Homersays

[Homersays]

This will be my thread for my views on the market in the future.

[Homersays]

Buy programs hit at 3:33 with the dow down 110 and looking like a meltdown was in progress. In the space of 9 min the dow rallied 60 pts and a close over 11000 is likely. Stay liquid or sell if you haven't already done so.

[Lyehopper]

Welcome Homer!

Good to see you with your own thread Homer!.... I'll be an avid reader.

Welcome to the forum!

[IIC]

Yeah Homz...I like to read your take...Easier to follow on one thread. Obviously, there is no problemo posting on other threads...But this way when I wanna know what you are thinking I know where to go...Best...Doug(IIC)

[Homersays]

One day reversal on extremely large volume. Not a market for the faint of heart. Can't fight the institutions, mutual funds and hedge funds as they are the reason for the volatility. They sink the market with their program selling and their program buying turns the market at the blink of an eye. The selloff down to the Dow 10750 area which was reached around noon occurred much too early for it to continue. The rally back is a sucker dead cat bounce getting in the small investor who never learns. Stay liquid. This market will close at a new low for the year imo this month. A real turnaround is not expected until October.

[DSteckler]

The market sold off hard this morning because hedge funds that were short yesterday carried their shorts into the close. They needed to smack the market lower this morning so they could cover at a profit. Once they did, they started buying.

Great game they play, eh?

[Homersays]

The market sold off hard this morning because hedge funds that were short yesterday carried their shorts into the close. They needed to smack the market lower this morning so they could cover at a profit. Once they did, they started buying.

Great game they play, eh?

Excellent analysis. Great insight. Mandatory reading for the entire board.

[Lyehopper]

The market sold off hard this morning because hedge funds that were short yesterday carried their shorts into the close. They needed to smack the market lower this morning so they could cover at a profit. .

"Once they did, they started buying"????....I thought "covering" was defined as "buying" Dave.lol.... Are you sure you're a "pro"?

[DSteckler]

"Once they did, they started buying"????....I thought a "covering" was defined as "buying" Dave.lol.... Are you sure you're a "pro"?

Covering brings the position back to zero because you're closing out the short, Lye. -1 + 1 = 0. It doesn't always involve buying because at times, hedge funds cover by delivering borrowed shares. Retail clients have to buy to cover.

Perhaps you didn't know that because you're not a "pro"?

[Lyehopper]

Covering brings the position back to zero because you're closing out the short, Lye. -1 + 1 = 0. Retail clients have to buy to cover. It doesn't always involve buying because at times, hedge funds cover by delivering borrowed shares. Perhaps you didn't know that because you're not a "pro"?

I thought shares sold short were "borrowed shares".... So, you borrow to sell short, right?.... Then you borrow to cover?.... Don't you pro's actually own anything????....SsSsSsSsssss!

[DSteckler]

I thought shares sold short were "borrowed shares".... So, you borrow to sell short, right?.... Then you borrow to cover?.... Don't you pro's actually own anything????....SsSsSsSsssss!

You can borrow shares from Brokerage A to short and pay them back by delivering shares borrowed from Hedge Fund B. Now you owe B but technically, you're not short.

And why own when you can use OPM?

[Lyehopper]

You can borrow shares from Brokerage A to short and pay them back by delivering shares borrowed from Hedge Fund B. Now you owe B but technically, you're not short.

And why own when you can use OPM?

Great in theory Dave..... But someday you've always gotta pay.

What's wrong with the theory that this is what happened today: Short sellers continued to sell this morning.... as those holding long panic'd and sold as well? Then about noon those who were short started to cover.... and as the market turned buyers also stepped in..... and the combination of short covering and new long positions being taken pushed the market higher. Now, why wouldn't that work as an explanation?

[DSteckler]

What's wrong with the theory that this is what happened today: Short sellers continued to sell this morning.... as those holding long panic'd and sold as well? Then about noon those who were short started to cover.... and as the market turned buyers also stepped in..... and the combination of short covering and new long positions being taken pushed the market higher. Now, why wouldn't that work as an explanation?

Lye, don't forget an important fact - there has to be someone on the other side of the trade.

The cause of any price movement is the imbalance between supply and demand, which is almost always created by institutional players. If there is a lot of volume activity on a bar (time frame isn't important), the insitutional player is involved. If volume is light, they're not.

During accumulation, institutional players are buying on a down spike with heavy volume (that's the only way they can get enough shares). During distribution, they are selling into an up spike on heavy volume (the only way they can unload a large number of shares).

What causes a downtrend (mark down)? A lack of buyers to support the price. The only ones who can provide this level of buying is institutional players but they don't because they sold a higher price levels. The market continues to fall until this phase is over.

When retail customers finally throw in the towel and start throwing everything out the window, the institutional players start buying. They are the ones sopping up shares on a heavy volume downspike. Eventually, selling pressure ends and accumulation begins anew as retail customers start buying again.

Professional short sellers typically sell and cover many times in the cycle, driving the price up so they short can more shares and then covering as the price drops.

[IIC]

Hedge Funds serve one main purpose...They screw up the market.

They try to squeeze every little penny...How many are any good?...Not many IMO.

But then again...Many Bazillionaires are happy with a paltry 8%...Maybe I would be too if I was one???...I realize that it is difficult to move in and out w/ very large sums...But if I had to settle for 8% a year...I'd pack it in:

http://biz.yahoo.com/prnews/060607/nyw092.html?.v=55

[DSteckler]

Hedge Funds serve one main purpose...They screw up the market.

They try to squeeze every little penny...How many are any good?...Not many IMO.

But then again...Many Bazillionaires are happy with a paltry 8%...Maybe I would be too if I was one???...I realize that it is difficult to move in and out w/ very large sums...But if I had to settle for 8% a year...I'd pack it in:

http://biz.yahoo.com/prnews/060607/nyw092.html?.v=55

Doug, more and more investors in hedge funds are endowments (college, hospital) and pension funds. They're less interested in a huge return (with a higher risk) and more interested in consistency of returns, low correlation to their benchmark, high Sharpe ratio, low beta, and high alpha.