Tuesday, September 2, 2008

When Crowded Trades Unravel

"No one goes there anymore-it's too crowded"
--Yogi Berra

Pretty soon we will all be paying less at the pump and if you're short commodities you made crazy loot today, but the market overall looks horrible. For months we have heard how when oil cracks the market will fly but it can't seem to get on the same page with the low inflation theme here. I think worries persist that we are that in a global recession that is going to get worse and that is the "real" reason commodities are dropping. It can't be "just" demand destruction and lack of "speculators."

The crowded commodity sector is unraveling before our eyes and should continue lower in my opinion. Positions that took months if not years to put on don't get remedied in one day, although the correction has been in full swing for a couple of months now. Today was just one of those "get me the hell out and hit the bid at all cost" days. I was short X,CF,POT,BTU,and OIH. I traded around some other positions but those five names were very cooperative and did the trick. I took CF and X home. I hate being a slob but they went out pretty weak, if I don't get a gap down I'll cover pronto. If you just wanted to sit back and watch the carnage without being hyper-active, SMN was a great way to play the basic materials short.

How did everybody do today? Let me know, because you should be killing them on the short side. If I can help in any way shoot me a comment or e-mail. I look at these types of days as "must make money" days." They don't come around that often, but if you are positioned correctly, the register rings all day.

There are plenty of "broken" charts to look at and I will be back shortly. What's with tech man???? Not a good sign.


SkyTrader said...

we were waiting for a good entry point to short MOS all morning, but didn't see one. Anything you suggest in a situation like that? How do you decide to get in, when the action you're looking for is already in full swing?

We finally took a shot at it at the end of the day, expecting a meltdown into the close. Small gain, but we definitely missed the ride today. Kinda frustrating.

If you ever stop by, we'd love your input on any of our recent trades or ideas: http://skytraders.blogspot.com/

anyway, great blog-- thanks and keep it up

RainmanInVegas said...

All your short ideas were right on.. Great Job. Too bad I was not around today to take advantage.
Keep it coming ..

kunal said...

Great posts on the death of AG and Commodities. keep up the great work. Who needs CNBC when you actually tell us the truth based on facts. Appreciate the great help. Whoever thought shorting commodities and AG brought my account back to positive this year and then some.

RainmanInVegas said...

You have any thoughts on DELL. Seems like a falling rock..

Steve said...

Your Monday charts were spot on!

It seems to me that the precious metals have lead the rest of the commodities down. While oil, coal, ag, steel entered a blow off rally that ended at the end of the June, weak gold, silver and even copper prices never confirmed the summer rally.

When Gold made another run at 950 in the last month and failed, it seemed to be the start of the next leg down for the rest of the commodity sector. You had a weak rally on low volume during the 2 weeks before labor day and then the next leg down started.

With Gold weakening further, it may mean this weakness in the stronger commodities is evidence that that the primary trend could be changing to down after so many years of being up.

And it looks like the utilities are trading with the commodities. So many things to consider shorting yet so little time!

Tyler said...

Hi Upsidetrader! I try to shoot you an email but I don't think the address listed is receiving. I know you stated these are the must make money days. I would like to know about stop positioning and when you recognize that these are just gonna be those trend down days and engage? Thanks for the help! and good luck trading.

upsidetrader said...

rainman-more fun to come-just the tip of the iceberg with this sector and i hate DELL

kunal-thanks and congrtas

steve-true, follow the money-in and out

tyler-days like yesterday i knew from the get go that commodities were going to get hammered, gustav was a dud and t6he dollar was stong-my stops are 1/2 to 1 percent

Tyler said...

thanks man, your calls are spot on, got short some of the oils during morning on the double top on the 1 min, but covered way too fast.

About Me

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I am a former hedge fund manager, broker and capital markets dude who now trades for his own account. I love what I do. I will try to post some stocks and an occasional chart that looks attractive for entry.I will also try to point out the idiocy of conventional wisdom and the lack of value added by the mainstream financial media. These postings should not be viewed as recommendations.