The bottom-picking thread (smelly fingers optional)

Quote from harkm:

Another positive sign. Small stocks hanging in there.

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noticed this also, all the small cap stocks i watch are not getting killed as much as so called "stable"/ "blue chips" its ridiculous now.
 
Quote from Cutten:

Quick update. I now have about 5% of my net worth in puts - brokers/financials, and ES, spread between Sep and Oct. I wired 40% of my account balance out, just to hedge broker risk.

Today played out exactly in line with the "crash week" scenario. This is eerily reminiscent of the post-Sep 11th panic week. This is now the second down 4%+ day in 3 days. The VIX is high, but has not spiked yet, rather it's been grinding higher, telling me that true panic/capitulation is not here yet.

So far the market action is indicating a Friday intraday or (more likely) closing bottom, with Monday open being the ideal low-risk time to get fully long. If we have no crash by Friday, just weakness, then I would roll the anticipated market bottom back to Monday close/Tuesday open. If there's no crash by Monday close, then I'm flat out wrong.

Now is the time to get ready with your multi-year long-term investment shopping list. You will soon get an opportunity to make purchases at discounted prices that will, in many cases, NEVER be seen for the rest of the 21st century or possibly for all time. Attractive positions include:

1) quality growth stocks e.g. AAPL - 2 more big down days will see Apple at <20 times earnings, dirt cheap.
2) ultra-solid low-cost blue chips e.g. WMT, DELL - these are the products people will buy when money & credit is tight, and the stock PEs are cheap now, let alone after another 10-15% puke in the market.
3) deep value plays e.g. financials, broker/dealers, homebuilders
4) commodity producers - these have been *hammered* the last 2 months, yet the secular bull is still intact. They have undergone forced selling and margin-call liquidation, many are down 50%+. yet the long-term future is bright.
5) emerging markets, especially BRIC. They are down 50-66% and will fall further in the next 2 days if we have a selloff. Buying markets down 2/3 or more, when they have great long-term potential, is generally a good investment play.

In the next 3 trading sessions, there will either be a damp squib, or a crash for the ages. Current conditions are the most fertile for a crash since 9/11 and before that 1998 and 1987. If you are not going to make limited-risk crash bets using options now, then you have to ask - when are you EVER going to make them? And if you don't want to be on a crash, at the very least, you should be ready for one - with a shopping list of trading and investment buys.

Most important is to realise that this is a once in a decade trading opportunity. There will be huge moves and chances to profit in both directions. You don't have to play both sides, just getting one side right is enough, as long as you limit risk & losses on the other side. Play small enough to stay in the game, but large enough to be happy if you bet and wing.

Isn't this the kind of environment that every market player lives for? Good trading all!
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I agree 100%. I wish I had the time, expertise and guts to play this right. This will be a "life altering event" for people that get it right. (well, or wrong, lol).

Despite all good advice and introspection, I have decided I am too damn stubborn to abandon my POT, BG, MOS and FNARX. I will ride them to zero just to piss everyone off. (since they would bounce like superballs if I were to unwind; I have that effect on stocks/funds). I just may buy some out of the money double puts as insurance(gamble) though, if the IV isn't too ridiculous.

I am subscribing to this thread to see how Cutten plays this out.
 
I'm thinking about jumping into some financials really soon, for a short term play. After all, the stocks that go down the fastest are the ones to go up the fastest. Maybe they haven't bottomed yet, but a short term bottom should be coming up soon.
 
I don't know. As has been said this is a once in a generation kind of situation we have here. I do not know if the normal rules apply. Some important supports have been broken and we are in what may be a third wave down leg. It is September and there is yet October to follow and the bulk of quarter and year ending window dressing selling.

A lot of people here anticipating a bottom soon too. That chart with the increased volume and following bounce might lull some into complacency. The first time is always stronger than succeeding occurrences. The reaction to the Bear Stearns bailout was much stronger than the reaction to Fannie Mae and the news with AIG has been all but ignored even though the last two are even more dramatic.

I'll be a bit of a contrarian and say if this market displays stubbornness and refuses to close strong above SP 1200 in the coming two weeks we might see a fair bit lower to come.
 
Cutten, in your opinion, for your anticipated Fri/Mon crash, are you thinking we just get a short term tradeable bottom or a long term investable bottom?

In my view, I suspect we will get a strong down move next week; however, I don't anticipate a tradeable bounce from it. I anticipate a strong down move followed by a period of consolidation and then continuing to grind lower for the next 24 months.
 
Just would like to add the reasoning here:
VIX 36 yesterday CBI 5(usually it gets higher) XLF Big Volume selling which worked in the past
News catalyst(World CBs intervention, imminent mergers, acquisitions and rescues, mean reveting nature of ted spreads)

Its possible that I'm early and everything crashes but my downside will be protected by deferred fed funds futures that I own
 
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