Investment Capitalist

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Notwithstanding my annoyance at last week’s “technical glitch” that probably made a few people over a billion dollars, the problems it caused for my programs because of extremely large tails in many stocks is a bigger hindrance. The lows set on Thursday’s sudden cascade 1000 point sell-off, although we’re being told was caused by a “fat finger”, have short-circuited many of my models such that their output can’t really be trusted. I’m still tweaking them to compensate for the tails, but the spike above 40 in the Volatility Index plays a huge factor in the output of my models. The number of days the VIX stays above 40 is also a factor.

The strongest “sector” from a long-term macro perspective unbelievably is the Biotech Index. The chart below is monthly! Let’s keep an eye on the group for some short opportunities because the corrections are going to be hard and fast, but not for the faint of heart, or the prop guy with a tight stop-loss for the day.

Please click on image above for higher resolution chart

Is the CRB Index running its course, with an ongoing rally in the US Dollar and fires burning in Europe over severe austerity measures in countries used to Socialism? Or will the mighty Chinese economy pull us all through whatever is going on. The weekly chart of the CRB shows how it’s turning over after running into a myriad of moving averages as well as an important Fibonacci retracement level. Therefore, a good area to find short trades if we continue to fall and/or the US Dollar continues to surge, are commodity stocks.

Please click on image above for higher resolution chart

On that note, here’s one idea. BP and RIG both are in severe trouble. Technically, fundamentally, from a public relations standpoint, and the amount of damages they’ll have to pay is still unknown. But although they’re good candidates to short, at some point, both stocks will be extremely attractive buys. For now, the breakaway gaps in each suggest lower prices to come. However, at the moment, both are extremely oversold, so I would only short them if they break last week’s lows. Otherwise, let’s wait for a retracement and then we’ll hit the bid.

For now, the most important observation I’ve made thus far is that the most reliable indicators have been Fibonacci Retracement & Projection lines as well as specific moving averages. If you don’t know how to use Fib Retracements and Projections, tune in to my radio broadcasts on T3 Live, the internet’s most advanced stock research and advisory service. In these volatile times, you need guidance from the best traders on Wall St., who trade during the day, completely transparent, buying and selling in real time while talking on the radio explaining what’s happening. T3 Live has been on CNBC, Fox, MSNBC and mentioned in all the major financial publications. Check it out with a free trial here.

There really are a tremendous amount of both long and short trade opportunities out there. The problem? Gap after gap after gap!  It gets extremely frustrating for those that try to trade  the tape rather than a portfolio strategy.  Nonetheless, it’s just a matter of finding the market’s pulse and trading with it. Right now, to be 100% directional is suicide. One shouldn’t go beyond 80/20 during the day and 60/40 overnight. Here are some ideas on both sides. I’ll announce their entry, or trigger on the radio:

The primary MACRO THEME for the month is going to be a rising Dollar with a flight to quality, the carry trade continues, bond markets know interest hikes are coming, probably after the streets of Europe stop burning. Short look at the commodity stocks vs. long the tech names. Once again, I’ll be on the radio with many more names on both long and short trades. It’s been a long time since the VIX has been above 40. Let’s hope it stays here for a few weeks at least.