I can't help but think but think about the theory of Reflexivity postulated by George Soros. Basically he says the market doesn't anticipate the economy, so much as it actually changes peoples expectations and that, in and of itself, changes the fundamental outlook for the economy.

Read about Soros here:
http://www.investopedia.com/articles/financial-theory/09/how-soros-does-it.asp

So now that people have seen their retirement go from $1,350,000 down to $666,000 and now waaaay back up to to $932,000 they feel flush with cash relative to where they were March 10 and now they're ready to buy their kids a computer for their return to college. So every one is abuzz about Intel's sales expectations. I wonder if they will still feel that fuzzy if their account goes back to $830,000 or $750,000.

I also think there may be something else afoot. Microsoft really screwed up Vista. Many companies including mine opted not to upgrade from Windows XP to Vista and as a consequence opted not to upgrade their computers. Microsoft will be launching Windows 7 on October 22 which is supposed to be much better than Vista. I think companies are finally ready to update their antiquated computers, and this is probably helping Intel. My feeling is that Intel is benefitting from this, but I don't think it is a good proxy for the state of the economy.

Of course I could be wrong, and if the tape powers well above todays close of 932, I will admit defeat and close my short position.
-Rick

Adding to my short position.

Been quite busy so I haven't even logged in since I set up this site. I am out of town even now, so showing any good charts is quite diffuclt. I had to steal a chart from bigcharts.com just to show my reasoning for going short last week, and adding to my short position today.

The size of this chart is ridiculously small! My apologies. I'll quickly go through my reasoning for getting short. The labels above point out my reasoning.

#1- The last counter-trend rally which begain in Novemeber shot up and then broke trendline after trendline (shown in red). This is typical. It takes several trendline breaks to kill the excitement of the bulls, and embolden the bears. 3-5 trendline breaks in a counter-trend rally of this duration is pretty trypical. So here we are experienceing our second counter trend rally and we have had 3 trendline breaks. That is reason #1 to be on the look out for this rally to fade.

Reason #2 is that we are coming up to reisistance (a psychological barrier) of 930. It will take some considerable strength to go above 930 and the market has tried twice in the last week and not managed to break out.

Reason #3 is akin to #2 and that is that the market tried to break above the high set about a week ago, and couldn't pull it off.

Reason #4 is that the market sold off pretty convincingly today after briefly running up to 924 and then getting slapped down by sellers on higher volume. Not a good show of strength for the Bulls.

So todays sell-off could very well be the beginning of the end for this 2nd counter-trend rally and I have added to my positions in SRS and SDS to capitalize on it. With more time I would pick more volatile equities or cherry pick some leveraged ETFs such as financials with a good risk to reward ratio.

I made a mental note about a month ago that I knew the rally's days would be numbered when the banks started issuing more stock. Well this is reason #5. BofA just sold $13.5 bln in common stock. GS already raised money through a stock issuance. Wells Fargo and Morgan Stanley recently raised $16.6Bln in a combined stock&bond sale.

For now...I'm spent!

-Rick

First Post

This Blog is my attempt at tabulating my findings, results, and returns of my equity positions in the stock market.

-Pareto-
The name Pareto comes from the Pareto principle (also known as the 80-20 rule, the law of the vital few and the principle of factor sparsity). The observation is that for many events, roughly 80% of the effects come from 20% of the causes. Italian economist Vilfredo Pareto observed that 80% of the land in Italy was owned by 20% of the population. It is a common rule of thumb in business; e.g., "80% of your sales come from 20% of your clients." This principle applies well to the markets (with the focus of this blog being the stock, futures, and commodities), as the most informed participants will eventually increase in size as they continue to profit. With some training and diligence, one can discern what the smart money is doing and invest in a similar fashion. This can be profitable because it can takes months or years for institutional investors to completely enter or exit a position, but an individual can enter/exit in one day.

-Trends-
Anyone that seriously considers putting money to work in the markets should be aware of the three trends in the markets:
1) short term- timeframe: days to weeks
2) intermediate- timeframe: weeks to months
3) long term (primary trend)- time frame: months to years

-Time Horizon-
The short term trend is hardest to determine because it is often moved to and fro by news and noise, which are inherently unpredicatable. The intermediate term and long term trends are easier to discern, and therefore the risk/reward ratio is better. Anyone that ignores the trends in the market will do so at their own peril. GOD help them!