Quote Critique

"People become attached to their burdens sometimes more than the burdens are attached to them." - George Bernard Shaw (Irish dramatist, 1856-1950)

Revealing wisdom by reversing the order of words is a tried and true method, and the technique borders cliche due to its prevalence. Nevertheless, Shaw hits on an excellent point that relates to trading in a tangible way.

You get what you want out of the market. This is true for gains and loses. The propensity for individuals to ride a cratering security to zero belies an unconscious desire for emotional stimulation. Complaining about loses is a symptom of cognitive dissonance, and it echos Shaw's sentiment; many are unwilling to surrender that which ails them.

Today's Twitterd Tickers $FAZ $C $BAC $AAPL $STT

Here are the tickers making noise on StockTwits.

Apple looks ready to plunge into the abyss. If you're a regular reader of Smoking Securities, you know I think AAPL is a dog. $27 cash is great, but using using a low estimate of 4.66 EPS next year, a 10 PE makes this a $74 stock. Don't be an emotional investor attached to a brand.

Five days ago I posted about the dangers of BAC here. The message of the market is clear, this is not a place for long term investment. Any purchase of BAC stock is a speculative short term bet that takes advantage of volatility, not improving fundamentals.

Although I expected Citigroup to print a 3 handle, I didn't think it would be in the 2.80 range so quickly. This beast remains a destroyer of long term equity, and should be treated like BAC. Investors relying on TARP banks to pay dividends are playing a dangerous game.

My last mention of FAZ was here, and so far the trade is moving in the predicted direction. The uptrend in FAZ is relatively new, so further deterioration in the financial sector seems likely considering how much room this has to run. Nevertheless, keep your position size up to date because the increasing daily movement will easily shake out emotional bets.

State Street is another toxic financial that should be treated with caution. A sharp rally into resistance will occur, but there is no sign of reversal as the trend remains lower.

Keep your Benjamins close. The market continues to exhibit risk aversion and volatility. This environment requires keen position size adjustment as the daily swings continue to grow. Small bets can reap huge rewards because the tape is relatively noisy. Moreover, poor capital allocation leads to emotional trading habits that increase the risk of ruin when luck goes bad.

IMHO, the collapse of BAC, BCS and UBS threatens the viability of ETFs and ETNs like SKF and OIL. Swap agreements and debt have credit risks that may appear overnight, though some argue that is possible for the USD. Beware potential liquidity issues for leveraged products that adversely alter the tracking of the underlying index if counter party uncertainties arise.

Historical Indeed

A new guy moves to the White House every eight years. I think the real news is here; today was the biggest Dow drop on inauguration in history.

Volatility is screaming upwards, and clearly fewer stocks are in bullish formations. The tape still warrants selling the rips, and I suspect we're in for bigger dips.

Buy write strategies continue to outperform the underlying index, indicating bearish sentiment as the market seeks to hedge long positions.

The momentary bounce in the NAMO was snuffed out by torrential selling. Unless you can move quickly, defense wins this game, so don't jump on the equity train.

The scariest chart I follow is the NASI. A run to the LEH collapse lows would be a doozy. Like all of the charts in this post, I have no confidence in any bounce until I see an X.

Amid the increasing volatility, fewer stocks are trading above the 50dma, so investors will probably continue to sell their increasingly worthless stocks.

The collapse of RBS and BCS should be making headlines every 2 minutes, but all eyes and ears are tuned to the $170 million party in D.C. A massive liquidation could be in the works as Britain finds itself trapped between a collapsing Pound and hemorrhaging banks. Cash remains king for all but the most nimble traders and disciplined short sellers. Breath deep.

Quote Critique

"A market is the combined behavior of thousands of people responding to information, misinformation and whim." - Kenneth Chang (NY Times journalist)

Misinformation and whim probably account for more market trading than I'd like to imagine.