Volkoff's Stock Buy and Sell Opportunities

FinancialTrader.com is proud to introduce Philip Volkoff as one of our content providers with extensive money management and proprietary trading expertise. Phil is an apprenticing cinematographer and artist by passion but also a seasoned trading and investment professional with over 27 years of Wall Street and Hedge fund experience. Phil views the markets from a deep macro perspective and utilizes technical analysis to help time appropriate market entry and exits points.

His performance objective is to return between 5%-8% annualized, maintain minimal risk exposure, and utilize simple exchange traded funds (ETFs) available to most investors

As a trader who looks mostly at the technical and sentiment data, I will also examine fundamentals to help confirm my technical outlook. Currently, two salient fundamentals keep jumping out that I find somewhat disturbing.

1..The first is the cap-and trade-bill passed by the house. This bill should have been passed years ago when the economy was much stronger. On the surface, cap-and-trade seems extremely contraction oriented, which will help the long dollar positions because it will cause more dollar debt destruction, a scramble for non debt dollars, and reduce the ability of the consumer to consume.

2...The second most disturbing piece of data was the savings rate jumping to 6.9%. In an economy that is 70% consumers buying trinkets from one another any up tick in the savings rate is extremely contractionary. As liquidity shrinks in the economy (because the transmission mechanisms have been so damaged by the crisis) no amount of liquidity the fed pumps into the system is will be taken up by the real economy.

No change in my positions still long dollar versus euro,short crude oil, long nat gas, short the European equities indexes and small short the S&P's. Although I did lighten up on nat gas because I' am negative on commodities in general.

Phil Volkoff

Like Shooting Fish in a Barrel

I wish trading was that easy. Today my biggest problem was determining which markets to play. From earlier posts, I mention that all the markets, commodities, stocks, and currencies were finishing C waves. Simply stated, a "C" wave is the end corrective wave in a correction in Elliott Wave Theory before the impulse wave and the major trend resumes. Keep an eye on the 138 area on the Euro. If we break that the Euro should accelerate lower taking the commodities, and stocks with it. Over the last year there has been almost a perfect inverse correlation between stocks and the dollar. Dollar up stocks down.

(Editors note: But for Volkoff's UNG position below, his proprietary signals are exactly in line with my quantitative models; different methods yet same results. The inflation and recovery camp is clearly kicking at the cactus of deflation barefoot. LM Lupo)

The markets seem to be consolidating at a critical juncture. I am still looking for the dollar to rally versus the euro. I think that if the euro trades down and takes out the 138.00 support area the move down should be swift. Thus, I am still long DRR which represents about 9% of my portfolio. I sold off 2% of my DRR and I bought a 1% position in SDS@55.69 which is double short S&P500 and a 1% position in EFU @63.74, which is a double short on the European stock indexes.

I also sold off about 1% of my double long natural gas position HNU.TO @$6.15 leaving a 3% position. My fear with the natural gas is that a strong dollar could hurt a lot of the commodities and crude oil looks real toppy.

Volkoff Open Positions	Long	Enter	Date	Trend Reverse	Current	Trend
UltraShort MSCI EAFE ProShares (EFU)	Long	62.74	6.19.09		-
SDS Double Short S&P 500	Long	55.69	6.19.09		+.1%
Market Vectors Double Short Euro ETN (DRR)	Long	44.28	5.26.09		+.5%
Double Long Natural Gas (HNU.TO)	Long	14.62	5.29.09		+4.25
PowerShares DB Crude Oil Double Short ETN (DTO)	Long		6.22.09

It's Friday and I am going home carrying the largest positions since I started trading this account at the beginning of March, 2009.

I call it knowing the little man inside and after 27 years of trading I have somewhat of a handle on him. Lots of time I am early on big moves and it seems just when I've endured enough pain the little man really starts to tell me how wrong I am. Yesterday the little man was really working on my head. What today's price action confirmed and the little man telling me I am going to be so wrong is that the short Euro move is right and long natural gas is right and maybe short European stocks is probably right too but I am more convinced about DRR and HNU.to and so I flattened out my EFU position.

I view fundamental reports as a supporting tool to help confirm my technical opinions about markets conditions. For example, when a market sells off on bullish fundamental news it confirms a short technical bias and vice versa when bearish news is greeted with bullish price action.

Today's employment report could have been interpreted as bearish $U.S. dollars because people are seeing a strong recovery and want to hold high yielding currencies, which has been the case recently but instead the Euro fell 3 handles. Today I piled on my short Euro position in DRR which is approximately 8% of my $620000 account. Also, most commodities were down on the day because of the strong dollar, yet natural gas bucked the trend to be up on the day. Once again, perceived bearish inter-market relationships with bullish action in natural gas. HNU.to is now 4% of my portfolio. On Thursday I sold out all of my EFU and stayed with DRR and HNU.to.

Catching knives can be painful, but extremely rewarding when the markets turn; however, it is essential to control risk. The double short positions below are not a huge percent of my account. EFU is 4% and DRR is 2%. The euro and the European equities are in a zone of significant technical and fib (Fibonacci) resistance which will translate into a bounce in DRR and EFU which are short etf's. I added just a little DRR today at 43.25, Friday 5-29-09, and established a new position in natural gas: commodity bulls take heart. I bought a little less than 1% of my portfolio of UNG at 14.62. Also, I added a Canadian double long natural gas ETN that trades in Canada (HNU.TO), or U.S.(HZBBF).

Remember, you have to convert the Canadian quote into U.S. dollars. My feeling is natural gas is near a very important low based on Elliott wave and momentum studies. I bought about 2% of the double long HZBBF at 6.77 U.S. dollars. I recommend reading an interesting article from Harvard economist Nial Ferguson on Europe where he compares it to Argentina in 2002. Europe is a basket case. As they say in the land of the blind, the one eyed giant is king.

Global markets are now commanding investor interest as risk rises. Europe's banking system is a fiasco and no leader wants to talk about it. Germans have elections in the fall and both parties don't want to talk. A classic prisoners dilemma. The bonds are tumbling creating an Olympic gymnast show. Bernake is trapped, particularly since he doesn't have enough ammo to stop the deluge of sellers into his bid. As Colonel Kurtz said in Apocalypse Now,"The Horror,The Horror".

My first post on Financial Trader reveals my new positions taken recently, affectionately known as 'knife catching'. As an Elliottician some of the best trades can be calling tops or bottoms during cyclical countertrend corrections existing in secular bull or bear markets.

I believe that the markets that have been rallying off the lows from the beginning of the year are completing C wave rallies which are countertrend ending patterns. If this is the case then crude, copper, beans, dollar, European equities will resume their major trends. I am betting using the ETNs DRR double short euro and EFU double short European equities.

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