there is a small chance we indeed have a black Monday (larger than 5% drop). If it does happen, then we may enter a full recession.
3. And I will add PM shares if there are way oversold. Now it's not there yet.
4. So mainly ultra short ETFs, plus QQQQ puts and RIMM puts.
5. Will monitor and manage my risky RIMM puts, hopefully it will turn around just like my QID and QQQQ puts.

PPT in action?

Market:

1. Today the market recovered nicely from the early rout, only down a fraction. Some people speculated that the PPT (Plunge Protection Team established after 1987 crash) may indeed rescue the market at the beginning, to prevent disaster.
2. Greenspan retracted his Monday speech and said a recession in the U.S. is possible, though not probable this year, in an effort to calm the market. It's a nice spin, Alan. Just like what Bernanke did yesterday. Their effort to talk up the market makes me wonder if there is more serious issue ahead of us.
3. The news that Oracle will buy Hyperion for $3.3 Billion provided support to market. And the manufacturing data lifted the spirit as well.
4. The market acted what I expected, down sharply out of the gate, so I didn't add anything.
5. But then, Dow erased 140 points of the 200 point loss and I decided to add. I added QID and SDS, both are ultra short ETFs.
6. It proved too early, eventually, dow was down only 35 and Nasdaq only down 12. It is difficult to time a better entry in a volatile market. Later of the day, I added another QID position, at its low of the day, which is good.
7. So now I have a big QID position, plus RIMM puts and QQQQ puts, and SDS.
8. But I'm not worried about this, the market is heading down, just how quickly and to what the magnitude, I'm not sure.
9. Just like in a bull market, if you think it's a correction or start of the bear market, like I do, then it's critical to enter early. I hope this will prove to be true.

PM and uranium closed sharply lower:

1. Yesterday's exit of the last GDX, EMU and URZ positions proved right, it's down bigger than the market today. I think people are taking profits in PM and uranium shares in this uncertain time, just like I did the previous two days. So there is no place to hide unless you're shorting, which is what I'm doing now.
2. But if market keep going down, then I'll move into PM stocks again, I think long term, they're far better asset than the stock markets. So I'll keep watching and build my watching list.
3. PM shares will provide the next golden opportunity in this year and next few years.

RIMM was up a fraction:

1. RIMM was up a fraction today. I didn't take any action here. Have enough puts, don't want to commit more, it's just too risky!
2. The news next Monday will determine it's short term direction, which I predict will be sharply lower.
3. General market can also pull it lower if there is no significant material in the release to drive the price one way or the other.

What's next?

1. I think tomorrow, the fact that it's Friday, may cause people to sell ahead of weekend, so I won't be surprised if market close lower again tomorrow.
2. And depends on what happened this weekend, we may have a black Monday.
3. VIX clearly shows there is great amount of uncertainty and people start to worry about risks.
4. I'll watch the market, may add QID or SDS again tomorrow. Other than that, I probably will do nothing.