Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

The Fog of War

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It seems to me the mass of humanity seems wisest only when disaster has recently struck. After the dot-com crash, everyone – and I mean everyone – clucked their tongues, shook their heads, and took on a bemused grin at the silly souls of 1999 who bid worthless stocks up to heaven. "What were they thinking? How could they believe those p/e's? I never would have done that!"

But then a new bubble started – the housing bubble. And it all made sense at the time. They aren't making any more land, after all, are they? And housing prices have never gone down. Interest rates are really low, and you've got a lot of first-time homeowners coming on the scene. I mean, it all makes sense.

So the the entire financial world is pushed to the brink (and only Lehman was allowed its own natural death; everyone else was artificially saved), and here again, everyone gets Instantly Wise. It's so obvious now how fraudulent and inflated it was, isn't it? Of course.

But we're in fog-land again. From Jim Cramer on up, everyone has figured out that it's silly to ignore the obvious reasons the market is going up. Don't fight the Fed, right? I mean, the writing's on the wall! Bernanke has made it crystal clear. It all makes so much sense.

And yet, whenever the next big fall comes – whether it's next week, next year, or five years hence – the Instantly Wise will wonder how on earth we could have deluded ourselves. How could we have missed the fact the Chinese were about to pull the rug out from under us? How could we have assumed hyperinflation wouldn't take place? What were we thinking?

Wait, we're not there yet. We aren't in Wise mode. We're again in the bubble, and only a fool isn't taking advantage of it. Enjoy the ride.

1106-confused

Cavium and a Lesson in Perspective

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It occurred to me recently that one of the mental trip-ups that can happen when looking at a chart is to think that a chart has "bottomed" or "topped" simply because the price has reached an extreme within the frame of the chart. Mentally, I suspect, we subconsciously assume the border of a chart represents some kind of boundary. This limits us, in my opinion, to seeing just how high (or low) a chart can ultimately go. The only "limit", after all, is $0.

One long position I have, Cavium, is a good example of this. Looking at the chart normally, it seems to have "topped out". But when I use the Resize Graph feature in ProphetCharts, I can make a lot of white space above the current price to see more clearly the potential blast higher a stock like this could take. (You can learn about Resize Graph, or any other ProphetCharts feature, in my book, naturally).

Irrespective of all this, I think it's an interesting graph as a long position:

1103-CAVM

The Looming Tower

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Well, after all this waiting, the big day – – November 3 – – is finally upon us.

I have mixed feelings about it. On the one hand, I'm terribly apprehensive about the bears getting a nuclear bomb dropped on their heads when QE2 is announced and the election results have sunk in. One can imagine a scenario where:

+ The announcement comes out;

+ The market instantly rips ten points lower (or whatever), getting everyone excited;

+ It promptly shakes off the loss and explodes to the upside, as the dollar utterly collapses.

I mean, who knows? Anything could happen.

The other feeling I have is relief that it's finally going to be out of the way……..for a while, at least. I don't think they'll start talking about QE3 on Thursday (although at this point, there's no telling). One thing I can promise you, though, is that I'm as sick of hearing about QE2 as I am sick of getting robocalls from politicians.

The safest thing to do would be to be completely in cash. Of course, that's always the safest thing to do. It also guarantees you will forgo any opportunity to make a profit.

I am taking a less conservative approach, but somewhat conservative nonetheless. My positioning is:

+ 85% committed (that is, 15% in cash and no margin being used);

+ 25% long positions;

+ 75% short positions

This way, tomorrow could wind up somewhat bad for me – – or somewhat good – – but it's pretty unlikely that it will be a disaster, no matter what Big Ben does to us.

1102-benatar

Barron’s Buries the Bears

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If you are a "cover contrarian" and a bear, you will love the cover of Barron's this week:

1031-bear

That's right; Barron's is declaring bears doomed, based on input from big money managers.

The same big money managers who said………

1031-geniuses

This is simple, folks: Big Money Managers have no vested interest in saying anything except that the market will go higher.

Every year.

Forever.

So this Barron's story is just a joke that the world never quite seems to get.

Coping

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What's a Tim to do?

What does a bearish swing trader do in an environment that feels about as hostile to him as a panel of Harvard Law School constitution professors would be against Christine O'Donnell? How does one cope when the environment is utterly different than one's style?

The pat answer, of course, is "adapt", and I'm certainly doing that as best I can. But let me be clear about this mutation.

What I Am Doing

+ Paying far more attention to the Euro than I ever have in my life;

+ Balancing my shorts with long positions (I have about 25% of my portfolio in longs);

+ Staying relatively "light" and away from margin (I'm about 75% committed right now);

+ Keeping my stops fresh;

+ Making good use of GLD and GDX as day-trading or overnight trade tools (funny enough, I'm short GDX and long GLD at the moment);

+ Keeping my ears tuned to the Slope comment section for ideas, insight, and information

What I Am Not Doing

+ Buying momentum stocks simply because they are going higher (PCLN, AAPL, BIDU, CMG, and so forth); it's tempting to want to buy, for instance, PCLN, since it seems to go up very day, but no, I refuse. I'm not going to get sucked into a March 2000 environment. No, thank you.

What I Have Ceased Doing

+ Paying attention to mass media Elliott Wave predictions. Absolutely worthless.

I am in "get through this" mode, and I will remain so until the coast is clear. This has not been an easy time for me – far from me – but I'm still very much in the battle, and I am managing my risk and – – on the whole! – – my emotions so they do not get the better of me.

I'd be interested in hearing how everyone else is doing, both good and bad.