Something to Keep in Mind as 2012 Starts

New England Patriots go down 21-0 in the first quarter. Then they win 49-21. Just unreal. Home field throughout playoffs which is the ONLY way they have a chance at a Superbowl run with that defense they have on the field.

Something to Keep in Mind as 2012 Starts
The last 6 months of 2011 were a mess, not sure another way to describe it. Over that span some correlations really jumped out at me and watching those going forward is a key theme of mine.

In a post I did for the iBC Blogger network I looked at how cigarette company RAI was outperforming the SP 500 over the last 6 months. I remarked that I thought the distance between them on a graph was indicative of the risk on/risk off nature of things. Here is a up to date look of RAI vs the S&P 500 (6 month view):

The same can be seen in the Utilities sector and here is a 6 month comparison for the Utilities ETF XLU versus the S&P 500:

If there is going to be some kind of move up in the general markets, the gap between tobacco/utilities and the SPX will narrow. This does not mean that those safer sectors will drop big, it will just mean that they do not get bid up as hard as other risk is sought out.

Now for the twist that I want you to be aware of.

It's natural and expected that in a move to a more aggressive stance on the market, money will be pulled from defensives and put to chase after other assets. You know the names should that happen and the Nasdaq will lead the charge. The spread in the graphs above will tighten and maybe even cross given a strong enough move.

But one thing is worth watching in this dynamic.

Look to the far right of both graphs above again. Did you look close?

If prices are dropping for BOTH the defensives and the general markets then you have to respect that as a strong signal. In no way has that slight blip been confirmed, but you need to be aware of it.

2011 may be over but it was the year of "Max Pain" as Robert Sinn likes to call it. Should defensives and the markets keep dropping in unison it may get uncomfortable once again.

Added!: Cat update. That small kitty is now bigger than her bed!:

Have a good night.

Happy New Year!

That eve once again is upon us.

Market Themes for 2012
After 2011, I am going to skip the "this will happen" sort of thing for 2012. I think it will be best to be ready with an open mind. It is likely several things will present themselves in the first 3 months of 2012 which will be important for the entire year. I want to be ready to see them.

As for my own ideas for the New Year there are three things I want to be more diligent about which would have made a big return difference in 2011:

-Allowing runners to run. It was reactive to jump out with a small to medium gain in a trade that was working. Not many, but several of these trades became longer term winners if held through a bit of volatility. Identifying the most sound moves up will extend gains.

-Focus on extreme sentiment inflection points and place the correct, forceful bet when the time comes. If the manic market continues, these spots may prove to be both somewhat common and very profitable.

-Do not trade so much. The first half of the year I would open my best 2-3 ideas, and then add on 3-5 other ones I felt had promise. I will work to stick to my best 3-6 ideas at a time (usually in short term account looking to play a 2 week resolution of a pattern or target) and give them the right amount of attention.

I feel very fortunate to have broadly expanded the readership of Economic Disconnect in 2011. I have to thank many people for all the links, ReTweets, and kind words that allowed this to happen. It's amazing really.

Let's keep it running in the New Year.

Happy New Year

In the New Year try to do one thing that I suggest; email, leave a comment on a blog, or talk to someone you have wanted to. Take a chance and you never know where that may lead you.

Evening Music
Going to load a few of my favorite songs of this year (I heard them for first time, maybe older than 2011) and a New Years Eve performance.

"Two of the Lucky Ones" by The Droge and Summers Blend:


Nightwish's tearfully pretty song "Sleeping Sun":


I tend to spend New Years right in my living room, its just safer and more fun. In 2006 The Bangles did a performance of "Hazy Shade of Winter" that just rocked the house:


Have a good night.

My Blog Roll and Why

Getting right after my to do list from last post, updated blog roll and a few notes on why I stop in the same places first thing all the time.

There are some new additions and readers should know that Twitter has been a major factor for me. The idea and news flow happens so fast now, Twitter offers the best way to see it all happen.

My Blog Roll and Why
Last night a great series of posts on Twitter by Trader Stewie (covered below) made me really want to get my blog roll updated. Here it is, going by alphabetical order, it's just my thing.

All Star Charts
J.C. Parets is the real deal. A real professional with plenty of background. When he posts, I read and make notes. Besides, an excellent person when I met him as well.

The Big Picture
What can be said? Barry Ritholtz is one of the best minds out there and also does not gloss over the bullshit.

Business Insider
Look, this crew never sleeps. Breaking news? They are on it. Joe Weisenthal is a machine and the writers at the site are tireless in their efforts.

chessNwine
I used to trade quite a bit from 2001-2006. I moved away from it when I saw things were getting, well, bad. A link at The Reformed Broker brought me to the site of chessNwine and I am glad it did.

Chess is the best chartist I know. If you can see his operation in the IBC PPT and 12631 it's very special. The coolest cucumber I know in any market condition, he is my go to guy.

EconomPic
He sort of retired but now he's back. Revealing charts that make confusing data easy to get a handle on, Jake is a must read. Plus he likes good music.

FINVIZ
Best free charting options out there. The heat maps are great.

gtotoy
The song "Smooth Operator" was made early for this guy! He can do it all, and never has any bias. Blog is great, but to see GTO operate in real time on Twitter is something else. Huge metal music lover to boot.

Illusion of Prosperity
My friend Mark is one of the smartest people I know and he uses the medium of sarcasm for his work. The charts he comes up with you just will not see anywhere else and the insight he offers is top flight. Must read.

Jesse's Café Américain
A measured look at gold and silver as well as the money system. Always calm, always sharp.

Kid Dynamite
You might get a chicken story. You might get the best dress down from a former insider on arbitrage. You might get schooled on silver. Or maple syrup. In any case, you need to stop in.

Leigh Drogen
I don't really have the best grasp on new trends and new era ideas, I am an old school fart. Leigh has it all covered. So I make sure to stop in. Do you know Estimize?

Macro Story
My man Tony gets it. His macro view is worth a price of admission.

Market Anthropology
This man creeps me out with the uncanny reads on market direction. Just follow along, it's worth your while.

The Mess That Greenspan Made
An old school read, Tim is the best.

Mish
Macro can be important, and Mike has a great read.

No Excuses BBQ
You got to eat right? I take all my tips from this guy.

Pragmatic Capitalism
I don't agree with maybe 99% of the MMT thing, but I learn and think a lot. The comments section is great too.

Slope of Hope
If you find you are getting too giddy on the long side, Tim and the crew can fix that.

The Automatic Earth
Bearish? Yes. Spot on? Yes.

The Golden Truth
My man Dave knows metals.

The Reformed Broker
What can be said? Market smart, sharp as nails, speaks to and for plenty of us. And a good friend.

The Stock Sage
Strong where I am not (currencies and Europe) plus so many actionable ideas. One to watch, if you want returns.

Trader Stewie
As honest as they come. If you are not on Twitter you are missing a real show with live trades and market observations.

Zero Hedge
Still a must read for stories no one wants to talk about.

So many more, but I will feature those guys in blog posts in the future.

Have a good night.

Wills, Will Not's, and To Do's for 2012

Everyone at the house and my Mom are super sick with a bad stomach bug. It's hydration duties here. I am feeling a bit tired and light headed off and on, but nothing too bad.

Market Operations
Last Thursday I bought the 3X short fund TZA. This was based on a sentiment indicator done by Robert Sinn, the SMS score. Things looked a bit poor as the rally went on, but limited volume and limited downside in TZA made me think the short idea would play out. Today was a solid correction to the downside and I closed the TZA trade for +4%. I think there could be some more weakness tomorrow but the Overbought cycle may be played out near term. We shall see.

As a side note, Robert will most likely be moving his market letter emails and SMS commentary to a paid service on his site. If you have been following along during the free trial you know the value his work provides. I will be subscribing in the New Year and this would only be the second paid service I have ever wanted to put my money down for (iBankCoin PPT and 12631 the other) so you know I feel there is actionable, quality work by Robert.

Wills, Will Not's, and To Do's for 2012
Some notes I have made over the past few weeks on my ideas for the New Year.

Will Nots
-I will not rule out taking a trade good traders put on because I don't want to "steal" their idea. There are some serious smart people out there and it's no crime to follow on an idea if I find the merit in it.
-I will not buy Chinese Burrito stocks. (easy)
-I will not buy Banks. (usually easy)
-I will not buy metal miners. (failed a few times this year)
-I will not take things too personal if I can in any way help it.
-I will not allow fear to keep me away from medical attention if I am in need. (summer intestine infection)
-I will not allow Twitter sniper's to make me jumpy in positions.
-I will not use leverage.

Wills
-I will pay more attention to sentiment/momentum indicators when buying positions. Maybe 10 times I bought names ready for a move up, but a quick check in with something like the iBC PPT hybrid score would have flashed caution. Getting shaken out quickly only to see the pattern you were looking for to resume is annoying. Costly in lost opportunity as well.
-I will get back to each and every person that asks me a question via any medium (blog, email, twitter).
-I will expand stop ranges to deal with volatility.
-I will ride winners until they prove it's all over, not just a hiccup.
-I will keep looking for hole in the wall sites that no one reads as some of the sharpest writers I know most don't even know about.
-I will work to improve my writing.
-I will be better about leaving comments on blogs.
-I will work to morph my longer term trading style with my short term style. One did far better than the other this year.

To Do's
-Update blogroll and improve site.
-Figure out if moving the blog to another medium has any merit.
-Lose weight
-Be ready for fishing season
-Be more concise with blog posts
-Go to The Big Picture Conference if it's held again
-Meet more people for lunch or dinner

Have a good night.

Merry Christmas Prime Rib

Merry Christmas everyone! Enjoy the day and look forward to next year. Here is today's big cook.

8 pound prime rib. Nothing fancy, just sea salt, pepper, and rosemary rubbed roast. Light coating of olive oil. On the Big Steel Keg at 250 degrees for 4 hours. Perfection for the holiday.

Pre-cook:

About an hour into the cook:

Final 20 minutes:

Allow to rest for 20 minutes in foil. Put on the cutting board:

Perfectly done!:

I hope you all are having a great day.

Friday Night Holiday Festival

It's almost Christmas!! Picked up a prime rib today for the Big Steel Keg smoker treatment on Sunday. Looks good, and there will be pictures.

My very best wishes for all the readers over the holiday and into the New Year. Great readers are what make me continue to work harder all the time. I appreciate it.

Market Observation
Not much to add. Still right where we were yesterday, only a little higher. No where near stopped out on the TZA position I have and will hold into next week.

The Megabucks Christmas
My last two Christmas tales were not meant to be sad. They were just memorable ones that I wrote about. How about a feel good story then?

One year when the Massachusetts Lottery came out with Megabucks, my parents won one of the smaller prizes! I think it was around $3000, which was monster money for our family. I believe it was 1985 but I get years mixed up sometimes. They won in November and I think they blew it all on Christmas presents. It was insane.

I got the biggest Transformer toy ever made, Omega Supreme:

And best of all, I got my first BMX bike, a Columbia Pro Am! I was able to find the exact bike with a picture search in Google:

I had a longer post in mind but no one can compete with Brian Lund's post from today The Greatest Gift I Have Ever Received so check that one out.

Friday Night Entertainment
Getting you ready for the big holiday weekend.

Fun with Pictures
Get you laughing.

Black Bart is in trouble now!:

see more epicfails

Scottish folded ear kitty!:

see more Lolcats and funny pictures, and check out our Socially Awkward Penguin lolz!

Film Clips
Holiday edition!

A classic comedy film that is set around Christmas time is "Better Off Dead". Sorry for the poor quality but you have to see the face squeezing CHRISTMAS part at the end:


A new era holiday classic is "Elf" and here is a great scene:

"You smell like beef and cheese, you don't smell like Santa", LOL

I never saw "It's a Wonderful Life" until high school and I think that was better because it meant all the more by then. Here is the Potter speech:

No equal. Nothing like that Stewart fellow.

Rock Blogging
Some tunes to send you on your way?

Got a request for "Call and Answer" by Barenaked Ladies and I am glad I did. Never heard it before and it's mighty fine:

Amazing tune, love it.

Twisted Sister and "Heavy Metal Christmas":

Ozzy tattoo! Nice!

This is great! Metallica's "Enter Sandman" to Christmas lights!:

Feeling a Pokemon seizure coming on.

On this holiday I would be wrong to not be in the mind of my dear friend, that I miss so much, Soleil. I miss you my friend and I miss all the help you gave me. Wish I could have helped you more. Florence and the Machine with a really nice acoustic version of "The Dog Days are Over":

Miss you.

Back in college a bunch of scientists formed a band. This tune rocks! I have zero music talent but I did help them set up. Who else had a T4 phage picture on the drumset? Man Bites Back and "Ghetto Starlight":


Last song! Grab a girl, a drink, or anything else!

My favorite by far Christmas song is Bob Seger's "Drummer Boy". Just so perfect:

Tear every time.

Have a good night.

The Long and Short of It

I hope you are all getting ready for the Christmas weekend! I am going to have some company coming soon so just a few quick notes.

The Long and Short of It
I could run through more charts and all that, but we have been looking at the same things for a while. Today was an important day I believe, and any confirmation to the upside will be very constructive going forward. That said, markets are at key inflection points that have proven difficult for some time.

The Pros:
-S&P 500 close over 1230 this week
-S&P 500 close over 1250 today
-Headline danger has abated from Europe
-Low volume implies lack of selling pressure going forward

The Cons:
-S&P 500 at key resistance level
-Low volume could cause run up to rapidly deflate should volume return
-Overall bullish sentiment surge last two days

As I planned, I took a full position in TZA (3X bear fund) when the S&P 500 hit 1250 this morning for the second time. I am flat on the position even as the S&P closed at 1254. This is a pure overbought short term play, nothing more. Overall I am constructive on this market and more upside confirmation going forward will mean it's time to be playing the long side.

Have a good night.